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The cost of long term disability insurance

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7 mins
How did the cost of disability insurance change from 2020 to 2021? How did premiums change according to gender, age, & occupation? Did the pandemic have consumers applying for more coverage? Breeze analyzed our internal data from the last two years to find out.

Disability insurance replaces a portion of a policyholder's monthly income if injury or illness prevents them from working.

If a plumber broke their hand or an accountant was pregnant and due for delivery, disability insurance monthly benefits could replace between 60% and 80% of their income while they were out of work.

It's insurance for the income needed to keep the bills paid, yet so few own it.

According to LIMRA, just 14% of Americans owned disability insurance in 2021. Comparatively, the same organization found 54% own life insurance. However, the average person is about 3.5 times more likely to face disability instead of death during their career.

The contradiction is partially due to a lack of consumer awareness for disability insurance. Jim Smith from Conning Research wrote the following:

Consumer awareness and attitude are focused on life and medical insurance and retirement planning, not disability income protection.

He also cited an eye-catching stat in his research: Thirty-year-old women have a 57% chance of becoming disabled and only a 16% chance of dying before age 65.

Another contributing factor to this gap is thinking access to Social Security or workers' compensation makes owning disability insurance unnecessary. But to receive benefits, the former requires the disability must last 12 months or be expected to result in death in the next 12 months, while the latter only covers injuries or illnesses that happen on the job.

About two-thirds of disabling injuries happen off the job.

Disability insurance benefits kick in regardless of time and location; if the disability prevents you from earning an income, it's likely covered.

How much does it cost?

To answer that, Breeze is turning to our own internal data from the last two years. We analyzed long term disability insurance quotes from everyday consumers to provide the average cost of long term disability insurance by age, gender, occupation, and state.

But first, we looked at if consumers were applying for more disability insurance coverage, possibly as a result of the COVID-19 pandemic.

Long term disability insurance average benefit increases 23% YOY

Methodology note: All data derives from long term disability insurance quotes that were run through Breeze in 2020 and 2021. Pricing and benefit figures are estimated averages and subject to change due to a variety of personal factors. Figures are strictly averages from quotes run through Breeze by a variety of consumers. Please remember all figures are based on quotes, not actual policies. If you have any questions, please email me at [email protected]

Before diving into the average cost of long term disability insurance, it's important to first know the average benefit amount.

These two are attached at the hip: the higher the benefit, the higher the premium.

From 2020 to 2021, the average monthly benefit amount for long term disability insurance increased by 23% from $2,561 to $3,150.

This considerable increase in the average benefit amount helps explain the premium increases you will see later in the report. Because consumers were looking for more coverage, the premium subsequently increased.

One possible theory for the increase in coverage? After seeing the COVID-19 pandemic cause unimaginable devastation in 2020, consumers were more aware than ever before of the possibility of a sudden injury or illness that can upend everyday life and leave them financially vulnerable.

As a result, they started looking for more robust disability insurance coverage in 2021 and beyond. This could be comparable to how life insurance sales increased as a result of the global pandemic.

Not surprisingly, we found this increase in the average monthly benefit amount led to a very similar increase in the average cost of long term disability insurance.

As a result of seeking higher monthly benefit, long term disability insurance average cost increases 20% YOY

Factoring in all quotes from around the United States, the long term disability insurance average premium increased 20% from 2020 to 2021. This increase can almost entirely be attributed to consumers seeking a higher benefit amount.

In 2020, the average annual premium for long term disability insurance was $1,084 (or $90.33 monthly). Comparatively, the annual premium jumped to $1,297 in 2021 (or $108.11 monthly).

Let's look at how the cost of long term disability insurance changed by age.

Depending on age, long term disability insurance annual cost ranges from $450 to over $1,500

Age plays a big factor in determining the cost of long term disability insurance. For example, the average annual premium in 2021 for the 18 to 24 age group was $451. For the 45 to 54 cohort, it was $1,800.

There's often a financial advantage to taking out a long term disability insurance policy at a younger age. In 2021, the average monthly long term disability insurance cost was...

  • $38 for ages 18-24
  • $72 for ages 25-34
  • $113 for ages 35-44
  • $150 for ages 45-54
  • $137 for ages 55-64

Younger consumers are generally healthier so they present less of a risk to disability insurers; this shows up when looking at annual premium pricing by age.

Long term disability insurance cost by occupation

Because long term disability insurance protects a policyholder's income, premium pricing is heavily tied to occupation.

A higher-risk job – like roofing – will usually increase the premium because a qualifying event is more likely to happen. Additionally, higher-income jobs will usually increase the premium because should a qualifying event happen, the benefits payout will be more compared to a lower paying job.

Check out the table to see the average annual cost of long term disability insurance by occupation. Use the search bar to find specific occupations and sort by clicking column headers.

Females pay more in premium compared to males

In both 2020 and 2021, the average annual premium for females was more than for males.

Females paying more in disability insurance premium compared to males has often been the case. This is because women suffer disabilities that impact their careers, such as breast cancer, autoimmune disorders, and depression, more than men. Disability claims for women also typically last longer than those for men.

For what it's worth, this is the opposite for life insurance as women often live longer than men.

Long term disability insurance cost by state

The last breakdown was the annual cost of disability insurance by state. Please note Alaska and North Dakota were not included in this analysis due to having insufficient sample sizes. New York was also excluded as Breeze does not currently offer disability insurance in that state.

Use the search bar to find specific states and sort by clicking column headers.

What would you pay for long term disability insurance?

Curious to see what you would pay for long term disability insurance after reading this report? Use Breeze to get a quote in 30 seconds!

Curious what disability insurance costs? Check your rate here

What about short term disability insurance?

It's important to remember the data in this report derives entirely from long term disability insurance quotes. The other type of disability insurance is short term disability insurance.

Short term disability insurance is intended for more temporary injuries and illnesses that you generally recover from. It's actually ideal for expecting mothers who will be going on unpaid maternity leave for a couple of months.

Short term disability insurance usually replaces between 40% and 60% of a policyholder's income and will last around three to six months typically. On the other hand, long term disability insurance can replace between 60% and 80% of a policyholder's income and can last for years or even until retirement age.

Looking to learn more about what your disability insurance cost might be? Check out this video we put together:

Methodology

All data derives from long term disability insurance quotes that were run through Breeze in 2020 and 2021. Quoted premium figures and benefit amounts are estimated averages and subject to change due to a variety of personal factors. All figures are strictly averages from quotes run through Breeze by a variety of consumers during the specified timeframe (2020 - 2021). Please remember all figures are based on quotes, not actual policies. If you have any questions, please email me at [email protected]