When shopping for disability insurance and comparing quotes, sometimes it seems that the premiums can vary greatly. Oftentimes, people ask: Am I missing something?
Here are some of the reasons that disability insurance premiums on individual disability policies can vary greatly from company to company:
1) Favorable Occupational Class. Occupations are classified into an occupational class by companies that will dictate the premiums. The higher the occupational class, the lower the premiums. Some companies have their highest class as a “5” whereas some have an even higher class as a “6.” For example, I was working with an optometrist today and we were comparing quotes. For him, the company that offered occupational class 6 was almost 50% less than all of the other companies. Here is a list of occupations that have a class 6 where the rates can be even less expensive since they are considered very favorable:
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Actuaries
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Architects
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Attorneys
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CPAs
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Degreed Engineers
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Pharmacists
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Biochemists
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Botanists
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Chemists
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Geologists
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Optometrists
2) Unfavorable Occupational Class. While some companies offer a more favorable occupational class for some occupations, other may offer a less favorable class. For example CRNAs are classified the same as anesthesiologists with some companies whereas they are a lower occupational class with other companies. This can account for a 20% swing in premiums either way. Other occupations such as physician assistants and nurse practitioners are labeled differently with various companies. Some companies distinguish if medical specialties are invasive and others don’t. For example, some companies classify dermatologists, cardiologists and radiologists the same regardless of the type of subspecialty. Some companies will consider invasive cardiologists, interventional radiologists and surgical dermatologists in the surgical classification which will increase premiums by 20%.
3) Unisex rates. As a woman, you will pay approximately 40% for a disability policy than a man. If you are able to obtain a unisex rate, this will reduce your rate. For men, some unisex rates can actually increase premiums. Look for discounted unisex rates that also include an employer discount to offset these changes.
4) Income and experience level. Some companies take your income and industry experience into consideration. For example, if you are in sales or in the financial industry and are earning $250,000 a year, some companies will allow you to upgrade your occupational class thereby reducing premiums whereas others will not.
The most important part of comparing disability insurance quotes is to ensure you are working with an independent, experienced broker who can ensure you are classified correctly in the right occupational class and who knows which companies will be the most favorable for your occupation.
