How much does disability insurance cost?

Contents

As a rule of thumb, you can expect to pay between 1-3% of your annual salary for disability coverage, but there are a lot of factors that determine how much you’ll need to spend.

by
Jeff Hampton

February 10, 2022 |
Disability Insurance

Wondering how much you’ll need to spend on disability income insurance? The short answer is… it depends. As a general rule of thumb, you can expect to pay between 1-3% of your annual salary for disability coverage, but there are a lot of factors that determine how much you’ll need to spend, including whether the policy covers short term or long term disabilities, your policy options, age, occupation, and more.

Using Haven Disability as an example, short term disability insurance can start at less than $10 a month, but will cost more for most people. When you consider that the average American household spends $47 a month just on streaming services alone, spending half of that to help ensure you can pay your most important bills in case of illness or injury is a good call.

How are disability insurance prices determined?

Type of disability insurance

There are two main kinds of disability insurance: short term and long term. Short term disability insurance is meant to protect you if you suffer a disability that prevents you from earning a paycheck for weeks or months. Short term disability benefits can start within two weeks of becoming disabled, and the coverage typically lasts between 3 months and a year.

Long term disability insurance is meant to cover much more serious illnesses and injuries. Long term disability benefits can continue for years, or even until retirement. On the other hand, long term disability benefits typically don’t start until you’ve been unable to work for a period of months. Because the benefits could potentially last for decades, you can expect to pay more for long term disability coverage.

Group vs. individual

Group disability insurance plans offered through your workplace will nearly always be less expensive than an individual plan, even if your employer doesn’t pay for the coverage. While workers’ compensation is mandatory for the vast majority of companies, only a handful of states require disability coverage. But even if your employer offers disability insurance, there are advantages to an individual disability plan worth considering.

If your disability coverage is paid for by your employer, or if you pay for it yourself with pre-tax money, the disability benefits you receive will be subject to taxes. Because an individual policy like Haven Disability is paid for with after-tax money, the benefits you receive won’t be taxed further. That means the same monthly benefit will go further with an individual policy.

Disability coverage offered through your employer will likely end if you switch jobs, but an individual policy can be taken with you if you move to a different company. Many policies also include a guaranteed option to renew your policy until retirement age. That can make a difference if your health situation changes down the road in a way that makes getting an individual disability policy difficult, or even impossible.

Health status

Being in good overall health will lower your disability insurance premiums, as will being a non-smoker.

Occupation

Those whose jobs are more physically demanding can expect to pay more for disability insurance coverage. That’s because far more illnesses and injuries will prevent you from doing your job if you’re a roofer than if you work in a call center, for example. If your occupation requires climbing, long periods of standing, or heavy lifting, even a relatively minor medical condition can interfere with your ability to earn a paycheck. (On that note, if you have a physically demanding job, it’s especially important to ensure your disability policy provides “own occupation” coverage, rather than “any occupation.”)

Gender

In most places, women can expect to pay more for disability coverage than men, although some states are considering a move towards unified pricing, such as Massachusetts and New York. The price gap is most pronounced at younger ages and narrows later in life.

Age

Being young won’t help your car insurance premiums, but it’s good news for the cost of both disability insurance and term life insurance.

Disability benefit options

Monthly benefit

Your monthly benefit is how much disability income you’ll receive per month if your disability insurance claim is approved. The higher the monthly benefit you choose, the more you can expect to pay in premiums.

Short term disability policies offered through employers are typically based on a percentage of your salary, with 40-60% being common. Purchasing an individual short term policy can offer a little more flexibility. Haven Disability offers monthly benefit options from $500 to $5,000 a month, with a maximum of 60% of your pre-tax wages.

Benefit period

A disability insurance benefit period is the maximum amount of time you’ll receive benefits from an approved disability claim. Short term disability insurance benefit periods are usually between 3 months to a year. (Haven Disability offers a choice of 3, 6, or 12 months.) For long term disability insurance, the LTD benefit periods are more often measured in years.

Elimination period

The elimination period determines how quickly you’ll become eligible for disability benefits if you’re sick or injured. You can think of it like a deductible, but with time instead of money. The shorter the elimination period, the sooner you’ll receive benefits.

To give an example, a 14 day elimination period means you’d need to be unable to work for just two weeks before your disability benefits kick in. For short term disability insurance policies, elimination periods usually range between 14 and 60 days. For long term disability policies, the elimination period can be 90 days or more.

Example disability insurance premium rates

The fastest way to see how much coverage will cost for you is to get a disability insurance estimate. But if you’d rather see some numbers, we get it. Here are some example rates for a few different ages and occupations that should give you an idea of how much disability insurance coverage will cost. (The premiums shown are all for healthy, non-smoking adults. Refer to important information about policy limitations and exclusions.)

