Disability income insurance may be a way for dentists and other skilled professionals to help replace wages lost when an injury or illness affects their ability to earn an income. When or if the unexpected happens and you can’t work for an extended period of time, disability income insurance benefits may replace a percentage of your income so you can focus on healing.
Not all disability income insurance policies are the same. Many different factors, options, and policy types may be available to you in a range of pricing. By understanding what affects the cost of your policy (also known as your “premium”), you may be better able to customize a policy to your specific needs and budget.
Explore four major factors in the pricing of disability income insurance as you consider the priorities of your own policy.
1. Age & Health
Younger dentists may be offered lower rates than older ones as statistically, they’re less likely to suffer a disabling injury or illness. In the same way your age may play a role in premium pricing, your current health may as well. It’s common for insurance policies to request and use your health information to price your policy, screening you for potentially disabling medical conditions. Risk factors such as smoking and obesity, or chronic health conditions such as diabetes, may play major roles in the cost of your insurance policy.
2. Policy Options and Provisions
Options, commonly referred to as riders, and provisions are details that may make one disability income insurance policy completely different from another. So, it may be important to understand what each means and how they may affect your premiums:
An own occupation definition may also be worth adding to your policy, even if it affects your premium. Own occupation generally protects you in the occupation that you are engaged in just prior to becoming disabled. If you return to work in a new occupation after becoming disabled, you may continue to receive your full monthly disability benefit payment.
Partial disability coverage may enable you to practice for a reduced number of hours, as your disability allows, while still receiving a portion of benefits. While this provision may add to policy costs, the benefit may be substantial if you’re ever disabled and want to continue your practice at some level.
A cost of living adjustment rider may help keep your monthly disability benefit in pace with inflation. After the first year of a claim, and each subsequent claim anniversary, the insurance company may increase your monthly benefit payments. The increase may be specified as a fixed percentage (ie 3%) or tied to an index such as the Consumer Price Index.
As your income increases, future insurability provisions may allow you to increase your coverage amount without the insurance company reexamining your health. While it could potentially add to the cost of your premium, this option may be important if you expect to earn more in the future than you do currently.
Disability income insurance benefits are not all created equal. If you become disabled, your benefits are determined by the details of your individual policy which dictates how long you’ll be entitled to receive benefits, how much per month you will receive and how long it will be before you begin receiving those benefits.
Ideally, you may want your disability income insurance benefits to continue until you return to work. However, the duration you’re able to receive benefits may vary depending on the specifics of your policy. A longer benefit period may cost more than a shorter benefit period of months or years. Typical benefit periods include to age 65, to age 67, and to age 70.
Monthly Disability Benefit Amount
Disability Income Insurance policies typically replace a specified amount per month of your income. The amount per month that you may be able to purchase is based on your income. The higher your income, the higher the amount of monthly coverage the insurance company will allow. A higher monthly disability benefit will raise premium costs as the potential benefit payout is greater.
Elimination or Waiting Period
If you become disabled and file to collect disability income insurance benefits, you’ll need to wait until after your policy’s elimination or waiting period to receive any money. Typical waiting periods may range from weeks to months. Longer waiting periods may lower your premium costs while shorter waiting periods may increase premium prices. A common elimination period for an individual disability policy is 90 days.
4. Premium Structure
When shopping for disability income insurance, you may have a choice in the way your premiums are structured:
Level premiums are priced consistently throughout the life of the policy, meaning you pay the same amount month after month, year after year. Graded premiums, on the other hand, may begin with a lower premium cost that gradually increases annually. You may also be able to switch a graded premium policy to level premiums.
Understanding Your Disability Income Premium Options
When it comes to disability income insurance, the cheapest option may not actually be the right option. Be sure you understand what’s affecting the price of your policy and the options that are most or least important to your specific situation as you shop around for coverage that’s right for you.
About Treloar & Heisel
Treloar & Heisel is a premier financial services provider to dental and medical professionals across the country. We assist thousands of clients from residency to practice and through retirement with a comprehensive suite of financial services, custom-tailored advice, and a strong national network focused on delivering the highest level of service.
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