Individual Disability Insurance Cost

Is Individual Disability Insurance Expensive?

(Depends. But either way, in a crisis it may be totally worth it.)

Brandi Calero-Holmes | February 13, 2020
Individual disability insurance cost

Most people think of themselves as pretty invincible. Sadly, though, that just isn't the case. And if the unfortunate happens and you're unable to work, having the right disability protection is key. 

With disability insurance, you receive scheduled payments that are based on a percentage of your salary for an agreed-upon length of time. Pretty great, isn't it? But is it expensive? Well, it doesn't have to be.

With a little help from an independent insurance agent, you can get the coverage you need at a price you can feel good about. That's because independent insurance agents work with multiple insurance carriers to help compare costs and plans with you. 

And if you've got questions, they've got answers. It really is as simple as that. But before you give an agent a call, it's time to talk about the nuts and bolts of disability insurance and what kind of costs it comes with. 

What Is Disability Insurance?

Someone once said if you’re not sure where to start, start at the beginning. And it’s a good thing to know what disability insurance is before getting into the nitty-gritty of the costs. 

Simply put, disability insurance replaces your lost income due to a disability, illness or injury, normally covering between 40% and 70% of your salary. There are several different types of disability insurance that may apply to you, like:

  • Individual long-term disability insurance: This coverage handles long-term injuries, disabilities, and illnesses. These disabilities or illnesses keep you from working and are not to be confused with work-related injuries or illnesses. Coverage lasts years, and sometimes decades, depending on your benefits.
  • Individual short-term disability insurance: Just like long-term disability insurance, short-term also covers injuries, disabilities, and illnesses that keep you from working. Instead of lasting years, this coverage only lasts for days or months, hence the title short-term.
  • Group long-term disability insurance: Group long-term is offered through your employer. You can choose to participate in group coverage or opt out. This policy is offered to all eligible employees at your work and is the kind of disability coverage that lasts for years. Health risk factors are not accounted for since it is rated on a group basis, which is a huge plus.
  • Group short-term disability insurance: This group disability coverage is just like group long-term insurance in the sense that it is offered through your employer and covers disabilities, illnesses, and injuries. Again, it is offered to all eligible employees and you may choose to opt out if you so desire. Health risk factors are still not accounted for on this disability policy type and your employer normally pays for this coverage. 

Government-backed disability programs: 

  • Social Security Disability Insurance: This is offered by the federal government and is a federally funded disability benefits program. Sounds like a big deal doesn't it?
  • State disability programs: State disability programs are in just a few states across the country and offer temporary disability insurance.

For this article, though, everything will be focused on individual disability insurance, the kind you get outside of your employer.

Why Is Individual Disability Insurance Important?

Well, because accidents happen and no one ever expects the unexpected. It's safe to say that the majority of folks out there depend on their income to maintain their lives. And if you can't work due to a disability or illness, you still need some sort of cash to come in because those bills aren't going to just go away. 

With disability insurance, a percentage of your salary is paid out to you to serve as income replacement and keep those bills at bay.

One out of ten people between the ages of 21 and 64 could end up with a disability, so it would be best to get some reasonable amount of coverage. 

A 2017 study done by Cornell University determined that there is up to a $25,000 difference between households without disabilities and households with them. You shouldn't risk financial hardship due to an accident or health issue.

So really, it's important to have some kind of disability insurance. Many employers offer some sort of group disability, but there are often holes in coverage and limitations, which is why an individual policy should often enter the mix, to help keep you going strong. 

Of course, many who have group disability don't know about their potential coverage gaps and just assume it's good enough, but an independent insurance agent can take a look at your existing coverage and help find you the right mix of protection to prep for the unthinkable.

What Does Individual Disability Insurance Cover?

Actually, it varies. Every carrier and plan is different from the next. That's another reason an independent insurance agent is a must. They work with tons of providers every day and can help make sense of it all and steer you toward the protection you need. 

But first, you should start with a good understanding of what your policy covers, and it's important to understand the difference between short-term and long-term disability coverage.

  • Short-term disability covers accidents, injuries, and recovering from childbirth. Each of these circumstances can put you out of work for at least weeks, or several months. But since you will eventually go back to work, the benefit period doesn't typically extend past 12 months.
  • Long-term disability covers more severe illnesses and injuries, like spine injuries or even cancer. This type of coverage can have a benefit period that lasts until retirement. 

It's important to know that medical expenses aren't covered in your disability insurance. But you can always get bundled policies or a few special add-ons to get extended coverage.

How Much Does Individual Disability Insurance Cost?

The costs will vary for just about everyone. That's because the insurance company bases its quote on a number of factors that all go into a fancy algorithm to determine your monthly rate. Among the biggest factors that affect your cost are:

Gender, Age, and Location

A 51-year-old woman in California may have a different policy amount than a 30-year-old man in Kansas. Your age can easily determine your likelihood of having a disability. 

The 2017 study also revealed that roughly a quarter of adults 65 and over have a disability. The location you live in can increase odds as well. For example, large cities are more likely to experience car accidents, crime, and hazardous construction.

Health Habits

The insurance company will want to know if you have a smoking history. Of course, smoking can lead to health issues that translate into a disability.

Benefit Period

The longer the coverage payout lasts, the more expensive the policy will be. Short-term disability is, of course, cheaper and usually lasts several months. Long-term disability could have benefit periods that last all the way until retirement. Depending on the insurance company, you can have more benefit period options to choose from.

Benefit Amount

The disability benefit is a percentage of your income. So the larger the salary, the larger the premium. Therefore, paying monthly costs for 60% coverage on a long-term disability insurance policy will be noticeably higher than 30% coverage on a short-term disability policy. 

Choose the best percentage for your financial situation. If you have other financial tools and savings in place, you may be able to lower the percentage.

Occupation

Is your job hazardous or accident-prone? If you suffered from a disability, could you still do part of your job at least? These are things the insurance company thinks about. For example, a lawyer who suffers a back injury can still do much of their work from home. However, a personal trainer may not be able to work at all. 

Features of Policies

When talking with an independent insurance agent, you'll find that the options they bring may include extra features that could provide more value to the policy, though it may raise your rates.

Once you meet with your insurance agent, you can give them all the info they need to help find the best blend of coverage and cost for your situation. 

How to Get Discounts on Individual Disability Insurance Rates

While there are no real discounts when it comes to individual disability insurance, there are ways to help you lower your rate. Specifically by looking at the factors mentioned above and adjusting the things you can. 

Obviously age only goes in one direction, but hey, if you're overweight or smoke a pack a day, make some changes, you'll end up saving even more in the long run.

Compare Quotes for Disability Insurance with an Independent Insurance Agent

Your time is valuable, so why waste it by trying to go through the disability insurance process yourself? Expert independent insurance agents will help you determine what type of coverage makes the most sense for you. 

Independent insurance agents stay on top of the industry and all the latest discounts so you don't have to. That means they'll help find the perfect amount of coverage at the best price. 

hey don't just help with the initial stage of obtaining coverage, either. If you ever become physically unable to work, they'll  be there to assist you. Now that's assistance at it's finest.

TrustedChoice.com Article | Reviewed by Paul Martin
Sources © 2020, Consumer Agent Portal, LLC. All rights reserved.

http://www.disabilitystatistics.org/StatusReports/2017-PDF/2017-StatusReport_US.pdf?CFID=19572287&CFTOKEN=6907302bc2c37f05-3F154C6C-91E9-EC75-5644740F69354955

2017 Study

Cornell University

© 2020, Consumer Agent Portal, LLC. All rights reserved.

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