A number of factors determine the cost of an individual disability income policy, including:
Age
Younger persons pay less per year for a policy than those who are older and more likely to become disabled. Note that the vast majority of companies don't issue policies for people older than 60.
Benefit Amount
Policies that replace more of an individual's salary are more expensive. A policy that replaces 80 percent of your salary costs more than one that replaces only 60 percent of your salary.
Benefit Period
The shorter the benefit period, the less expensive the policy. For example, a policy with a two-year benefit costs less than a policy that pays benefits to age 65, or the retirement age specified under Social Security.
Current Health Status
Your health status determines whether you are eligible for standard rates or rates that are higher. A policy also may exclude from coverage any health conditions that exist before the policy is issued.
Definition of Disability
A policy that pays benefits if you are unable to perform the duties of your own occupation is more expensive than a policy that pays benefits if you are unable to perform the duties of any job for which you are reasonably qualified.
Elimination period
This is the waiting period before benefit payments will begin. The waiting period usually ranges anywhere from the 31st day to six months or more after the onset of the disability. Depending on how much money you have saved, and your other resources, you can reduce your premiums by electing to wait 60 days, 90 days, or even six months before you start to receive benefit payments.
Discounts
Many companies offer discounts for policies issued at the same time on more than one person, as well as when an employer (or association) collects the premiums for individual policies from employees and pays the insurer.
Extent of Disability
A policy that pays benefits only if the policyholder is totally and permanently disabled costs less than a policy that also pays benefits for a partial or temporary disability.
Gender
Women usually pay more than men for an individual policy because claim costs are higher for women than men. Under a group policy, however, men and women typically pay the same rate.
Optional Benefits
For an extra premium, some policies offer additional benefits, such as cost-of-living increases or the option to purchase higher benefits in the future.
Smoker/Tobacco Use
Most companies either give a discount to non-tobacco users or add a surcharge to the premium for tobacco use.
Type of Job
Expect to pay more for a policy that covers a high-risk occupation compared to a low-risk occupation.
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