How Much Should I Spend On an Individual Disability Insurance Policy?
Sep 25, 2023
Jamie Fleischner

Jamie Fleischner

25 Sep, 2023

The cost of disability insurance can vary widely based on several factors, including your age, health, occupation, income, the amount of monthly benefit you want, the policy features, and the insurance company you choose. Here are some general guidelines to help you understand the cost of disability insurance.

If you are between the ages of 30-35 when you are initially purchasing a policy, men should expect to pay between 1-3% of their income and women about 2-4% of their income. Typically you can protect about 80% of your take home pay. If you are paying for your disability insurance with personal dollars, the benefits to you are tax free.

Here are the factors that will determine the cost of your disability insurance policy:

  1. Age: Younger individuals typically pay lower premiums for disability insurance because they are considered less risky to insure. As you get older, the more expensive the policy.
  2. Health: Your health plays a significant role in determining the cost of disability insurance. If you have pre-existing health conditions, you may pay higher premiums or have certain exclusions in your coverage. If you have a condition such as a shoulder excluded, it usually does not increase the cost of your insurance. If you have a chronic condition such as diabetes, they may charge an additional amount to your policy.
  3. Occupation: The nature of your job can affect the cost of disability insurance. High-risk occupations, such as construction workers or firefighters, may have higher premiums because of the increased likelihood of disability. For physicians, your medical specialty will also determine your occupational class. Anesthesiologists and emergency physicians are among the most expensive specialties whereas pathologists and pediatricians are among the least expensive since they are lower risk.
  4. Discounts: If you are elgiible for a discount, this can help reduce your premium by 10-20%. Some typical discounts are AMA, ABA and medical residency discounts.
  5. Coverage Amount: The amount of coverage you choose affects the cost. If you opt for a policy that replaces a higher percentage of your income or includes additional features and riders, the premium will be higher.
  6. Benefit Period: The length of time you want benefits to be paid (e.g., 2 years, 5 years, until retirement) can impact the cost. Policies with longer benefit periods tend to have higher premiums.
  7. Elimination Period: The elimination period is the waiting period before benefits start. Policies with shorter elimination periods usually have higher premiums.
  8. Optional Riders: Adding optional riders to your policy, such as cost-of-living adjustments or residual disability benefits, will increase the premium.
  9. Insurance Company: Different insurance companies offer varying rates for disability insurance. It’s essential to obtain quotes from multiple insurers to compare prices and coverage options.
  10. Gender: Historically, women have paid slightly higher premiums for disability insurance because they tend to file more disability claims than men.

For more information about individual disability insurance or to request a quote, contact Set for Life Insurance today!

Related Posts

We’re here to help

Getting the right disability insurance can be downright confusing. At Set For Life, we’ll help you understand the options and work with you to select just the right product for you and your family. These articles will help you understand some of the complexities involved, but we’re happy to walk you through it! If you’re ready to get set, reach out for a quote today!