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The Cost of Disability Insurance: How It’s Calculated + What to Know

Everything from your profession, to age and gender, to specific policy decisions, impacts the cost of disability insurance. However, you can expect to pay 2% to 4% of your income for specialty-specific disability coverage.

Although disability insurance comes with a cost, it can provide financial protection for you and your family when you need it the most. 

According to the Council for Disability Awareness, medical conditions like cancer, heart attack and diabetes cause the majority of long-term disabilities. But other common issues like back pain, injuries and arthritis sideline many Americans from their jobs and income.

Disability insurance makes sense for most physicians, given your education investment and future earning potential in your medical or dental specialty. Keep reading to learn what can impact the cost of disability insurance for you.

What is disability insurance?

Disability insurance acts as a partial income replacement if you’re too ill or hurt to work. Short-term disability insurance is often employer-provided and typically pays out benefits for three to six months. Whereas long-term disability (LTD) insurance applies to injuries or medical conditions that might linger for years.

Long-term disability insurance offers benefit periods ranging from two years up until traditional retirement age. It won’t replace your entire salary. But you can typically purchase a policy that covers up to 60% of your gross monthly income.

Long-term disability insurance: Any-occupation vs. own-occupation

There are many variations of long-term disability insurance. Specifically, a policy’s definition of disability can dramatically change your level of coverage.

Physicians, and other high-income earners, should opt for an own-occupation policy that protects their medical or dental specialty income.

With this type of policy, you’ll receive disability insurance benefits if you’re unable to perform the “substantial duties” of your specialty. In contrast, with a standard any-occupation policy, you’ll need to prove that you’re unable to work, whether it's in your field or another profession.

How much does disability insurance cost?

Disability insurance premiums vary by insurance carrier and policy. But as a general rule of thumb, you should expect to pay between 2% to 4% of your income for own-occupation coverage.

Related: Graded vs. Level Premium Disability Insurance: A Breakdown of Costs

Factors that impact the cost of disability insurance

Disability insurance companies determine your premium rates based on several primary factors, including:

  • Age. The older you are, the more you’ll pay for disability insurance. It’s best to purchase disability insurance at the beginning stages of your career when you’re the youngest.
  • Gender. Unlike life insurance, women often pay more for disability insurance coverage. However, unisex discounts can help reduce your premiums.
  • Occupation. Disability insurance carriers rate occupations according to their risk of filing a disability claim. For example, surgeons and other professionals that rely on their hands are at high-risk compared to a family practice physician who doesn’t perform invasive procedures.
  • Health history. You’ll receive better rates if you’re in good health. Depending on the insurance carrier and policy, you might need a medical exam or health screening as part of the underwriting process.
  • Location. Disability insurance rates can vary by state, so where you live can play a role in your monthly costs.
  • Coverage amount. A higher payout translates to higher premiums. Physicians generally need more coverage than other professions because of their high six-figure salaries and expensive lifestyles. 
  • Benefit period. This is the period of time you’ll receive benefits after you become disabled. The longer the benefit period, the higher the cost of disability insurance.
  • Waiting period. Also called the elimination period, this is the length of time you must wait between experiencing a disabling event and collecting your first benefit payout. A 90-day waiting period is standard, but other options are available, ranging from 30 days to one year.

Additionally, certain lifestyle choices can affect the cost of disability insurance. For example, smoking or engaging in risky activities, such as skydiving, can increase your rates.

Policy riders can change the cost of disability insurance

Many policy decisions impact your premium rates, including a variety of disability insurance riders. These are optional provisions that provide more comprehensive benefits or coverage based on your individual needs.

For example, a future purchase option rider will allow you to buy additional coverage as your salary increases without further medical underwriting. This can be beneficial for residents, fellows and young attendings who haven’t reached their full earning potential.

Other policy riders to consider include partial disability and residual benefits, a cost-of-living adjustment (COLA) rider, catastrophic benefits and many more.

Keep in mind that not all disability insurance riders are necessary, and many can significantly increase your rates. So, it’s best to speak with an independent insurance broker to customize a policy that fits your financial needs, monthly budget and risk tolerance. 

Disability insurance costs by profession

Your occupation is a major determining factor in the cost of disability insurance. Specialties that perform interventional or invasive procedures can expect to pay more for coverage.

Explore the cost of disability insurance for the following medical and dental specialties:

Medical professions

Dental professions

Disability insurance alternatives

For some, the cost of disability insurance might not be within their ideal budget. In which case, there are a few alternatives people usually rely on. This might include:

  • Social Security Disability Insurance (SSDI). The average monthly benefit for SSDI is $1,341 as of February 2023. Therefore, it isn’t a viable option for physicians on its own due to its low payout.
  • Group disability insurance plans. Employers sometimes provide LTD as part of their benefits package. However, these group plans often come with lower monthly benefit caps (e.g., $5,000 to $10,000) and a narrow definition of disability — both of which can seriously limit your coverage.
  • Emergency savings or other forms of being self-insured. Some people choose to forego disability insurance if they have a fully funded emergency fund or the ability to live off of their investments or other income sources.

Most physicians can benefit from an individual disability insurance policy to either supplement their existing coverage or provide a stronger definition of disability. 

Is disability insurance worth the cost?

Long-term disability insurance is worth it with the right policy. It’s the cheapest when you’re young and healthy, but it can pay off even if you’re mid-career. The key is to find a balance between your ideal level of income protection and overall costs based on your household’s financial needs and lifestyle preferences.

Ideally, you want to choose an own-occupation policy with a broad definition of policy to protect your medical or dental specialty. From there, you can make policy decisions (e.g., benefit amount, benefit period, etc.) and include disability riders that make sense for you. For a custom disability insurance quote, fill out the form below!

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