In Texas, disability income insurance costs between 1% and 4% of the annual salary of the policyholder. The price is determined by the type of plan and the coverages. Group policies, purchased through an employer, or state-ran coverages are always less costly than individually-purchased disability income plans.
As a supplementary insurance policy that is meant to protect an insured’s income should the insured become disabled for a short or long term, it costs a small fraction of the insured’s actual income before disability. For instance, a policyholder who receives $70,000 annually as salary will pay between $700 and $2,800 annually for disability income insurance coverage in Texas.
While the rule of thumb is that a disability income insurance policy costs between 1% and 4% of the income of the insured, it may cost more than that depending on the insured’s customization. Government employees can also apply for disability income insurance under the Texas Income Protection Plan (TIPP). The cost of disability income under TIPP can be lower than 1% of the monthly salary of the eligible state employee.
Disability insurance is not for individual earners only. Business owners can also purchase disability income insurance for their employees, to provide additional coverage, on top of Workers’ Compensations, which covers injuries suffered in the workplace. Group coverage is always less expensive
As a policyholder of disability income insurance in Texas, you should pay between 1% and 4% of your annual salary as your disability insurance policy premium. However, policyholders of disability income insurance in Texas can customize their plans in a way that their disability benefits can cater for their monthly expenses when they might be out of a job. With this customization, the amount that such policyholders will pay for the policy will change and may no longer fall within the range of 1% and 4% of their pre-disability income. You can contact a disability insurance agent licensed to operate in Texas for the cost of disability income insurance.
Insurers determine the cost of disability income insurance in Texas by considering the would-be policyholder's gender, occupation, and income. The higher the possibility of becoming disabled due to the nature of their work, the higher the policy premium. Also, the higher the income, the higher the monthly premium that the policyholder will pay.
There is no specific average cost of disability income insurance in Texas. The policyholder's income mainly determines how much will be charged for a disability income insurance policy.
As incomes of Texas residents vary, the cost of disability income insurance also differs from one policyholder to another. It is safe to say that there is no specific price for a typical disability income insurance policy in Texas. Considering the average annual wages in Texas which is about $58,000, a typical disability insurance policy will cost between $580 and $2,320 annually.
Disability income insurance in Texas costs between 1% and 4% of the annual salary of the policyholder. If the cost is pegged at 1% of the yearly salary of the policyholder, it is this percentage that is paid as a premium either spread over twelve months or wholesomely. For instance, an insured who makes $100,000 yearly will pay $1,000 as premiums for one year if the cost of the policy is set at 1%. Therefore, the policyholder can pay that $1,000 once or $83.33 monthly for twelve months as a premium.
The two types of disability income policies usually cost about the same (1% - 4% of the annual gross amount of the protected wage), but the amount of coverage and the amount of time you must wait before you start getting the payments differs. Make sure to review your needs with a licensed health insurance agent:
|Type of Disability Income Insurance||Typical Elimination Period||Typical Coverage|
|Short-Term Disability Insurance||under 14 days||up to 80% of gross income|
|Long-Term Disability Insurance||avg. 90 days
Available: 30 - 365 days
|up to 60% of gross income|
The income of the policyholder primarily determines the price the insured will pay for their individual disability income insurance. Furthermore, policyholders may customize their individual disability insurance policies and this can increase or reduce the cost of their policies. Gender, age, occupation, and the policy type (long-term or short-term disability income insurance) of the policyholder can also influence the cost.
Government sponsored disability income coverage is always much less expensive, but only the state and federal government employees typically qualify. For example, short term disability insurance obtained through the ERS (Employees Retirement System of Texas) - TIPP costs 28 cents (0.28%) of every $100 of the monthly income. Long-term disability income insurance under the same plan costs 63 cents (0.63%) of every $100 of the monthly income of policyholders every month. This means that an insured with a monthly gross income of $7,500 will pay $21 monthly for short-term disability income insurance or $47.25 monthly for long-term disability income insurance.
The cost of group or privately purchased individual disability income insurance is typically between 1% and 4% of the insured’s annual gross income. Government employees in Texas can get disability income protection for less than 1 percent of the gross wage. TIPP (as of 2022) charges 0.28% (28 cents on $100) for short-term and 0.63% (63 cents for every $100) for long-term disability insurance every month.
