Factors That Affect Disability Premiums

Which Factors Affect Disability Premiums?

Disability insurance – also referred to as income protection insurance – provides a replacement income should the insured become disabled and unable to work. The amount of coverage is designed to provide a reasonable income replacement while still encouraging people to return to work if able. 

Many individuals, including those who recognize the value of disability insurance, are unaware of what to expect from disability insurance policy prices. This is due to the difficulty when calculating an actual number. The cost of your premium is determined by a variety of factors. 

Individual rates differ based on the age, health, gender, smoker vs non-smoker, state of residence, and occupation class of the applicant. As a result, two people of the same age – or gender, health status, geographic location, etc. – with the same income level can see differences in premium costs. The most common factors that impact premiums are described below. 


Disability insurance covers wages in the event you become unable to function due to a medical condition or injury. If you have disability insurance and can’t work, your provider pays a monthly benefit for a fixed period until you recover. Disability benefits are intended to assist with cost of living and other bills that you are unable to cover. 

One of the most important deciding factors used to assess the cost of disability insurance premiums is the applicant’s age. Disability insurance becomes more expensive when you get older. Aging comes with a higher chance of becoming disabled either by illness or injury. According to some figures, the cost of comparable policies will rise up to 5% each year as a person gets older. Many analysts agree it’s better to buy disability insurance when you’re young in order to receive the best deals. 

The younger you are, the lower your premiums would be, just as it is with life insurance. Age increases the likelihood of becoming disabled and it also impacts the length of recovery. Therefore, insurance companies raise the cost of disability insurance premiums for older individuals. They do this because they factor in the length of time they would have to pay out disability benefits. Additionally, age comes with higher incomes and extra financial commitments, like mortgage payments or raising children, which require more coverage as well. 


Your medical background also influences premium rates. If you become injured or sick and lose your source of income due to an inability to work, disability insurance covers your loss of income. You retain your disability insurance policy by paying a monthly or annual fee. That cost is determined by the risk you pose to the insurance provider in terms of what they will have to pay out. Generally, the greater the risk, the higher the rates.

Insurance providers will assess your current state of health to factor in premium costs. More so than not, you are less likely to become disable if you are living a healthy lifestyle, and vice versa. It is common practice during assessments to ask about your family’s medical background, any preexisting health problems, and medications you may be taking. 

You will most likely be asked to undergo a paramedical review as well. This type of medical assessment is similar to a physical examination. Your height, weight, BMI, pulse, and blood pressure will be measured and calculated by a technician. Anything out of the ordinary, such as being overweight or having high blood pressure, would have a negative effect on your disability insurance premiums. 

Insurance providers usually see someone with a chronic condition as being a greater risk of becoming disabled. Therefore, insurance companies may increase the premium to cover your disability benefits. An individual that has a history, or a family history, of potentially debilitating health conditions will almost certainly pay higher premiums than someone who does not. Back/spinal injuries or disabilities, arthritis, asthma, cardiac problems, and other potentially incapacitating conditions are only a few examples. 

Pre-existing Conditions 

If you have a pre-existing condition, the cost of your premium may be higher. Pre-existing conditions are a well-known feature when it comes to health insurance. Under this type of insurance, you cannot be refused coverage if you have one. Unfortunately, this isn’t the case for disability insurance policies and provided benefits. Individuals with certain pre-existing conditions can qualify for disability insurance but the condition itself is not covered by benefits. 

This is classified as an exclusion when referencing a pre-existing condition or disability on the insurance policy. If you have an excluded pre-existing condition, the insurance provider is less likely to factor in the condition as much when determining the cost of your premiums. However, your disability insurance will not provide coverage for this condition. 

Under the normal parameters within your disability insurance policy, one would begin collecting disability benefits at the start of an injury or illness. That said, if your injury or illness is caused by an excluded condition, you will be ineligible to claim disability benefits. 


Women pay more for disability benefits than men – which is nearly the exact opposite when it comes to life insurance. When all other variables are equal, women will pay up to $40 more for disability insurance than men. This is because women are more likely than men to encounter an injury or illness that significantly impacts their careers. Some examples include breast cancer, autoimmune disorders, and mental health conditions like depression. Additionally, women’s injury or illness cases are more likely to last longer when compared to men. 

Yet, disability insurance premiums for men increase at a faster rate than women. At the age of 40, men are paying approximately 50% more for their disability premiums. At the age of 60, they are paying approximately 191% more for their premiums than they would at 24. 

Women, on average pay more for disability benefits for reasons previously mentioned. While this may seem to be disproportionate, disability insurance providers have found that women are affected for longer periods of time. Also, they find that women suffer a debilitating illness more often than men. Fortunately for women, the rate at which premiums increase is much slower than men. At the age of 40, women pay approximately 35% more for disability premiums. At the age of 60, they pay approximately 102% more for premiums than they would at 24.  

Smoker or Non-smoker

What is described as tobacco use? 

