Compared with other forms of insurance, disability insurance premiums tend to be much more expensive. Why? Because you are at a greater risk of becoming disabled than you are to die prematurely or lose your house to a fire. Understanding how disability insurance premiums are calculated and knowing what discounts might be available is important to ensure you get the right kind of coverage at the right price. Generally disability insurance premium rates are based on the following factors:
Factors that Affect Disability Insurance Premiums
- Gender: Women’s disability policies can cost as much as 40 percent more than a men’s.
- Occupation class: Different occupational class are assigned different rates based on risk factors. For instance, a surgeon is considered to be a higher risk than a general practitioner.
- Monthly benefit: Your disability premiums are, essentially, paying for a future monthly benefit. So, the greater the monthly benefit you need, the higher the premium.
- Age: The older you are, the greater the risk of a long-term disability. So, the older you are when you buy a disability policy, the higher your premium will be.
- Health: Your overall health is a major factor in pricing disability insurance. Certain existing health conditions may present a higher risk of disability which can result in a higher premium.
- Elimination period: As with any type of deductible, the more you pay out of your own pocket, the lower the premium you pay. A longer elimination period – the amount of time that must elapse before benefits are paid – will reduce your premium cost.
- Benefit period: The benefit period you choose will affect the premium. A policy with a benefit period to age 65 will be more expensive than a policy with a 5 year benefit period.
- Riders and options: Physicians and dentists should have as complete of coverage as possible that includes a residual rider, cost-of-living rider, and the option to increase the benefit amount without proof of insurability. All of these riders add to the cost of the premium.
Discounts to Look For When it Comes to Disability Insurance Premiums
It can all add up pretty quickly depending on these factors. Medical professionals should expect to pay as much as 4 percent of their income towards disability income protection. Discounts can help reduce the cost of a disability policy if you know what to look for.
- Women can benefit from policies that offer unisex rates with savings of up to 40 percent.
- Some disability carriers offer a discount when three or more policies are purchased at once. Also known as a multi-life discount.
- Some medical employers have arranged for an employee discount with some carriers.
To avoid future surprises, make sure the discounts that are applied to future increases in coverage. And of course, you should always seek the guidance of a qualified disability specialist who can help you shop the universe of disability carriers for the best pricing.
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