As non-government sponsored disability income insurance in Texas costs between 1% and 4% of the insured’s annual income, the monthly cost as a premium is calculated by dividing the annual cost by 12. For instance, a policyholder who earns a gross wage of $100,000 yearly will pay between $1,000 to $4,000 as policy premiums in a year. The monthly cost will be from $83.33 to $333.33.
People who are self-employed in Texas can also buy disability income insurance. The cost of disability income insurance varies for this set of people depending on the policy they obtain and against the income they purchased the policy. The policy will cost between 1% and 4% of that income if it is for personal income. If for the cost of running a business, the policy's cost will be based on the cost of running the business, not the business owner's income.
How Much Does a $500,000 Disability Income Insurance Policy Cost?
Following the rate of 1% to 4% of the insured’s annual income, a $500,000 disability income insurance will cost between $5,000 and $20,000 annually as premiums. This translates to a monthly premium of about $417 to $1,667.
To find out how much a disability income insurance policy tailored to your needs may cost in Texas, speak with a knowledgeable insurance agent who is licensed to sell disability insurance in Texas.
Disability income insurance does not have any deductibles. The insured only needs to wait for a certain period before disability benefits start to come in for the insured, so as to cover their income gaps. This specified period is also known as the elimination period.
Disability income insurance does not have any deductibles. The elimination period matters for the cost; the longer the period, the lower the cost.
The major factors that can raise the cost of disability income insurance are:
The income that the insured wants to protect - The higher the insured’s income, the higher the cost of the policy. A policyholder who makes $50,000 a year will not pay as high as another policyholder who makes $200,000 a year.
The insured’s occupation - If you have a riskier job, there is a high tendency of having disability income insurance with higher cost.
The insured’s age - A policyholder who obtains disability income insurance when they are young gets it for a lower price. People who are closer to the retirement age tend to pay a high cost and monthly premium.
The duration of the policy - A short-term disability income insurance policy is not as expensive as a long-term disability coverage. Since for a short-term disability income insurance the policyholder will receive benefit payments for a short period (maximum of 5 months), the cost of the policy is not that high. A long-term disability policy covers the insured’s income for an extended period of at least 12 months. Its cost is fairly higher than that of short-term disability coverage because the insurer will have to pay benefits to the insured for a longer period.
Your income, the disability insurance option, your age, the riders attached to your policy, and your occupation determine the price you pay for your policy. If the cost of your disability insurance is so high, it means mainly that your annual income is high. There is also a possibility that your policy is long-term or has many riders attached to it.
The top 6 factors that raise or lower your disability income insurance are the waiting period, results of the medical exam, benefit period, amount of coverage, optional coverages, and premium structure.
The waiting period is also known as the elimination period. This is the period before the insured starts receiving benefits from the insurance company after a disability has kicked in or the policyholder cannot work as a result of illness or injury. The shorter the period, the higher the cost. If you have long-term disability income insurance and cannot wait for 3 months, this will increase the cost of your policy. If you can wait for more than 3 months, it will lower the cost.
Medical exams are usually required as part of the application for an individual disability income policy. The final cost may depend on the fundings, if some significant health issue is discovered.
The benefit period is the duration for which you are going to be entitled to disability benefits which will serve as your income. There are two benefit periods: short-term and long-term. A short-term benefit period is for at most 5 months, while a long-term period is for an extended period which can run up to 10 years. The shorter the benefit period, the lower the cost; the longer the period, the higher the cost.
The amount of income that needs to be covered affects the cost. The higher the income, the higher the overall cost. (NOTE: The coverage amount is not adjusted automatically. If you receive a raise, make sure to document it with the insurer, to adjust the coverage accordingly. Speak with your insurance agent and/or the insurer for more details.)
Optional Riders are the extra options that may be added to the policy. Options usually add to the total cost. The typical riders that the insured may add to disability income insurance in Texas are:
Non-Cancelable - means that the policy cannot be canceled or changed in any way by the insurer. You get to have it at the same costs with the same coverage for as long you pay for it.