Tobacco use is characterized as using any tobacco product – including cigarettes, cigars, chewing tobacco, snuff, and pipe tobacco – four or more times per week in the previous six months. That said, the term “smoking” may refer to a variety of items. 

Electronic Cigarettes and Vape Pens/Products

E-cigarettes are nicotine inhalers that run on batteries. So, do e-cigarettes and other vaping devices count as tobacco products? In short, yes. According to the Food and Drug Administration, e-cigarettes and vape pens are officially listed as “noncombustible tobacco products.”

If you are attempting to stop smoking with e-cigarettes or vape pens, consider other options. These devices are often used by tobacco users to help them stop smoking cigarettes. Unfortunately, some studies suggest that this form of quitting is unsuccessful. In fact, smokers who used e-cigarettes were 67% less likely to quit than smokers who didn’t use them.  

Health Insurance Costs for Smokers vs Nonsmokers

Health insurance rates are calculated by plan type, number of people on the policy, age, location, and tobacco usage under the Patient Protection and Affordable Care Act (ACA). Tobacco use can be taken into account by certain insurance providers in order to boost health insurance premiums for smokers. 

Tobacco Surcharges and Subsidies

Tobacco ranking is the method of charging tobacco consumers more. The Affordable Care Act (ACA) requires insurance providers to charge smokers up to 50% more than non-smokers in the form of a cigarette surcharge. While this is permissible, it does not indicate that all states have opted to enact this fee. Therefore, tobacco surcharges differ from state to state. 

The government offers discounts to eligible people in order to make health care more available for those with low to moderate incomes. Premium tax credits and cost-sharing reduction subsidies are the two most common types of subsidies. The cigarette surcharge is paid solely by smokers. Premium tax credits are determined after the insurance provider changes the premium for age and geographic area, but before tobacco use. As a consequence, the tax credit does not extend to tobacco surcharges. 

State of Residence

Your medical condition and eligibility aren’t the only factors that determine whether you are qualified to receive benefits. It seems that where you live influences the chances of receiving disability compensation. Unlike auto and homeowner’s insurance, the state in which you live has no effect on the expense of your insurance. However, it does have an impact on the laws and regulations that control it. 

As disability insurance is controlled by state legislatures, a policy in New York can vary from one in Utah. New disability insurance plan refunds, late payment grace periods, and policyholder and beneficiary’s protection are all regulated by state law. Also, regulations in place may influence who is entitled to receives the benefit payout. 

Every state has its own collection of dangers and threats. Coastal states are more vulnerable to the impacts of climate change, such as hurricanes and wildfires. Whereas inland states are at a higher risk of destructive winds and tornadoes. Life insurance firms calculate premiums that include mortality risks like medical background and hazardous interests. You will not be charged more because you live in a state that is more vulnerable to natural disasters or lifestyle risks like higher rates of obesity. However, residents see spikes in their disability policy premiums if they live in states with higher numbers of disability claims. 

Occupation Class

The term “disability insurance” is a little misleading. It’s more appropriately referred to as “income security.” It pays more to those with a higher salary because it protects their income. However, this means that the cost of disability insurance is higher for those whose income is greater. Disability insurance – also known as income insurance – usually costs between 1-3% of the adjusted taxable income. 

Disability insurance providers classify workers into particular occupational groups to determine premium rates and benefits. The risks of the job are taken into account in these classes. Another consideration with certain occupations is the claim experience. Generally, insurance firms rate occupations on a scale of 1 to 5 or 6. In most cases, the higher the number, the lower the insurance company’s premium will be. 

Insurers must also measure jobs based on the difficulty of returning to work after a disability. Since certain disabilities will make it impossible to do certain jobs but not others. 

Light Labor. Skilled manual work in a lighter industry, such as auto mechanic, carpenter, or landscaper is regarded as light labor. 

Labor. Heavy or unskilled manual jobs with more risks, such as bus drivers, roofers, or contractors are regarded as labor. 

Professional. An office job, like an accountant or software engineer, with minimal risks is categorized under the professional class.

Technical. A profession, like a salesperson or laboratory technician, with an average level of risks is classified under technical class. 

In general, the greater risk one faces in their day-to-day work environment, the higher the premium will inevitably cost the insured. A dangerous occupation could increase your premiums or even disqualify you from buying life insurance. 

The underwriting process decides the life insurance premium you earn from your insurer. This assessment is based on the initial application interview and medical review. Many people worry about how their health or medical conditions can impact the cost of their life insurance policy. That said, your profession can also, in certain situations, increase the cost of your premiums. 

The cost of a life insurance policy is dictated by the probability of insuring you. So, insurance companies look into your profession to determine your premium cost. The probability of you dying governs the amount of risk you face. Insurance companies measure this when determining the cost of coverage for each policyholder. 

Someone who deals with heavy machinery, for example, would pay a higher premium than someone who works solely at a desk. Many professions, such as chiropractors, dental hygienists, beauticians, and jewelers could pay a higher premium than accountants and lawyers. This is because a minor injury, such as a sprained finger or a strained back, may prevent them from working. 

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