Long-term disability insurance is the best way to cover the one in four chance you’ll experience a disability longer than 90 days in the course of your career. It provides security when other forms of income protection, like Social Security disability insurance, short-term disability policies, or workers' compensation can't. But how much is this protection going to cost you?
In this article you'll learn about:
In most cases, a long-term disability insurance policy will cost 1-3% of your annual salary, and is the most cost-effective form of income protection you can get, starting at around $25 a month and going as high as $500 a month.
|Annual Salary||Yearly Cost||Monthly Payment|
|$30,000||$300 - $900||$25 - $75|
|$50,000||$500 - $1,500||$60 - $125|
|$100,000||$1,000 - $3,000||$83 - $250|
|$150,000||$1,500 - $4,500||$125 - $375|
|$200,000||$2,000 - $6,000||$166 - $500|
The long answer is more complicated. We’ll explain below and we recommend you read on. Long-term disability insurance (LTD) is important—it could be the only thing that keeps you from having to cancel your Netflix subscription at some point down the line. So you want to make sure you know what you’re buying.
There are several big factors that affect your rate, also called your premium. These include:
The above are the most important factors in setting your long-term disability policy’s base price (or base rate, as its called). Going for a modest coverage amount with benefits lasting a handful of years and a long waiting period? You’re probably going to end up closer to 1% of your salary in cost. Want fuller protection with a longer benefit period and a short waiting period? You’re probably going to wind up closer to 3% of your annual salary.
But there are a few extra features you can consider adding on to your policy, called riders, that could add in extra costs. Some of them are free and come standard, like a Waiver of Premium rider, which means you don’t have to pay your premiums while you’re unable to work and receiving benefits. Some of them will cost extra but you should still consider, such as:
Other riders, like a cost-of-living adjustments rider (which increases your monthly benefit to match expense inflation), are useful for some people but may be too expensive for most shoppers.
Learn more about what disability insurance riders and features. They might cost a little extra here or there, but they may be worth it for your particular lifestyle and needs.
Colin Lalley is the Associate Director of SEO Content at Policygenius in New York City. His writing on insurance and personal finance has appeared on Betterment, Inc, Credit Sesame, and the Council for Disability Awareness. Colin has a degree in English from the University of North Carolina at Chapel Hill.
Policygenius’ editorial content is not written by an insurance agent. It’s intended for informational purposes and should not be considered legal or financial advice. Consult a professional to learn what financial products are right for you.