Return of Premium - returns all of the premiums you have paid to the policy, if you decide to cancel the coverage (typically one of the most expensive riders)
Survivor Benefit - if you die after you start receiving disability insurance benefits, the payments may continue to be paid out to the designated beneficiaries.
Catastrophic Disability - helps cover the care of a catastrophic disability, illness, or injury.
Basic Partial Disability Benefit (Residual disability rider) - pays a partial disability benefit to the insured if they get injured or hurt, but not to the point of total disability. Some insurers may cover sick days when the insured individual misses work.
Student Loan Rider - is frequently purchased by young professionals with extensive college debts. If the insured can’t work, the loan still gets paid.
Future Purchase Option (Future increase rider) - allows you to plan for a future increase in coverage, to keep up with the expected rise in income.
Retirement Protection - replaces your contributions that you would have made to the retirement accounts while you are totally disabled. Typically, the insurer creates a separate investment account, where the contributed funds grow until the insured reaches the retirement age.
Cost of Living Adjustment (COLA) - increases the payout according to inflation each year while you are disabled.
Level vs. Graded Policy: Disability income insurance can come in two main options, which reflect on the cost:
For a level plan, the premium does not change; it remains constant from the start of coverage, as long as the insured continues making payments.
Graded benefit plans are typically purchased when there are issues with the insured’s health. The graded benefit plan works in incremental steps, where at the start of coverage the cost is lower and so is the percentage of coverage. With each year (or another predetermined period of time) of continued coverage, the premium goes up, and so does the percentage of coverage of the insured income.
How much the cost of your disability income insurance increases after a disability depends on the type of policy that you have. The cost of disability income insurance may increase, and it may not. If it will increase after a disability, the increment is determined by the insurance company.
The answer to the question is both Yes and No. Disability income insurance policies can be non-cancellable, guaranteed renewable, or both. If you obtain a disability income insurance policy that is just non-cancellable, the insurance company cannot increase the premium due to a claim. If your policy is just guaranteed renewable, the insurance company is expected to renew your policy but can increase the cost of your policy. Only when your policy is non-cancellable and guaranteed renewable can you renew it, and its cost will not go up.
If your policy is cancellable, the insurance company can increase the premium. The insurance company determines the increment in premiums, and the new rate applies to all policyholders of the same policy.
Discuss your disability income insurance needs with a Texas-licensed health insurance agent.
No, it will not go up if you become disabled but not on the job. Disability income insurance covers the injuries that happen off-the job, since Workers’ Comp covers the injuries sustained on-the-job. Most disabilities do not happen on the job; many of them result from one illness or the other. While being on the job or not does not increase the cost of disability income insurance, whether it is non-cancellable or just guaranteed renewable determines if it will go up or not. Contact a knowledgeable Texas-licensed insurance agent who sells disability income insurance to get more information and address your specific disability insurance needs.
The insurer needs to inform you of the intention to change the premium they charge you at least 30 days before the commencement of the new rate. The insurer must state the current price, the new price, and the commencement date.
The cheapest disability income insurance plan is the short-term disability income insurance policy. Short term policy provides income protection of up to 66% of the insured’s income for a maximum period of 12 months. The waiting period before you can start getting paid, can be as short as 1 day. Contact a knowledgeable Texas-licensed disability income insurance agent to get more specific prices for the different disability income insurance policies.
No, the cost of disability income insurance does not go down over time. When you obtain a disability income insurance policy that is even cancellable, the price does not go down.
Texas does not make disability income insurance mandatory for its residents or for employers to provide for their employees. Therefore, you as an individual or a business owner decide whether to get it or not. The amount of disability income insurance you need depends on your needs and assessment based on your monthly income, responsibilities, and expenses. Your assessment should be based on the following questions.
For how long can you survive on your savings without another income?
What is your definition of disability?
Will you be able to change jobs as a result of a particular disability?
For how long will you want to live on disability income benefits?
Answers to the questions above will help you know how much disability income insurance you need. Speak with a Texas-license health insurance agent to get help in assessing your needs and to discuss the disability income coverage options available for you.
