How Much Does Long-Term Disability Insurance Cost?

Long-term disability insurance can really be a fickle beast. Everything about it from the type and length of coverage that it provides to the cost can be fickle. This is because so much of it depends on the specific disability insurance provider. The insurance providers are usually the ones that set the rules and regulations for the policies. However, there are some industry standards that are usually followed by all providers. And, cost kind of falls into this category. For instance, a long-term disability plan could cost you anywhere from 1 to 3 percent of your current salary, ranging from $25 a month to $500 a month.

All that aside, there is simply no denying that long-term disability is one of the best ways to cover you and your family if you do become disabled. And, given that there is a one in four chance that you’ll become disabled at some point for longer than 90 days, you’ll want to jump on coverage as soon as you can. Long-term disability provides security where other forms don’t. Social security, short-term, and worker’s compensation are all no doubt great policies, but there are just areas where they are lacking. These are the areas where long-term can provide the relief and protection that you seek.

In this article, you’ll learn about long-term disability insurance as well as how the rates are set, what you might end up paying for coverage, and the extra features available.

Examining The Costs Of Long-Term Disability

As learned in the previous section, there are a lot of things that go into the overall costs of long-term disability insurance. However, there are some standards set forth by the industry. And, one of those standards in Canada is that most people can expect to pay anywhere from 1 to 3 percent of their annual salary. This might start as little as $25 a month and go all the way to $500 a month. It depends on your profession as well as the type of coverage that you seek.

Here is just a quick rundown of what you can expect to pay for different types of coverage.

Annual Salary Yearly Cost Monthly Payment

$30,000 $300 to $900 $25 to $75

$50,000 $500 to $1,5000 $60 to $125

$100,000 $1,000 to $3,000 $83 to $250

$150,000 $1,500 to $4,500 $125 to $375

$200,000 $2,000 to $6,000 $ 166 to $500

Just keep in mind that this chart is just kind of a short, quick answer to how much a policy might run you. The long, more accurate answer is much more complicated, which you’ll learn more about below. However, if you want to help your family sustain the kind of lifestyle that they are familiar with during your downtime, you’ll without a doubt need long-term disability insurance. It alone might not even be enough to provide all the amenities and comfort that you were used to before, but it’ll certainly keep you on the right track. You also need to know and understand the types of policies available to you.

Determining Your Long-Term Disability Costs

As you’ve probably dealt with auto or home insurance in the past, you are probably familiar with premiums. If not, premiums are the monthly rates that you will pay for coverage. You pay these premiums each month and the provider in turn offers you a certain amount of coverage. Long-term disability works in the same manner. That being said, there is a wide range of factors that will help determine your premiums, and this is where the more complicated comes in. Below, you’ll learn about all the factors that can affect your premiums.

Coverage Amount

This one probably goes without saying, but it is important to cover it anyways, as many individuals finding this site are completely new to the insurance game. That being said, the more money you need each month, the more you’ll pay for it. You can obviously see this much from the chart above. The more coverage you need, the more you’ll pay for it. The good thing here is that you’ll be paying your premiums after taxes, which means that the money you receive in return will be tax-free. As a general rule of thumb, most people shoot for right around 60% of their average income.

Benefit Period

This is probably another given for most, but worth mentioning anyway. The longer you need coverage, the more you’ll pay for that coverage. If you need a disability policy for 10 years, you’ll pay more monthly than if you need it for 5 years. Coverage until the age of 67 or older will likely be too expensive for most people. Shoot for 2 to 3 years at a minimum unless you have the money. If you have the money, you can’t go wrong with more coverage, as it’ll mean more protection for your family.

Waiting Period

Most people don’t know it, but long-term disability doesn’t kick in immediately. There is a waiting period. What does one do during this waiting period? Take advantage of the short-term, which will usually only cover living expenses. Waiting periods can go anywhere from one month to 6 months. The quicker you need coverage, the more you’ll pay for it.

Your Age

Just like with life insurance, the older you are, the more you are going to pay for coverage. If you’re young, you can jump in and pick up a policy for much cheaper than what you would if you were older.

Your Health

The healthier you are, the better off you’ll be! Smoking, drinking, drugs, and diseases like diabetes or hypertension will only increase your overall costs.

Occupation

Do you have a high-risk job? Maybe you sit behind a desk 8 to 10 hours a day. While higher-risk might be more exciting and enticing, it does mean that you’ll pay more for proper and adequate coverage. It also means that the chances of your becoming disabled are higher so it’ll be worth the extra splurge.

Location

Unfortunately, your location can factor in as well. People in Ottawa might pay more than those in Ontario.

Take Advantage Of Extra Features

These factors mentioned above are just among the most important things that insurance providers consider when setting your premiums. However, there are some other things that can factor in. And, this would be the extra features that you pick up. That’s right, you have the option of even fuller protection with longer acting and lasting benefits. These extra features are usually referred to as riders. Some of these riders might be available to you free of charge, while others will require payment. Whatever the situation is, here are two extra features that many usually like to add on to their existing policies.

Non-Cancelable – This means that your insurance company cannot cancel your policy or raise your rates if you switch jobs. You can make the cancellation, but the provider cannot.
Own Occupation – If you are unable to do your current job, but can still do some kind of less strenuous work, you’ll still receive your current or agreed-upon benefits. Even if you decide to work somewhere else, you’ll still be able to claim the benefits offered at your current location.

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