Factors Affecting Disability Insurance Costs

It’s one thing to know just how much you need disability insurance. However, it’s another thing to know how much it costs. You must understand the factors affecting disability insurance costs for the best rates.

This post will put you through all there is to know.

Factors Affecting Disability Insurance Costs

Your rates for disability insurance are influenced by a variety of factors, including:

Age

Age affects the cost of acquiring disability insurance. Purchasing insurance while you are younger and less likely to become disabled will result in lower rates.

Benefit period

This is the length of time you will get disability benefits. Benefit lengths may be for two, five, or ten years, up to age 65, or for life. The higher the premium, the longer the benefit period. 

Experts suggest a minimum benefit duration of five years.

Coverage Amount

The bigger your disability insurance requirements, the higher your premiums will be. A person with a six-figure income will need more coverage than someone with a lesser income. Hence, a person with a higher income will pay more for disability insurance. 

Experts recommend a level of coverage equivalent to sixty percent of your gross (pre-tax) income. Benefit payments are not taxable; thus, 60% of your current take-home pay will equal 100% of your benefit payments.

Health

Your rates for long-term disability insurance will be more affordable (lower) the healthier you are. Additionally, health-damaging activities like smoking and medical conditions like diabetes and hypertension will increase insurance premiums. Throughout the underwriting process, these factors will be examined.

Location

The cost of long-term disability insurance varies by state. They tend to be higher in areas where more people make claims, but each insurer’s rates differ, so compare costs.

Occupation

More likely, you will get a disability if your profession is more hazardous. If you have a dangerous career, disability insurance may be expensive or provide fewer coverage options.

Waiting period

Between being disabled and getting benefits from long-term disability insurance, there is a waiting period, commonly known as the elimination period. The shorter your waiting period, the higher your disability insurance premiums will be.