How Much Does Disability Insurance Cost?

Disability Insurance, Selling DI

Disability income insurance is different from all other types of insurance. The cost of your car insurance is based on how many years you’ve been driving (your age), the value of your car, your driving history and a few other factors. The cost for disability income insurance is based on similar components such as age and your medical history - however, unique factors affecting the cost of disability insurance are related to the policy features chosen by the insured. The decisions your client makes about policy design also impact the price.

Your client can expect to pay between 1-4% of his/her annual income for a disability insurance policy. This annual cost seems high when compared to a client's auto insurance coverage but consider the length of time benefits are received and the amount of money your client could receive throughout the life of the policy.

Below are details about the factors affecting the cost of a disability insurance policy.


Insurance companies underwrite disability coverage based on the risk of an applicant filing a claim. The older we get, the greater the risk of experiencing a disability. This increased risk is not only related to the aging process. The more time we spend in the workforce also increases the risk for occupational and/or repetitive injuries.

Because there is a greater risk, disability insurance is more costly for older people. This is one of the many reasons we encourage professionals to think about disability income insurance early in their careers when it’s more affordable.


All other factors being equal, women can pay up to 40 percent higher premiums for disability insurance. While this may seem unfair, from the insurance company’s perspective, women typically have more risk of experiencing a disability. Women suffer more disabilities that impact their careers and statistically file more claims than men. Disability insurance claims for women also typically last longer.

Something women can do to help even out the premium discrepancy is to find a policy that offers unisex rates. A unisex rate can reduce a woman’s insurance premium by 30-50 percent. Unisex rates are common among multi-life cases – such as a group of co-workers from one employer or a professional association – where the insurance company can spread the risk over multiple customers.


Insurance companies will pay close attention when assessing a potential insured's health. Clients will be asked about medical history and current health conditions. These questions will also include past and current tobacco use, current medications and dosages, etc. Your client will also likely have to submit to a paramedical exam.

The paramedical exam is like a physical checkup. An independent, third-party vendor will conduct the exam which is paid for by the insurance company. The paramedical examiner will record the applicant's height, weight, body mass index, pulse and blood pressure. The examiner will also collect blood and urine and other data depending on medical history and the requirements of the underwriter.

ExamOne is an example of one company performing paramedical examinations. Find out what clients should expect in their exam here.

The paramedical examiner will also ask several questions about your health. Some questions will be repeats of what your client provided on the application. These include:
  • Family medical history
  • Pre-existing conditions
  • Medications you’re taking
  • Whether you drink alcohol or use tobacco
The answers provided will be used to validate the health information provided in the application, but they'll also inform underwriters of any medical concerns that could affect the insurance carrier's risk.

Occupational Hazards

How much a client pays for disability insurance heavily depends on what he/she does for a living. A pilot potentially encounters more risk in their daily duties than someone working in an office. A less obvious comparison is a construction worker and a construction foreman. The construction worker performing the manual labor has more risk than the foreman who is in a managerial role. Most insurance companies will also ask questions about the regular duties performed, to get a better understanding of day-to-day occupational risks.

Different jobs are grouped into specific risk classes; these classes are slightly different for each insurance company. The occupational classes are numbered on a scale of 1 to 5 or 6. Typically, the higher the number, the less risk an insurer considers that profession. Occupations with lower numbers have more risk and higher premiums. Factors considered when establishing occupation classes include:
  • The likelihood of becoming disabled because of risk associated with a particular job
  • The amount of strenuous manual duties
  • The probability of an insured returning to work following a disability
  • The disability claim experience associated with the profession
Because there are differences in occupation classes and insurance coverage features between disability insurance companies, we typically provide quotes from multiple carriers for each client.

Financial Underwriting

The amount of disability insurance money an insured can receive is based on a percentage of income. Therefore, an important part of the underwriting process and determining how much your client's cost will be is based on income. This is done through financial underwriting. The insurance company’s underwriter may look at the following:
  • Earned income
  • Unearned income – income from property, pensions, inheritance, etc.
  • Overall net worth
  • Bankruptcy history, if applicable
For underwriting purposes, income is considered earned if a disability would stop or reduce it. Investment or business income that is not dependent on your client's ability to work will not be included in financial underwriting.

Clients will have to provide personal tax returns from the previous year. In many cases, the insurance company will also want to see pay stubs, to help calculate year-to-date earnings. If your client is a business owner, the underwriter will also want to see business tax information.

Where You Live

Where your client lives will greatly impact the cost for disability insurance. The difference could be as much as 30 percent. The variation in cost is based on three factors:
  1. State regulations. Some states have more regulation on insurance products than other states. This makes it more expensive for insurance companies to get products approved by a state’s insurance department.

    Carriers frequently limit the products they offer in states with strict regulations. Fewer carriers mean less competition which can also increase the cost.
  2. Claims history in states. Insurers also base their rates on the claims history in a particular region or state. The more disability claims an insurer experiences in an area, the more it will charge all customers in that area.
  3. Living costs and income levels. Disability insurance cost is based on the insured’s income. Therefore, states and regions where people earn more income and have higher costs of living make income replacement more expensive.

Disability Insurance Plan Options that Affect Cost

Other factors that affect premium costs are choices your client makes when selecting a policy. Insurance carriers offer options for some plan design features, including…

Benefit Length

The Benefit Length refers to amount of time the policy will pay out benefits. The longer the insured receives payments, the more the policy will cost. Some policies pay a monthly benefit for a specific period, such as 10 years. Others pay until the insured reaches a certain age. Most carriers offer a few options that’ll help your client tailor the policy to their specific needs. Some clients may prefer a longer benefit period and feel the additional cost is worth extending coverage.

Waiting/Elimination Period

Disability insurance policies include a waiting period, which is sometimes called an elimination period or qualifying period. It’s the amount of time between when a disability occurs and when benefits will start being paid.

The elimination period for disability insurance is like the deductible on your auto insurance. It’s the part your client pays out-of-pocket before benefit payments begin. The longer the waiting period on a disability insurance policy, the less the insured will pay in premium.

disability insurance contact usIf you have any questions or want to learn more, please give your Local Sales Rep a call!