couple learning about the cost of disability insurance

How Much Does Disability Insurance Cost

The cost of disability insurance is based on multiple factors. Although similar to other types of insurance, disability insurance has unique differences. 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.

One factor affecting the cost that is unique to disability insurance are the policy features chosen by the insured. These policy features and optional riders also impact the price.

You can expect to pay between 1-4% of your annual income for your disability insurance coverage. This may seem high when compared with auto insurance but consider the length of time and amount of financial benefit you 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 you get, the greater your risk of experiencing a disability. This increased risk is not only related to the aging process. The older we get, the more time we’ve been in the workforce which 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 Influences on Price

All other factors being equal, women can pay up to 40 percent higher premiums for disability insurance. While this may not seem fair, 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 they 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 Affects on Cost

Insurance companies will pay close attention when assessing your health. You will be asked about your medical history and current health conditions. These questions will also include your past and current tobacco use. You 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 your height, weight, body mass index, pulse and blood pressure. The examiner will also collect blood and urine and other data depending on your medical history and the requirements of the underwriter.

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

The paramedical examiner will also ask several questions about your health. Some questions will be repeats of what you 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 you provide will be used to validate the health information you provided in your application. They also inform underwriters of any medical concerns that could affect your risk.

Occupational Risks

How much you pay for disability insurance heavily depends on what you do 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 you perform, to get a better understanding of your 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 disable 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.

Financial Underwriting

The amount of disability insurance money you can receive is based on a percentage of your income. Therefore, an important part of the underwriting process and determining how much your cost will be is based on your income. This is done through financial underwriting. The insurance company’s underwriter will assess your…

  • Earned income
  • Unearned income – income from property, pensions, inheritance, etc.
  • Net worth
  • Your bankruptcy history, if applicable

You 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 you own your own business, the underwriter will also want to see business tax information.

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 ability to work will not be factored into your financial underwriting.

Where You Live

Where you live will greatly impact how much you pay 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 Affecting Cost

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

Benefit length

You can choose the length of time the policy will pay out benefits. The longer you receive payments, the more the policy will cost. Some policies pay a monthly benefit for a specific period, such as 10 years. Others pay until you reach a certain age. Most carriers offer a few options that’ll help you tailor the policy to your specific needs. Some 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 you pay out-of-pocket before payments start. The longer the waiting period on a disability insurance policy, the less you will pay in premium.

Learn more about disability insurance or get a quote today!

4 Mistakes to Avoid When Buying Disability Income Insurance

Buying disability income insurance can be confusing. Choosing the right policy for your unique needs requires time, research and sometimes professional advice. Fortunately, you’ve made the right choice and you’ve come to the right place to learn more!

Disability insurance policies have many moving parts that affect price, coverage benefits and policy features. These moving parts often make polices very tough to compare. Here are the four most common errors you should try to avoid when shopping for and deciding on disability income insurance.

Mistake #1: Not buying enough coverage

When it comes to buying any kind of insurance, people rarely overestimate how much they need. If there’s a mistake to be made in determining a coverage amount, most buyers of insurance — whether it’s life, property or disability — will buy too little.

It’s an easy mistake to make. After all, nobody wants to buy insurance, everybody believes they’ll never use it and many people don’t have extra money in their budget for complete coverage.

But buying too little disability insurance coverage today can cause major headaches if an injury or illness that impacts your ability to earn a paycheck does occur. You could easily lose half of your income or more between what you earned before your disability and what your insurance benefits pay. The problem could be potentially compounded by any medical expenses caused by your disability.

When assessing your disability insurance needs, thoroughly consider:

  • Your current and future income
  • Your current and future living expenses
  • Any increasing expenses resulting from a disability (e.g.—medical treatment)
  • Any increasing cost of goods and services (i.e.—inflation)

Mistake #2: Relying solely on group or employer-provided coverage

Many people make the mistake of relying solely on any group disability insurance they may have through their employer or a professional association. Group plans are cheaper than individual policies because the employer or association is paying either part or all the cost. Also, group coverage is easier than researching individual coverage because the employer or association has already done all the leg work. Plus, since most people don’t anticipate ever becoming disabled, it’s easy to believe group insurance is more than enough.

