Is Disability Insurance Too Expensive?

Long Term Disability

Is Disability Insurance Too Expensive?

Your most valuable asset isn’t your house, your car, or your retirement account. It’s your ability to earn an income.  Leaving future income unprotected is risky for most families who would find that, without paychecks coming in, they’d be in serious financial trouble.  So, disability insurance may seem like a no-brainer, but at what price?

How much does it cost to protect your income?

Premiums for disability income protection insurance are based on your age, gender, smoking history, and state of residence. Your benefit amount and length of coverage will also factor into the cost of your policy.  Finally, you’ll also need consider the costs of any additional riders you add to customize your plan.

While coverage may not be cheap, there are ways to keep your costs down:

Apply while you’re young and healthy

so you’ll get the most favorable terms. Once you’re too sick or injured to work, you usually can’t get the protection you need.  If you are studying to become a professional, you can apply for coverage before you graduate, with options to increase coverage as your income grows.

Look for a non-cancellable and guaranteed renewable policy,

so your future payments are guaranteed and the insurance company can never cancel your coverage.

Customize your coverage

with options that let you increase your benefit amount as your income grows and help keep pace with the cost of living.

Buy though an association that offers member discounts.

The Alum LTD Program is one such avenue.1

According to the Council for Disability Awareness, you can expect to spend between 1-3% of your annual salary for income protection insurance.  Keep in mind that once you have a quote, you can always tweak the benefits if the price seems too high – you could increase your waiting period, reduce your payout period, or even consider reducing your monthly benefit.

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Is it worth it?

If you and your family rely on your income, disability income protection insurance is probably worth it, especially when you consider the following:

  • Your benefits are tax-free as long as you pay your premium with after-tax dollars.
  • There are no restrictions– the payments really are a substitute for your regular monthly income, and come with no strings attached.
  • You don’t have to pay anything back or pay any interest or penalties.
  • Your benefits can last a long time – to retirement age – so if you experience a disability at a young age, your policy could pay you a monthly benefit for decades.

When considering what’s at risk without disability income protection, it’s probably enough to overcome the price, which may not be as much as you may think.

1 The Alum LTD program offers a 10% exclusive discount to alumni.  The alumni discount is not available to medical professionals, but other discounts may be.

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