Why disability insurance costs may differ

Q: The male physicians in our practice pay less for their disability insurance than the women, even though we all have similar incomes, are about the same ages, and practice primary care. Why is that?

A: They may be paying less due to a variety of factors. For example, your age when the policy was issued plays a part in determining the premium amount. The younger the insured is when the policy is issued, the lower the premiums are for the same benefits.

Another factor could be the amount of disability benefit issued. The more disability benefit the insured will receive, the more premium he or she will be required to pay.

Another reason may be that contracts can have different definitions of disability. One is an own occupation definition of disability. With own occupation coverage, if the insured becomes disabled, benefits are still payable even if he or she is able to gain employment in another profession. Group or individual plans that are not own occupation-specific may only cover total disability and not pay benefits if the policyholder is partially disabled or can do other work.

Finally, if your colleagues bought coverage as a part of a group plan, they may have received a multi-life discount, which can account for a 15% to 30% discount on the premiums. If they leave the group they could take the coverage with them, pay the premiums on their own, and keep the coverage.

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. Answer provided by John Hill, CFP, CPA, managing partner of WealthPartners, LLP, in Ridgeland, Mississippi.