Group policies are a good way of supplementing your disability coverage, but you should never rely solely on one. Doing so puts you at risk of:

  • Losing coverage because of a job or membership status change
  • Having the sponsor or insurer cancel the policy
  • Only getting benefits that cover a fraction of your pre-disability income
  • Only getting benefits for a limited timeframe
  • Having limits on what is considered total disability
  • Not having access to additional key features and benefits available on individual disability plans
  • Paying taxes on the benefits you receive if you become disabled

An individual policy, on the other hand, is owned by the insured. It can therefore be tailored to your specific needs and lifestyle. This type of policy typically cannot be canceled and is guaranteed to renew, meaning the only way to lose coverage is to stop paying premiums.

Mistake #3: Not comparing your disability income insurance options

Would you buy the first car you test drove? Or the first house you walked through? Not likely. Most people spend time comparing multiple options – especially when considering more expensive items – before making a final decision.

The same should be true for disability insurance. While the cost of disability insurance doesn’t equate to the cost of a house or car, it’s a purchase many don’t consider often – or view as optional. You should never limit your search to one policy or recommendation. There are several companies that offer this type of insurance, with different plan features to suit your needs.

When you compare options, you need to look at more than just cost. You should compare various contract provisions, benefits, waiting/elimination periods, features included in the base contract and any optional riders that may be offered. You should also look at the insurance company and ensure that it’s a highly rated, reputable firm.

Doing this without professional help could be a daunting task for most people, but we’re here to help! We’re experts in disability income insurance and we work with many different, top-rated companies. We can help you find the right policy with the right features at the right price.

Mistake #4: Not taking the time to understand all of your policy’s provisions

The worst time to be surprised by what is — or isn’t — in your disability insurance policy is when you must file a claim. Take the time to review the coverage and know as much about the contract before you sign the dotted line and start paying premiums. Again, we’re here to help you understand what you’re getting.

The policy details you should absolutely understand include:

  • How disability is defined – is it own occupation or any occupation?
  • When you can collect for residual or partial disability
  • Length of waiting period (AKA elimination period) – how long do you have to wait until you start collecting your benefits from the insurance company?
  • Benefit length – if you become disabled, how long will you receive benefits?
  • Exclusions and limitations, including disabilities related to mental illness
  • Future increase option – will your income be increasing in the future? Make sure you can increase your disability benefit amount down the road to avoid gaps in income.
  • Catastrophic benefit – do you get extra benefits if you suffer a severe disability that impacts your daily activities?
  • Cost-of-living adjustment on benefits – will your benefits adjust each year to keep pace with inflation?

Disability Insurance Saved Scott’s Lifestyle

Approved SSDI Disability Claim

Determining Social Security Disability Insurance Eligibility

Social Security Disability Insurance eligibility is determined using medical criteria in the Blue Book (Officially: Disability Evaluation Under Social Security). The impairments include the most common medical conditions that are severe enough to keep an individual from working. If you match the requirements of an impairment that is listed, you may qualify for SSDI benefits. SSDI pays benefits to people who are unable to work for at least one year.

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Healthy people running and preventing disability

Avoiding a Disability by Making Healthy Lifestyle Choices

An ounce of prevention, the old saying goes, is worth a pound of cure. That’s certainly true about disability. You can immediately reduce your odds of becoming disabled by making a few commonsense improvements in the way you live.

To learn more about disability insurance and how it works, check out Disability Insurance Basics!

Embrace a healthy lifestyle

Oh, you’ve heard this one before? It’s still true. Shedding bad habits and adopting healthier ones creates an abundance of benefits – not just for you, but for the people who love you and want you to stick around a long time.

Quit Smoking

It’s no secret that nicotine use has been linked to a variety of life-threatening illnesses, from cancer to heart disease and stroke. If you’re a smoker, make quitting your top priority. Need help kicking the habit? The American Cancer Society can help.

Get regular checkups

Think of your doctor as an ally who helps keep you well, not just the person who treats you when you’re sick. Regular checkups and screenings are vital, especially if you or your family are predisposed to certain medical conditions. Wondering about which screenings and immunizations you need? Ask your primary healthcare provider or visit the US Department of Health and Human Services website.

