How Much Does Disability Insurance Cost?
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.
Age
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.
Gender
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.
Health
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.
