The cost of disability insurance is dependent on many factors including your age, gender, specific occupation, location, and amount of coverage. Physician disability insurance will replace lost income in the event you become disabled and lose your ability to work and earn a salary. It provides additional cushion above and beyond short-term disability insurance, workers’ compensation, and any social security disability benefits. Additionally, any benefits that are received by the policyholder are tax-free, unlike employer-sponsored insurance. So how much does disability insurance cost?
How Much Does Disability Insurance Cost?
The cost of physician disability insurance can vary widely depending on your age, gender, medical specialty, the state where you reside, and how much income you need to replace. In general, expect disability insurance to cost 1-2% of your annual income.
Consider the following example
The following assumptions are used for the quotes shown below:
- 30-year-old male located in Texas
- $5,000 in monthly benefit
- 90 day elimination period
- Own-occupation definition of disability
- Standard health underwriting
||30 YEAR OLD MALE
||30 YEAR OLD FEMALE
||$620.10/mo , $7,086.88/yr
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What Influence the Cost of Disability Insurance?
As mentioned, there are many factors that can make disability insurance premiums more or less expensive.
The older you are, the more risk there is that you may experience a disability. Therefore, the cost of disability insurance increases as your age increases. All things equal, someone that purchases disability insurance at 30 years old will pay less in premiums than someone at 35 years old.
Physician disability insurance companies organize medical specialties into different occupation classes that determine risk. Some medical specialties experience higher claims and therefore will pay more in premiums.
Unfortunately for women, females are more likely to experience a disability and therefore will typically pay more for physician disability insurance than males.
Definition of Disability
Every physician disability insurance policy will outline what exactly determines whether you are disabled or not. This definition is everything in a disability insurance policy. An own-occupation disability insurance definition is the most comprehensive definition and will ensure that you receive benefits if you cannot practice in your specific medical specialty, regardless if you can practice medicine in another specialty.
How much you want to receive in benefits if you become disabled also affects how much disability insurance will cost. For example, a surgeon earning $500,000 annually will most likely need more coverage than a family medicine doctor earning $200,000.
After deciding how much you want to receive, the next question is for how long? This is called the benefit period. All disability insurance policies allow you to pick how long your benefits will be paid if you become disabled. While most doctors purchase policies that will pay until age 65, there are 2, 5, and 10-year options available. The longer the benefit period, the more expensive your premiums will be.
If you become disabled, the insurance policy will start paying benefits after a specific period of time, called the elimination period, or waiting period. You have the option to pick between 30, 60, 90, 180, or even 365 days before you start collecting benefits. The longer the benefit period, the less you will pay.
This is huge. The cost of disability insurance depends on your overall health, which is determined during the medical underwriting process. Your height, weight, and any prior medical issues are all taken into account to determine how healthy you are. Additionally, if you smoke you can expect to pay up to 25% more in premiums than a non-smoker would.
Additional Riders and Policy Benefits
Physician disability insurance policies are highly customizable and contain add-on benefits called “riders.” For example, a cost-of-living adjustment rider will increase any benefits paid to keep pace with inflation. There are even features that allow you to receive benefits for student loan repayment and partial disabilities. All of these additional riders will increase the cost of disability insurance coverage.
How Much Physician Disability Costs: 3 Examples
Below are three examples of what a physician might pay for coverage, assuming all three would pay benefits until they turned 65.
$5k Monthly Benefit
A 35-year-old male non-smoker receives a maximum monthly benefit of $5,000. The annual premium is just over $2,500, which mean he pays $208/month. It includes an own-occupation definition of disability. The policy also has a residual benefit rider and a 3 percent annual cost of living adjustment using simple interest.
$10k Monthly Benefit
A 27-year-old male non-smoker receives a maximum monthly benefit of $10,000. The annual premium is $3,350, meaning he pays $279/month. The own-occupation provision is available as a rider. This policy also included a residual disability rider and a 3-percent simple interest cost-of-living adjustment.
$17k Monthly Benefit
A 40-year-old male non-smoker receives a maximum $17,000 monthly benefit. The annual premium is about $5,800, for monthly payments of $483/month. It includes an own-occupation provision and a residual disability benefit. The policy also has a recovery benefit, automatic increases, and unlimited coverage for mental disorders or substance abuse.