Disability Insurance | Premium Matters

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Purchasing an individual disability insurance policy is an important decision as you are committing to a policy to cover you throughout your career. When comparing policies, how important is the policy premium?

Premium is one of the most important parts of the policy as you are committing to pay this expense for a long period over time. As such, you need to pay attention.

Here are some important tips when comparing individual disability policies when it comes to premiums.

  • When comparing premiums, it is first important to ensure you are making an equal comparison. Some companies have a graded or step premium option. This means that the premium is initially less expensive and gradually increases or bumps up at a later time. This is not the same as a level, fixed premium. As such, make sure you are comparing like options.
  • If the policy is noncancelable, guaranteed renewable, the premiums are fixed and guaranteed for the life of the policy, typically to age 65, 67 or 70.  When comparing, make sure all of compared policies have this clause for a like comparison.
  • If the policy is guaranteed renewable, it means that the company has the ability or option to increase the premium at a future date. This reduces the premium when purchasing the policy, but the premiums are not guaranteed.
  • Association policies such as the AANA (for CRNAs) have banded rates. This means that your premium is based on the age you are during the policy year. These can be changed year to year. As you age, especially when you turn 40 or 50 your rates may drastically increase. If you are in your 20s or 30s and are comparing an association policy to an individual policy with a fixed premium, it may not be a fair comparison since you may pay more in the long run as you age and your association premiums escalate.
  • Discounted premiums can make a significant difference. Especially if you are a women obtaining a unisex policy. However, not all unisex policies are created equally. If your policy is not adjustable and you have a pool of options to increase in the future, those future purchases may be at gender distinct rates which could be more than double the amount you are paying per $1000 on your original policy. Look for an adjustable policy where the discounts are permanent and apply to any future increase.

For more information about comparing individual disability insurance premiums or to request a personalized quote comparison, contact Set for Life Insurance today!

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