The High Cost of Claims
Disability insurance is generally more expensive than life insurance. Why? Because the probability of a claim is higher, and the cost of a claim can be astronomical.
- Frequency: Accidents and illnesses happen frequently.
- Duration: A claim can last for decades. Paying someone $5,000/month for 20 years costs the insurer $1.2 million.
Pricing Factors
1. Occupation Class
Insurers categorize jobs by risk.
- Class 4A/Professional: Dentists, Accountants, Architects. Lowest risk of physical injury, so lowest premiums.
- Class B/A/Skilled Trades: Construction supervisors, Electricians, Mechanics. Higher risk of injury, so higher premiums.
2. Health and Age
Like all insurance, buying young locks in lower rates. Existing health conditions can lead to "exclusions" (e.g., your back won't be covered) or higher prices.
3. Gender
Statistically, women file more disability claims than men (often due to pregnancy complications, mental health, and autoimmune disorders). Therefore, rates for women are typically higher than for men.
How to Save Money
- Longer Waiting Period: Increasing your wait from 30 days to 90 days is the single most effective way to drop the price.
- Steped Premiums: Instead of a "Level" premium that stays the same forever, you can choose a premium that starts low and increases every year. This helps cash flow when you are just starting your career.