Get regular cancer screenings

Early detection saves thousands of lives every month. Your family history and certain risk factors sometimes indicate that a person’s screenings should start at a younger age. Ask your doctor, or visit the American Cancer Society website for more information.

Watch your weight

Those extra pounds can cause big trouble. They strain your heart, raise your blood pressure and significantly increase your risk of a heart attack. Eat more high-fiber, nutrient-rich fruits and vegetables, and fewer high-fat foods. For more dietary information visit the US Department of Agriculture’s Choose My Plate Website. Calculate your body mass index (BMI), to assess your personal situation, with this tool from the National Heart Lung and Blood Institute.

Get regular exercise

A healthy life requires periodic physical activity. To prevent heart disease, cancer, high blood pressure and obesity, the American Heart Association recommends 30-60 minutes of exercise at least four times a week.

Avoid excessive drinking

While drinking in moderation is usually fine, heavy drinking can lead to liver damage and other serious health risks. The Substance Abuse and Mental Health Services Administration can answer your alcohol questions.

Become safety-minded

Disability-causing incidents can spring up when you least expect them. Stay alert for possible dangers. Drive defensively. Wear your seatbelts. At work or play, always use the recommended safety equipment. For more information, visit the National Safety Council.

Watch your back

Back injuries and arthritis are the leading causes of disability. You can reduce your chances of injury by losing weight, do gentle stretching exercises before a rigorous workout, and practice sound weightlifting techniques. The Cleveland Clinic Health Information Center is an excellent source of information.

Cultivate your mental and emotional health

Good relationships and a positive mental attitude really help. Maintain contacts with family and friends. Stay active and involved through work, recreation and perhaps volunteer work in your community. Yes, it’s a 24/7 world but no one can work 24 hours a day. Take time for relaxation and doing things that make you happy. Reducing stress reduces the likelihood of some physical illnesses.

For more information, visit Mental Health America.

Source: Council for Disability Awareness
mage courtesy of Amalludin Rateman

Protect your income and hard work with disability insurance

Disability Insurance Protects Your Hard Work and Your Income

You’ve worked hard to get where you’re at. Your hard work allows you to earn an income and pay for things you need – or want – in life. If you suddenly became unable to work, your paycheck would most likely stop – making it difficult to pay your mortgage, car payment, utilities, etc. Disability insurance protects your income and […]

financial expenses and disability insurance

Disability and Loss of Income – 10 Expenses to Consider

Disability and the experiencing loss of income has huge financial implications that few are prepared for. Without the ability to maintain a steady income, workers may fall behind on utilities, mortgages, etc. and have trouble making ends meet.

In fact, about 77 percent of consumers (shareable infographic) said they would not be able to pay their bills for more than a year if they suffered a loss of income, according to the Council for Disability Awareness. However, the time those who are disabled are out of work is often more than two years, according to the CDA.

The recent Disability Insurance Awareness Month highlighted the importance of coverage in case you are unable to work. If you have to spend days, months, or even years away from the office, disability insurance could give you the funds to cover that loss of income and pay your bills.

Here are 10 expenses you need to prepare for in case of a disability:

1. Medical Costs

Once you experience a disability, you may be required to visit specialists, perform medical tests and buy medications to help you recover and treat your condition. These expenses would be in addition to your regular expenses you’re expecting to pay. The last thing you should have to think about during a disability is to figure out to pay for treatment.

If you don’t have enough funds in your savings, you may end up resorting to putting charges on your credit card—and you could go into medical debt.

About 43 million consumers  (PDF) have delinquent medical debt on their credit reports, according to the Consumer Financial Protection Bureau.

2. Loss of Income

In the case of disability, not only would you have to cope with medical bills stemming from your injury or illness, you would also have to deal with income losses from missing work and recovering. Some may be fortunate enough to have saved vacation or personal time off, but how long could that last? What do you do when your PTO runs out and you still don’t have a paycheck?

The loss of several paychecks—or more, depending on how long you are out of work—is not to be taken lightly.

