The cost of disability insurance contracts can vary greatly. Policy language, plan design and coverage amounts will all factor into the cost. More specifically, the insured’s age, gender, monthly benefit, waiting period, optional riders and the occupational classification will all be considered and ultimately determine the premium they charge for the insurance you purchase. As a general rule, the younger a physician is, the lower the premium charged. And policies utilizing a more specific definition of disability will be more expensive than one offering a broader definition (like any-occupation).
As you evaluate costs and determine which disability plan might be right for you, consider the following:
- Type: a non-cancelable policy means the plan cannot be canceled, the benefits cannot change, and the premiums cannot increase. These contracts can be attractive because they ‘lock-in’ rates, but that comes with a cost and can make these plans more expensive. A guaranteed renewable policy, on the other hand, guarantees the coverage cannot be canceled – but premiums can (and usually do) increase. In most cases, guaranteed renewable contracts utilize 5-year age band rates, with rates increasing as you move into a new age band. These plans are typically less expensive while you’re younger but get more expensive as you age.
- Occupation: within the medical profession, an insurance company typically rates each specific occupation differently. In other words, specialties that are more likely to produce a claim (from a disability) tend to cost more. A family practice physician and an orthopedic surgeon, both 43 year old males and both selecting the same coverage, are still likely to have different premium amounts.
- Amount: a policy with a larger benefit amount will obviously cost more. Some policies offer a “future increase option”, where you can increase the benefit amount if commensurate with income – without additional medical underwriting. A policy offering that feature will be more expensive than one without, even if they have the same base benefit amount.
- Language: policies utilizing an own-occupation definition of disability will be more expensive than one using any-occupation The more specifically your occupation is defined, the more expensive the policy. That’s because the precise language is more likely to trigger benefits, in the event you can’t perform your specific specialty.
- Riders: policies can come with a variety of riders. These “additions” to your policy will obviously make the coverage more expensive but may be well-worth the added costs. When comparing costs, make sure you include an apples-to-apples comparison of the riders as well.
- Age: the general rule of thumb – the younger you are, the better the insurance rates. Some plans use nearest age, while others might use current age. That means waiting even a month to purchase could be costing you money.
- Health: as with age, the general rule of thumb is the healthier you are the better the rates. However, there are exceptions to this rule. As a young physician, for instance, you may receive offers with limited underwriting. That means your health status may not influence the cost of coverage you purchase – which could be extremely beneficial for those with current health issues. Look for terms such as GI (guaranteed issue) or GSI (guaranteed standard issue) to spot these offers.