May 15, 2009, Newsletter Issue #57: How Disability Statistics Influence Insurance Premiums

Tip of the Week

Did you know that of the hundreds of thousands of families that file for bankruptcy protection every year, one in four state “disability” as the reason for their financial crisis? This is but one reason that disability statistics influence insurance premiums. Most working members of our population, blue collar, white collar, or professional, depend on their regular monthly income to maintain their lifestyle and household. Should that income cease, sometimes even for only a short period of time, entire financial structures can change for the worse.

Income and disability are therefore closely related to disability insurance premiums. If you question why disability insurance at first appears to be costly versus the cost of life insurance, consider this. Life and disability insurance are related since pay-outs for both occur because of health issues of one type or another. However, life insurance involves a stated amount, known by your insurer at the time the policy is issued. On the other hand, disability insurance involves an amount of monthly income to be paid over an often indeterminate time period, often for many years, sometimes for life.

The incidence of disability and the disability statistics specific to various occupations are therefore a major factor in the computation of insurance premiums. You should not be surprised that the cost for similar private disability insurance coverage for a professional athlete or Formula 1 race car driver is normally higher than for a business executive or orthodontist.

The Disability Statistics Center at the University of California in San Francisco and the Center for Disease Control are but two of the well respected entities that disseminate this data. Disability insurance companies use this and other third party data, compare it to their own prevalence of disability statistics to properly price their premiums. The end result: You will get the insurance protection you need at a fair cost based on the statistics for your profession and the benefit options you select.

Refer to your insurance policy contract for specific information regarding your coverage and for actual terms, conditions and exclusions. The above statements are general in nature and may or may not reflect the actual terms of your insurance policy.

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