3. Utility Bills

Keeping the lights on — and other basic utilities — is a necessity for everyone. A leave of absence from work and the subsequent loss of income may make it harder to pay for gas, heating and electricity. To complicate things, if you’re not working, you’re most-likely stuck at home all the time. The creature comforts, or loss of creature comforts become more noticeable when you can’t escape from them.

Do you have enough emergency savings to cover what could potentially be many months of utility bills?

4. Rent or Mortgage

Housing is usually the biggest single expense for consumers. Also, keeping a roof over your and your family’s head is paramount. You could risk eviction or foreclosure if you fall behind on your rent or mortgage.

Since a disability stretching for more than two-and-a-half years could equal 135 weeks of missed paychecks, you may have to dip into your savings to pay for your housing.

5. Internet and Phone

If you were disabled and couldn’t work, you would still need to account for the services provided by your Internet and phone companies. You still need to stay in touch with family, be able to contact doctors, etc.

You could choose to cut your service package or switch to a lower-cost plan but for most, not having internet or phone is not an option.

6. Food Expenditures

Disabilities often bring on a change in both your budget and your health situation. In either case, you may need to change eating habits or follow a special diet to accommodate your medical condition. While cutting back on dining, food is another one of those things we can’t do without.

7. Transportation and Gas

If you were disabled, you would need to take into consideration how you would get to and from doctor’s appointments, the pharmacy and other places. If you were to find a car too expensive, you might opt to take public transportation instead.

8. Insurance

Although insurance—health, car, home, renter’s, and other policies—often only makes a small dent in your regular paychecks, in the case of a loss of income, you would still need to take this expense into consideration.

Add up how much you would require in cash reserves to stay current on insurance for a yearlong disability or longer.

9. Child Care

If you were disabled with a condition that would mean you needed more child care services, you would need to budget for this higher cost.

For example, if you were disabled, you may need someone else to watch over your children while you visit doctors and other medical appointments.

10. Fees and Interest

While you could put all your household bills on your credit cards, this may be an unsustainable way to pay your expenses in the case of a loss of income.

Not only would you have to deal with rising payments from interest, you also risk having fees from overdrawing on your limit.

All of these considerations make a loss of income resulting from disability a big challenge. But if you carry the proper income protection coverage, you could get back on the job without the added stress of bills piling up in the background.

Source Council for Disability Awareness
Image courtesy of frankieleon 

Accidents Can Happen to Anyone – Disability Insurance Can Protect Your Income if it Does

“Who would have expected to be permanently disabled from a broken arm?”

Delayed Social Security Disability Benefits forced Monica to use her retirement savings after a simple broken arm turned tragic.

Monica had it all by the age of 37: A successful career in the financial field, a wonderful son, and big dreams for the future. She never dreamed a disability would change her life forever.

But, in January 2003, Monica stepped off a porch and slipped on the wet ground. She went down, trying to brace her forward fall by stretching out her arms for support. Her right elbow, shattered in a dozen places, needed to be surgically repaired.

After initial recovery, Monica developed osteonecrosis, a condition known as “dying of the bone.” Monica’s humerus bones started to crumble and she became confined to a wheelchair. Monica eventually hired a caretaker to help her do basic daily tasks, such as bathing, eating, and dressing.

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Young business woman learning about disability income insurance policy components.

Everything You Need to Know When Buying Disability Insurance

There are a lot of things to consider when buying disability insurance. Just like other types of insurance, the decisions you make will affect your disability insurance benefits, coverage and premiums. The best way to make sure that you’re making responsible decisions is to evaluate your situation and long term needs. Below are important factors from that can help you when buying disability insurance.

Amount of Coverage

While there’s no substitute for a thorough needs analysis conducted by an insurance professional, you’ll find that most policies cover between 50% and 70% of your income. When thinking about how much coverage you need, consider both short-term and long-term expenses, as well as any other sources of disability income, such as investment income or group disability income coverage.

Group Disability Coverage

Some employers, including most larger ones, offer group disability insurance. However, an employee may still need to consider individual disability insurance because the coverage offered by the company might be insufficient. In this case, the amount of individual insurance you can obtain will be affected by the amount of group coverage you receive.