25-year-old woman, sales manager

Healthy non-smoker, WA

3 month benefit period
(14 day elimination period)$7.25$15.76$28.53

6 month benefit period
(14 day elimination period)$9.07$21.21$39.42

12 month benefit period
(30 day elimination period)$10.76$26.29$49.58

30-year-old man, paralegal

Healthy non-smoker, MA

3 month benefit period
(14 day elimination period)$5.44$10.32$17.65

35-year-old woman, graphic designer

Healthy non-smoker, NJ

3 month benefit period
(14 day elimination period)$8.71$20.12$37.23

6 month benefit period
(14 day elimination period)$11.32$27.95$52.89

12 month benefit period
(30 day elimination period)$13.53$34.52$66.15

40-year-old man, chef

Healthy non-smoker, IL

3 month benefit period
(14 day elimination period)$8.02$18.07$33.13

6 month benefit period
(14 day elimination period)$10.58$25.73$48.46

12 month benefit period
(30 day elimination period)$12.26$30.78$58.56

How to reduce your short term disability insurance premiums

Finding the right level of disability insurance protection with a price that matches your budget can be a balancing act. While your age, gender, occupation, and health history may be mostly out of your control, there are still some levers to pull if you’re looking for the most affordable disability income protection that still meets your needs.

Reduce your monthly benefit

With Haven Disability, you can purchase a monthly benefit of up to 60% of your income. But like we mentioned earlier, if you purchase disability coverage with after-tax money, the benefits you receive won’t be subject to further taxes. That means a monthly benefit of 60% may actually come close to matching your normal take-home pay.

If your budget has some fat that can be trimmed, you may consider getting just enough disability insurance to cover your essential monthly expenses, like the rent or mortgage, car payment, health insurance, car insurance, life insurance, food, and utilities. But if your income barely covers the bare necessities in the best of times, getting disability coverage of less than 60% of your pre-tax income may not be the right option.

Choose a shorter benefit period

The longer the benefit period, the more you can expect to pay for disability coverage. Haven Disability offers a choice of 3, 6, or 12 months, with 12 months being the most expensive. A longer benefit period offers more protection, but if your primary goal is minimizing your disability premiums, choosing the 3 or 6 month option will reduce the cost.

Choose a longer elimination period

Choosing a short elimination period, such as 14 days, means you’ll be eligible to file a disability claim if you miss as little as two weeks of work. If missing one paycheck would disrupt your ability to cover your essential monthly expenses, you may want to stick with the shortest possible elimination period.

On the other hand, if you have enough emergency savings to cover your bills for a month or two, or if you have enough paid sick leave and/or vacation time to fill the gap before your disability benefits kick in, choosing a longer elimination period will reduce your disability insurance premium.

Ready to see a quote?

It only takes about 30 seconds to find out how much Haven Disability coverage will cost, and can be applied for online in minutes. You can also use the disability insurance quote tool to experiment with the different options we listed above for finding exactly the combination of protection and price for your needs and budget.

Check my price

Our editorial policy

Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our editorial policy

Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.

Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.

Our disclosures

Haven Term is a Term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a Simplified Issue Term Life Insurance Policy (ICC19PCM-SI 0819 in certain states, including NC) issued by the C.M. Life Insurance Company, Enfield, CT 06082. Policy and rider form numbers and features may vary by state and may not be available in all states. Our Agency license number in California is OK71922 and in Arkansas 100139527.

MassMutual is rated by A.M. Best Company as A++ (Superior; Top category of 15). The rating is as of Aril 1, 2020 and is subject to change. MassMutual has received different ratings from other rating agencies.

Haven Life Plus (Plus) is the marketing name for the Plus rider, which is included as part of the Haven Term policy and offers access to additional services and benefits at no cost or at a discount. The rider is not available in every state and is subject to change at any time. Neither Haven Life nor MassMutual are responsible for the provision of the benefits and services made accessible under the Plus Rider, which are provided by third party vendors (partners). For more information about Haven Life Plus, please visit: https://havenlife.com/plus.html

Read our disclosures

Get our most-read stories, twice a month

Very happy with the whole process from start to finish on my application. Only area that could be improved is that my wife also applied and was rejected and we did not get a reason. She is a 30 year old female without any existing conditions so I was surprised.

The whole process was seamless and easy. My application for term life insurance was all done online. The rates are fair, and the people at Haven Life seem to genuinely care about their customers.

Best life insurance company.

The process of getting life insurance with you is a very smooth process. I really liked the way you communicated through the process and were on top of the things. I really appreciate it. Thank You for my peace of mind and my family’s peace of mind.

Super easy! I was putting off purchasing life insurance as all I wanted was a term policy and was dreading the thought of having to meet or speak to a broker and deal with the dreaded upsell tactics. While researching options, I stumbled across Haven Life and began looking into it. Thrilled that I did. I could not have imagined an easier, more streamlined process from beginning to end. Very easy process and excellent, easy-to-understand documentation on the site.

As a rule of thumb, you can expect to pay between 1-3% of your annual salary for disability coverage, but there are a lot of factors that determine how much you’ll need to spend.

In this article: