What is the average cost of disability insurance?


The cost of disability insurance will depend on several factors - the proposed insured's age, occupation and income, as well as the policy's terms and conditions - including the payment period, the waiting or elimination period and the benefit amount.

For individual policies, the average cost would come down to 1 to 3 percent of your gross annual salary. For instance, if you earn $40,000 annually, then your premiums will be at $400 to $1,200.


However, you can have lower costs of premiums by availing of discounts that the insurance company may offer. These discounts usually involve:

  • Opting for a stricter definition of disability. There are various definitions which the insurance company can use to define disability as payable under the policy. "Own occupation" coverage pays if the insured is unable to perform the duties related to his occupation. Own occupation coverage is more expensive, but anyone who can work for another job can still collect disability benefits. "Any suitable occupation" coverage pays only if the insured is unable to perform duties that will fit any occupation.
  • Multiple policies. Some insurance companies give these discounts if you are buying two or more policies (for yourself and for other members of the household, or one of each type of insurance policy - life, disability, health, etc.).
  • Shorter benefit payment period. You can also lower the cost if you opt for a shorter payment period.
  • Longer waiting period.

There are also additional benefits that a person can opt for, which will increase the premiums:

  • Inflation rider. This additional benefit will automatically adjust the benefit payment amounts annually to account for inflation. Most policies adjust by 3% every year.
  • Return-of-premium rider. This rider pays back the premiums when the policy is terminated, or after a set number of years. This rider can add up to 50% on the cost of the premiums.
  • Cost of living rider. The rider adjusts the benefit amounts based on the current cost of living. The premiums may increase by up to 20 to 40% of the premiums.

For group policies, the premiums will be cheaper, since the employer may sometimes shoulder a portion of the premiums. Or else, even if you pay all the premiums, since the plans are sold by "bulk", the premiums can be lower.

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