Elimination Period

This is the amount of time you are required to wait after a disability occurs before you can receive benefits. It can vary from as short as 30 days to 90 days or longer. Longer elimination periods generally translate into lower premiums. However, you should be certain that you could afford to meet all of your immediate needs for that period of time if you were to become disabled.

Benefit Period

Another policy option concerns the amount of time you will receive benefits. They can last for between one and five years, up to age 65, or even for life, depending on your specific needs. The benefit period will directly impact your premiums—the longer the period, the higher the premium.

Taxable or Tax-Free Income

When employers pay your insurance premiums, the benefits you receive will be taxable because they are considered income. If you pay your premiums with after- tax dollars, then your benefits will be tax free (according to current IRS regulations).


When considering the amount of coverage you need, keep in mind that you will probably want to continue funding your retirement needs, even if you are not working.

Definition of Disability

Some plans pay claims if you can no longer perform the duties of your current occupation, while other plans will pay benefits only if you are unable to perform the duties of any occupation. Still others will pay benefits based upon loss of earned income. Each option offers a different level of cost and benefit.

Content reproduced with the permission of Life Happens, a nonprofit organization dedicated to helping consumers make smart insurance decisions to safeguard their families’ financial futures. Life Happens does not endorse any insurance company, product or advisor. © Life Happens 2015. All rights reserved.

Social security disability insurance eligibility requirements

Social Security Disability Insurance – The Unicorn of Disability Insurance

Many people believe that social security disability insurance (SSDI) will pay out cash benefits if they’re unable to earn a paycheck. The truth is – only 36% of SSDI applicants ever get approved. You’re more likely to find a unicorn in the forest than you are an SSDI check in the mail. However, knowing the social security disability insurance eligibility requirements and applying early will improve your chances of getting approved.


There are two types of social security disability insurance: Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). The Social Security Administration manages both programs and both require a medical need for eligibility but that’s where the similarities stop. SSDI is only available to those who have worked and contributed via payroll taxes. On the other hand, SSI is an income and asset-based program and eligibility is not based on your work history. To qualify for Supplemental Security Income, your income cannot exceed $735 per month ($1,103 for couples)1.

Social Security Disability Insurance Eligibility Requirements

Financial Eligibility Requirements

You’ve probably noticed the FICA Social Security Tax deduction on the bottom of your paycheck. That is the amount you pay into the Social Security program every paycheck. A portion of this tax goes towards the SSDI program. After a certain number of years paying in to the system, you’ll have earned enough work credits to be financially eligible for SSDI. Work credits are based on the number of years you’ve worked. As of 2016, you have to earn $1,300 to earn one work credit.

Medical Eligibility Requirements

Aside from financial eligibility requirements, you must also have a qualifying medical condition to receive social security disability benefits. There are quite a few medical conditions or impairments that qualify for Social Security Disability Insurance. Some of the more common medical conditions include back injuries, cardiovascular conditions (heart failure, coronary artery disease, etc.), respiratory illnesses (asthma, COPD, etc.), vision and hearing loss, mental disorders, etc.

Applying for Social Security Disability Insurance

Approved SSDI Disability ClaimAs with many government programs, the application process can be tedious. Luckily, the Social Security folks have made applying for Social Security Disability Insurance easier (for most applicants) with an online process. Aside from the basic info – name name, date, social security number – you’ll also need to provide information about your medical condition including diagnosis, doctor contact information, patient ID numbers, list of prescriptions, etc.

Oh yeah… and don’t forget the information about your work history! Social security disability insurance is based on your income. You’ll need to provide details about your income and the name and address of your current employer. The Social Security Administration will also need a list of your employers for the 15 years prior to when your disability began. You should try to gather all the stuff you’ll need prior to applying for benefits, however, you can stop and save the application and come back later if you’re missing something. The Social Security Administration created this Checklist For Online Adult Disability Application (PDF) which lists everything you’ll need to apply for social security disability insurance.

Social Security Administration – Annual Statistical Report on the Social Security Disability Insurance Program

Social Security Administration – Annual Statistical Report on the Social Security Disability Insurance Program Outcomes of Applications for Disability Insurance