Long-term disability insurance is sometimes available through your employer or by purchasing an individual policy. If you experience a covered illness or injury and can’t work for the specified amount of time written in your policy, it can pay up to 60% of your monthly salary. It’s more expensive than short-term disability, but you might find ways to save by adjusting your coverage.
What’s the average cost of long-term disability insurance?
Your coverage is based on a percentage of your salary, and so is your premium. Your rates will typically be between 1% and 3% of your annual salary. Rates depend on the percentage of your salary you want to be replaced, how long you want coverage to last and how long you’re willing to wait to begin receiving benefits.
What factors affect my disability insurance cost?
As with any insurance, your personal information and the specifics of your policy determine how much you pay every month to keep your policy. The most common factors to determine your premium include:
- Age. The older you are when you buy your policy, the higher your disability premiums will be. This is because the risk of disability increases as you age. If you get a non-cancelable disability policy, your rates are locked at the age of purchase.
- Benefit period. Some policies let you choose the time limit for how long your policy will pay out benefits. This set number of years can range from two years to retirement age. The longer your benefit period, the more your premiums will cost. But if your benefit period is too short, you could end up without coverage and still unable to work.
- Coverage amount. This is the monthly amount you’ll be paid if you’re totally disabled. It typically ranges from 40% to 60% of your monthly paycheck. A higher payout percentage usually means a higher premium.
- Health. Not only do most disability policies have rules about pre-existing conditions, but your health and medical history can factor into the cost of your premium. You’ll be charged extra for habits like tobacco use.
- Location. Insurance rates vary by state, and disability insurance is no different. Usually a higher population state will come with higher rates because more people are making claims.
- Occupation. How much money you make will affect the cost of your premiums. The higher your salary, the more you’ll pay in premiums. This is because your insurer will have to pay out more money in the case of your disability.
- Riders. Some policies offer riders to customize your coverage, most of which cost extra. For example, the waiver of premium rider allows you to skip paying premiums while you’re out on disability.
- Waiting period. Long-term plans usually come with a waiting period — or elimination period — of 30, 60, 90, 80 or even 720 days. A shorter elimination period means a higher premium.
How do I get the cheapest long-term disability insurance?
To help you save money, keep the following in mind before you apply:
- Age matters. The younger you are when you apply, the better your rates will be. Buying disability insurance while you’re young and healthy translates to better rates.
- Weigh the cost of riders. Before you add a rider to your policy, make sure the extra costs are worth the benefit you’ll get down the road.
- Know what you need. Understanding exactly how much coverage you need and for how long can ensure you don’t pay for more coverage than necessary.
Long term disability rates by age
The table shows a breaks down of rates in 10-year increments from 30 to 50 years old for a healthy, non-smoking man with an annual salary of $50,000 and $100,000.
|Age||Monthly premium for a $50,000 annual salary||Monthly premium for a $100,000 annual salary|
|30 years old||$59 to $80||$90 to $121|
|40 years old||$79 to $107||$119 to $161|
|50 years old||$127 to $171||$190 to $258|
*Based on sample rates from Policygenius, July 2020.
Get quotes for long term disability insurance
Disability insurance is one of the most cost-effective ways to protect yourself from the unknown. But you can still save money by applying as soon as possible, adjusting your benefits to reduce your costs and comparing your disability options to get the best deal.
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