How Much Does Disability Insurance Cost

How Much Does Disability Insurance Cost

A steady income is considered to be a basic necessity of the common man in the modern era. However fate is not always in favor of all mankind, and there are scenarios where people are indisposed. And, hence are not able to work for a certain period of time.

Disability insurance is basically an insurance policy that helps people maintain a certain volume of income, even when they are indisposed. The sole aim of the policy is simple, if the person is not able go to work for a given period of time, he or she should have a certain income to maintain some basic necessities. There are several parameters and concepts that are attached to this insurance policy and its cost derivation.

What is Disability Insurance

In simple words, it is an insurance policy that helps a person to pay for basic expenditures when he/ she is indisposed, and cannot go to work for medical reasons.

Any working person can take such a policy. A requisite premium has to be paid by the policy holder every year. In cases where the person suffers from any illness or accident, and is not able to go to the office, then his/her income stalls. This is when the disability insurance policy pays for the basic necessities of that person.

Note, medical expenditures are not covered under this policy, because such expenditures are covered by the medical insurance and health insurance. The disability insurance pays expenditures such as educational expenditures, rent, food expenditures etc.

The insurance policy, in some cases, is provided fully or partially by the employer. In cases where the employee is a workman, or the work profile involves a prominent risk. Then the policy is provided and premium is paid for by the employer. This is usually observed in cases where the establishment recruits several workers in factories. The white collared personnel are however rarely provided such services, and they have to purchase and pay for their own policy.

About Disability Insurance Cost

A good average disability insurance will amount to $600 to $1,800 per year. In many cases where the employer provides for the insurance policy, about 1 to 5% of the employees income is paid as a premium. If you do the policy on your own, then you will have to pay a premium.

You are also at a liberty to choose between a short policy and a long term policy. The short term cost will amount to 2 to 3% of the annual income. The long term insurance cost will amount to 4 to 5% of the annual income.

Some points that are considered by insurance companies while providing such insurance policies include:

  • The first thing that the insurance company considers is the age of the patient, the more the age of the patient, more expensive is the annual premium.
  • The company conducts a medical examination where diabetic and blood pressure patients are examined. In such a case, where the applicant suffers from chronic illness, the annual premium is much greater.
  • Smoking and non smoking and driving records are some personal records that are examined by the company to ascertain the insurance cost. Smokers and rash drivers are usually made to pay higher price for premium.

Basically, if you want to know the cost for covering disability, be ready to pay about 2 to 5% of your annual income. It is better to be safe than sorry.