Disability Insurance

Disability insurance typically costs 1% to 4% of your annual income, but several personal and policy-specific factors influence the exact premium. There are few aspects that determine the cost of the disability insurance and those are based on a few factors such as age, health, home state, medical specialty, gender, monthly benefits and optional riders.

Group Insurance

1. Can be canceled or changed at any time – The employer or insurer can modify the terms or cancel the policy.
2. Not portable – If you leave your employer, you generally lose coverage.
3. Restricted definitions of disability – Most group policies do not include the “own occupation” definition, meaning you may not be covered if you cannot work in your specific job, but could work in another.
4. Taxable benefits – Disability benefits are usually taxed, as premiums are typically paid with pre-tax income.

Individual Insurance

1. Cannot be canceled or changed – As long as you continue to pay your premiums, the policy cannot be altered or canceled by the insurer.
2. Portable – Your coverage stays with you even if you change employers or move across the country.
3. Own occupation disability benefits – Many individual policies provide own-occupation coverage up to age 65 or 67, ensuring you’re covered if you can’t perform your specific job duties.
4. Non-taxable benefits – If premiums are paid with after-tax dollars, the benefits you receive are generally not taxable.

Social Security Disability Insurance (SSDI) is a government program that provides income if you become unable to work due to a qualifying disability. It’s part of your overall Social Security benefits—but it has significant limitations.

• Difficult to Qualify: SSDI has strict medical and work history requirements. In fact, most applicants are denied, even after multiple appeals.
• Lower Benefit Amounts: The monthly benefit is typically much less than what you’d receive from a private disability insurance policy.
• Lengthy Approval Process: Even if you qualify, getting approved can take several months or longer.

Because of these challenges, most experts agree: SSDI should not be your only source of income protection. A private disability insurance policy can provide broader coverage, higher benefits, and faster access to funds—offering far greater financial security.

Underwriting is the process an insurance company uses to evaluate your application for coverage. It helps the insurer determine the level of risk, whether to approve your policy, and how much to charge for your premium.

As part of the underwriting process, the insurer may review:

• Medical History
  This includes your past and current health conditions, physicians you’ve seen, and medications you’ve taken.
• Financial Records
  Documents like pay stubs or tax returns are used to verify your income and justify the benefit amount you’re applying for.

Underwriting helps ensure that your coverage is both appropriate and fairly priced based on your individual situation.

How Long Does Underwriting Take?

The underwriting process typically takes 3 to 6 weeks from the time your application is submitted. On average, you can expect it to take about one month.

Most of this time is spent gathering the necessary information, such as:

• Medical records from your healthcare providers
• Financial documents, like pay stubs or tax returns

This information allows the underwriter to make a well-informed decision about your application and determine the appropriate premium and benefit amount.

Being prompt in providing requested documents can help speed up the process.

Depending on the benefit amount you’re applying for, a brief medical exam may be required as part of the underwriting process.

• The exam is paid for by the insurance company and conducted by a third-party medical service, often at your home or office for your convenience.
• It may include a:
  • Basic physical exam
  • Blood work
  • Urine analysis
  • And in some cases, an EKG

The results are sent directly to the insurance underwriter and reviewed along with your application. You can also request a copy of the exam results for your own records.

This step helps ensure that your policy accurately reflects your health profile—and supports fair, appropriate coverage decisions.

An “own-occupation” disability insurance policy is a type of coverage that protects your ability to earn an income in your specific occupation or specialty. It is considered one of the most comprehensive forms of disability insurance.

Under this type of policy, you are considered disabled if an illness or injury prevents you from performing the material and substantial duties of your regular occupation—even if you are able to work in a different capacity or field.

This is especially valuable for highly trained professionals, such as physicians, surgeons, dentists, attorneys, and other specialists, whose skills and income are closely tied to their specific roles.

If you pay your disability insurance premiums with after-tax income (net income), the monthly benefit will not be taxed. However, if you choose to deduct your premiums from your taxable income, the monthly benefit will be taxed during a period of disability. Similarly, if your employer pays the premium on your behalf, the monthly benefit will also be taxed.