The Average Cost for Disability Insurance

Disability insurance can be purchased as an individual policy, or provided by an employer as part of a group insurance plan. Costs can vary depending on many factors, including the elimination period, benefit period, the age of an individual, his occupational class and the benefit amount.

Individual Cost

Individuals who purchase a disability income policy can expect to pay about 1 percent to 3 percent of their annual salary. This means that an individual with an annual salary of $50,000 can expect to pay between $500 and $1,500 per year. The benefits provided typically total about 60 percent of an individual's salary per year. However, insurers normally offer discounts that can be used to lower the policy's cost.

Discounts

Insurance companies have many types of discounts that can be applied to an individual's disability income insurance policy. For example, the policyholder might select a longer waiting period before benefits are paid. Insurers also may offer a discount when more than one policy has been purchased or is in force. Discounts also can be applied to the policy when a shorter benefit period has been selected.

Monthly Expenses

One of the biggest factors used to determine how much an individual will pay for disability insurance is her monthly expenses. This typically includes everything an individual spends on living expenses and includes rent, mortgage payments, groceries, phone bill, gas and other bills. The total amount of monthly expenses influences the amount of coverage selected, which in turn affects the cost of the policy.

Annual Inflation

Inflation increases every year and can be factored into the cost of the policy. The most common measure of inflation is the Consumer Price Index. Individuals who select a short-term disability policy are not really affected, but if an individual is disabled for a long period of time, the projected rate of inflation should be considered.

Additional Options

Disability insurance comes with additional options or riders that can affect the cost. One example is a cost-of-living rider. This can increase the premium cost between 20 percent and 40 percent, but will pay increased annual benefits when an individual becomes disabled.

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