Standard
Substandard (Higher Premium)
Preferred (Lower Premium)
Estimated Monthly Premium
$0.00
This is an estimate and may vary based on insurer and specific policy details.
Understanding Long Term Disability Insurance Costs
Long Term Disability (LTD) insurance is a crucial financial safety net that provides income replacement if you become unable to work due to illness or injury for an extended period. The cost of an LTD policy is influenced by several factors, including your income, the coverage you choose, your age, health, occupation, and the specific terms of the policy.
How the Cost is Estimated
The premium for LTD insurance is typically calculated as a percentage of your monthly income, but this percentage is adjusted based on various risk factors. While exact calculations vary by insurance provider, a common approach involves a base rate adjusted by several key inputs:
Estimated Monthly Premium ≈ (Monthly Income × Benefit Percentage × Base Rate Factor) × Occupation Class × Health Rating × Age Factor × Gender Factor
Note: The "Base Rate Factor" is an internal underwriting metric that fluctuates, and the "Age Factor" and "Gender Factor" are often embedded within insurer-specific underwriting tables.
For the purpose of this calculator, we use simplified industry averages and estimations:
Monthly Income: Your gross earnings before taxes.
Benefit Coverage (% of Income): The portion of your income you want the policy to replace (e.g., 60%).
Benefit Period: How long the benefits will be paid (e.g., 5 years, 10 years, or until retirement). Longer periods increase premiums.
Elimination Period: The waiting period before benefits begin after you become disabled (e.g., 90 days). Shorter periods result in higher premiums.
Occupation Class: A rating based on the risk associated with your job. Higher-risk occupations have higher premiums.
Age: Younger individuals generally pay lower premiums.
Health Rating: Your overall health status. Better health usually means lower premiums.
Gender: Historically, women have paid higher premiums due to longer life expectancies and higher claim rates, though this gap is narrowing.
Example Calculation:
Let's consider an example:
Monthly Income: $6,000
Benefit Coverage: 60% of income
Benefit Period: To Retirement (age 65)
Elimination Period: 90 Days
Occupation Class: 3 (Lower Risk)
Gender: Male
Age: 40
Health Rating: Standard
In this scenario, the calculator would use these inputs to derive a monthly premium. The monthly benefit amount would be $6,000 \* 60% = $3,600. The premium calculation is more complex, involving actuarial data for disability probabilities, claim durations, and mortality rates for the chosen benefit period, adjusted by the occupation and health factors. A simplified estimation might suggest a monthly premium in the range of $50 – $150, depending on the specific insurer's rates and underwriting.
Why is LTD Important?
Your ability to earn an income is likely your most valuable asset. LTD insurance protects that asset, ensuring you can maintain your lifestyle and financial stability if a disability prevents you from working. It can cover essential expenses like mortgage/rent, utilities, food, and debt payments, preventing financial hardship during a challenging time.
Disclaimer: This calculator provides an estimated cost based on common factors. Actual insurance premiums are determined by individual underwriting by the insurance company. Consult with a licensed insurance agent for a personalized quote.
function calculateLTDcost() {
var monthlyIncome = parseFloat(document.getElementById("monthlyIncome").value);
var benefitPeriod = document.getElementById("benefitPeriod").value;
var retirementAge = parseInt(document.getElementById("retirementAge").value);
var eliminationPeriod = parseInt(document.getElementById("eliminationPeriod").value);
var benefitPercentage = parseFloat(document.getElementById("benefitPercentage").value);
var occupationClassMultiplier = parseFloat(document.getElementById("occupationClass").value);
var gender = document.getElementById("gender").value;
var age = parseInt(document.getElementById("age").value);
var healthRatingMultiplier = parseFloat(document.getElementById("healthRating").value);
var resultElement = document.getElementById("result");
resultElement.style.color = '#28a745'; // Default to success green
// — Input Validation —
if (isNaN(monthlyIncome) || monthlyIncome <= 0) {
resultElement.textContent = "Invalid Income";
resultElement.style.color = 'red';
return;
}
if (isNaN(age) || age <= 0) {
resultElement.textContent = "Invalid Age";
resultElement.style.color = 'red';
return;
}
if (benefitPeriod === "toRetirement" && (isNaN(retirementAge) || retirementAge 30) {
ageFactor = 1.0 + ((age – 30) * 0.02); // Increase premium by 2% per year over 30
}
// Gender Factor: Historically higher for females.
var genderFactor = 1.0;
if (gender === "female") {
genderFactor = 1.15; // Assume 15% higher for females (varies greatly)
}
// Benefit Period Factor: Longer periods increase cost significantly.
var benefitPeriodFactor = 1.0;
switch (benefitPeriod) {
case "2": benefitPeriodFactor = 0.7; break; // Shorter periods are cheaper per month
case "5": benefitPeriodFactor = 1.0; break;
case "10": benefitPeriodFactor = 1.3; break;
case "20": benefitPeriodFactor = 1.6; break;
case "toRetirement":
var yearsToRetirement = retirementAge – age;
if (yearsToRetirement > 25) benefitPeriodFactor = 2.0;
else if (yearsToRetirement > 20) benefitPeriodFactor = 1.8;
else if (yearsToRetirement > 15) benefitPeriodFactor = 1.6;
else benefitPeriodFactor = 1.4;
break;
}
// Elimination Period Factor: Shorter periods increase cost.
var eliminationPeriodFactor = 1.0;
switch (eliminationPeriod) {
case 30: eliminationPeriodFactor = 1.2; break; // More expensive
case 60: eliminationPeriodFactor = 1.1; break;
case 90: eliminationPeriodFactor = 1.0; break; // Standard
case 180: eliminationPeriodFactor = 0.85; break; // Less expensive
}
// Combine factors
var finalMonthlyPremium = estimatedBasePremium * occupationClassMultiplier * healthRatingMultiplier * ageFactor * genderFactor * benefitPeriodFactor * eliminationPeriodFactor;
// Cap the premium to a reasonable percentage of income (e.g., max 5-7% of gross income)
// This is a protective measure against overly high calculated premiums in the simplified model.
var maxPremiumAsPercentageOfIncome = 0.06; // 6%
var maxAllowedPremium = monthlyIncome * maxPremiumAsPercentageOfIncome;
if (finalMonthlyPremium > maxAllowedPremium) {
finalMonthlyPremium = maxAllowedPremium;
}
// Format the result
resultElement.textContent = "$" + finalMonthlyPremium.toFixed(2);
}
// Show/hide retirement age input based on benefit period selection
var benefitPeriodSelect = document.getElementById("benefitPeriod");
var retirementAgeGroup = document.getElementById("retirementAgeGroup");
benefitPeriodSelect.onchange = function() {
if (this.value === "toRetirement") {
retirementAgeGroup.style.display = "block";
} else {
retirementAgeGroup.style.display = "none";
}
};
// Initial check on page load
if (benefitPeriodSelect.value === "toRetirement") {
retirementAgeGroup.style.display = "block";
}