Shawn Spencer
5 min readMar 17, 2021


Disability insurance is the only type of coverage that protects your most valuable asset — your income. With the advent of search engines, shopping for disability insurance has become as easy as shopping for anything else. You can simply go to any number of insurance websites, plug in some details about yourself, and start the process of getting some quotes. Some sites even provide instant disability insurance quotes, so you can get an approximate cost immediately and then request more information if you’re interested.

But, what goes into the pricing of a disability insurance policy, and in the end, is it worth it? That is a much deeper question and something that is harder to determine via an online quote calculator. The price of a disability insurance policy is a direct reflection of the features of the policy as well as the risk the insurance company perceives towards the insured. Let’s look at what goes into the numbers you see when you shop for a policy.

What’s in a Premium?

The price you pay for a disability insurance policy is called the premium. The premium is established through an assessment of the risk that the insurance company will have to pay a claim on the policy. The higher the risk, the higher the premium. So, what types of things increase risk to the insurance company?

There are some things you can control:

  • Higher monthly benefits — It stands to reason that a policy that pays $5,000 per month is going to have a higher premium than one that pays $2,000 per month.
  • Shorter elimination periods — The elimination period is how long you have to be out of work before being eligible for benefits to be paid. If you have a policy that provides benefits after only 30 days, that’s going to be more expensive than one that provides benefits after 90 or 180 days.
  • Longer benefit periods — The benefit period is how long you are eligible to receive benefits. If the insurance company knows that they may have to pay you util age 65, they will charge you a higher premium than if they knew they might only have to pay for 2 years.
  • Optional riders — A “rider” is a feature that you can add to your policy for an increased premium. These are things that provide more value to the coverage such as cost of living increases, coverage for partial disabilities, and future increase options.

And, there are some things you can’t control:

  • Your occupation — Jobs with higher levels of manual labor typically have higher premiums than “office jobs”. The risk of being unable to work outside with your hands is generally more substantial than someone who sits behind a desk all day.
  • Your age and sex — Generally, the older we get, the more medical history we have, and the greater the chance that that medical history might keep us from working at some point. Sex also plays a role in the pricing of insurance policies. The claims experience of insurance companies for disability (called morbidity experience) is generally higher for females than it is for males. Incidentally, the opposite is true for life insurance where males are more expensive than females.
  • Your health — Disability insurance is medically underwritten, so they do look at your health when assessing the risk. There are certain medical conditions that will increase the risk of a claim to be paid, and this can affect the cost of the coverage.

Is it Worth it?

This is a subjective question that everyone shopping for disability insurance needs to answer, but there is one way to reframe the question that I have found extremely helpful.

Let’s imagine you’re interviewing for two jobs. They are both close to home and you love the people and the culture at both. There is only a small difference in compensation and one other benefit.

Job A

Salary while working: $100,000
Salary while sick or hurt and unable to work: $0

Job B

Salary while working: $97,921
Salary while sick or hurt and unable to work: $62,400

Which job would you chose?

In over 20 years of helping people with disability insurance, I’ve never had anyone tell me they’d take Job A. Job B is simply the same job after accounting for the cost of buying a disability insurance policy [1]. This thought experiment shows the value of having a disability insurance policy. If you were simply to get an instant quote showing an annual premium of over $2,000, you might think that’s too expensive. But when framed as a conversation about the value the policy can bring — over $62,000/year in tax free income — the coverage looks more affordable.

Consider the cost of not having the disability insurance policy. While Job A would pay slightly higher, without the safety net of the disability insurance policy, the potential cost is staggering. A 35 year-old making $100,000 could make over $3,000,000 by the time they are 65. The choice becomes protect that multimillion-dollar asset with a policy, or potentially risk losing it to something you can’t control.

How Much is Disability Insurance?

It’s easy to get online and get a price for a disability insurance policy. It’s also easy to work with your agent to change the parameters of the coverage to affect the cost. Lengthening the elimination period or shortening the benefit period are two common ways to make a disability insurance policy more affordable.

The real question you should be focused on, however, is what is the cost of not having a policy? With one in four of today’s 20 year-olds expected to suffer a disability of at least 90 days before they get to retirement age, disabilities are very real events that have tragic consequences [2].

Chose Job B.

[1] Assumes ProVider Choice Select, age 35 male, class 4 in the state of Maryland with basic partial rider.

[2] Social Security Administration, Disability and Death Probability Tables for Insured Workers Born in 1997, Table A.