The assessment of your monthly expenses plays a significant role in determining the amount of disability income coverage you need. You need to factor in the bills you need to pay every month and other recurrent monthly expenses. A short-term disability income insurance will allow you to collect 40% to 66% of your annual income while long-term covers 60% - 80% of your income. This 40% to 80% of the annual income will be divided by 12 months to arrive at the monthly benefit.
You have the opportunity of adding some riders (cost of living adjustment rider, future purchase option, student loan protection rider, or enhanced partial disability benefit rider) to your policy to cater for some expenses. These riders can help augment your disability benefit so that it will be enough to cover your medical examination expenses or mortgage payments. These riders help you cover your regular expenses. Therefore, your expenses should determine whether you add riders to your policy or not. Speak to a knowledgeable Texas-licensed insurance agent who can help you identify your needs and match them with the most comprehensive and cost-effective coverage.
Yes. It is cheaper to get group disability income insurance through your employer or a professional association, even if you are self-employed or your employer does not offer it. Employers and associations that buy disability income insurance do so for a group of people (employees or members of the association). Buying individual disability insurance for a group of people at once often reduces the cost and is cheaper than buying it individually.
The surest way to save some money on the cost of disability income insurance is to obtain it through a group, either by being an employee or being a member of a professional association. If you have some riders that you may not need attached to your policy, you can save on your disability insurance policy by removing such riders.
An individual cannot negotiate the price of disability income insurance, but associations or groups can negotiate using the strength of their number. For instance, with the membership of about 128,000 family physicians, the American Academy of Family Physicians (AAFP) can negotiate lower premiums and better monthly benefits for their members.
You can save money on your disability income insurance by:
Buying it through your employer or professional associations - Employers can help their employees buy disability income insurance with low premiums using the power of the number of employees.
Reducing the percentage of your income that will be covered - You can negotiate for a reduction in the percentage of your income that will be protected. However, this will also affect your monthly benefit because it will also reduce.
Reducing the benefit period - longer-term benefits always costs more. Shorter duration costs less.
Elongating your waiting period - If you can survive for more than 3 months without an income, bargaining for a longer waiting period will reduce the cost of your disability income insurance.
Shop around - Speaking with a licensed insurance agent in Texas can help you save some money on the cost of disability income insurance. A knowledgeable insurance professional with access to multiple insurers can provide different options of coverage for comparison.
If you cannot afford private disability income insurance, you may be eligible for any of the two federal programs that provide some income for some people when they cannot work for some time. They are the Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). Additionally, you have additional financial protection if your Texas employer offers worker’s compensation and you get injured at work.
Apply for either the social security disability income or the supplemental security income. You are eligible to apply for SSDI if you have worked for some time and paid your social security taxes while working. You can qualify for the supplemental security income, on the other hand, if you are disabled or older than 65 with limited to no income.
In Texas, the following discounts are available for disability income insurance policyholders:
Unisex rate discount - Women pay more for disability income insurance because they file claims more. Insurance companies can decide to remove this gender-based rate to attract more female policyholders. This discount will allow female policyholders to pay the same price their male counterparts pay.
Premium discount - Many insurance companies give their customers some discounts when they pay their premiums upfront.
Multi-policy purchase discount - This form of discount is meant for people who purchase different insurance policies from the same insurance company. For example, a policyholder who buys auto insurance, life insurance, and homeowners insurance from an insurance company can be eligible for some discounts when purchasing disability income insurance from the same insurer.
Association discount - You get an association discount when you buy disability income insurance through your professional association or a group. When people buy a policy through their association simultaneously, the association uses the population of their members to ask for discounts.
Multi-life discount - There are always discounts when you buy group disability income insurance. When at least 3 employees of the same employer collectively buy individual disability income insurance from the same insurance company, they can be given a discount as a group.
Special offer discount - Insurance companies can deliberately decide to run discounts for some categories of people to attract more policyholders.
It is advisable to speak with a knowledgeable and licensed insurance agent who can help you save on the cost of disability income insurance policies. Insurance agents know the current market, the best insurance products, current pricing of the products, and they know how to bundle coverages to save costs. A knowledgeable agent can custom-build and modify quotes to meet the needs of the customer while not compromising on the cost-effectiveness and comprehensiveness of the coverage.