How Much Does Short-Term Income Protection Insurance Cost?

“How much does Disability Insurance cost” is the second most asked question our customer service team receives and it’s met with the single most unsatisfying answer of all time. – It depends.

We know! And we told you it would be deeply unsatisfying. “It depends” is a horribly vague term for what’s going to be a long answer. We’ll try simplifying it by using the same format we used in our last post about “Insurance Coverage If You’re Already Sick or Hurt,” one short answer and one longer, more in-depth answer, to help give you all the knowledge necessary to make an informed buying decision.

Short Answer:
The price of your monthly premium generally depends on your age, the amount of coverage you buy, the type of work you do, the amount of time you’re willing to wait for your cash benefits to kick in after filing a claim (elimination period) and the amount of time you want your benefits to last (benefit period.) Generally, individual buyers spend between 1-3% of your salary on income protection insurance.

Longer Answer:
Your monthly short-term disability insurance policy cost depends on how you turn a few specific dials. Let’s go through the list together:

Coverage Amount
Consider this, how much money do you need each month to cover your fixed expenses like rent and groceries? The number you come up with should be your basis for the amount of coverage you need or the amount of income you need to insure in case of an unexpected illness or injury. The amount you pay for an income protection insurance policy can be higher or lower depending on the amount of your income you need and can afford to insure.

Elimination Period
If you have health insurance, you have probably heard the term deductible which is the amount of money you need to pay before the insurance company will begin providing benefits. In Income Protection Insurance the Elimination Period is the amount of time, in days, you need to be disabled before the insurance company will begin providing benefits. The longer you’re willing to wait for your benefits to kick in, the lower your monthly premium will be. The decision on whether to buy a policy that has a shorter or longer elimination period all depends on your own unique financial situation and risk tolerance.

Benefit Period
This is a fancy term for how long you would like your benefits to last in case you become hurt or sick and can’t work.  Typically, a short-term income protection insurance policy provides you benefits for up to 6 months to 1 year which is perfect if you do not have the savings available to you to cover your expenses. The amount of time you want/need benefits to last depends on your unique situation. Make sure to consider the benefits you already get from your job and how much money you have in savings before committing to a policy. Place note, that individual policies that you pay for provide tax-free benefits. Benefits provided and paid for by your employer are typically subject to federal and state taxes.

Statistically, you’re more likely to lose income due to an unexpected illness or injury when you’re older, there’s no way around that. If you’re older and trying to buy income protection insurance, typically, you’re going to pay more, sad but true.

Your Job
The work you do also plays a part in how much your monthly premium will cost. Typically, someone with a low-risk job, like an office worker who works behind a desk all day, has a lower monthly premium compared to someone of the same age who works on a crab fishing boat in the Bering Sea. The more risk associated with your job and the more physically demanding it is, the more you’ll typically pay on your monthly premium.

At the end of the day, there are other factors that can impact your overall monthly premium including your height and weight, your overall health and whether you smoke, but knowing and understanding these 5 factors can help when you are considering what kind of Income Protection Insurance is right for you and how much you buy.

It’s also good to note that most workers are eligible for a long-term disability Program call Social Security. We pay taxes out of each paycheck for this long-term disability program. It is called a long-term disability program because benefits could last until age 65. But (and we’ll get into this in our next blog post) it can also take a long time to actually be approved for benefits under the program. Social Security Disability Insurance is intended to cover serious disabilities resulting in permanent impairments to your ability to earn a living because of an illness or injury. It can take a year or more to get Social Security Disability Insurance benefits.

If you have any questions or comments drop us a line here or contact our help desk, we’d love to hear from you.   

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