Graded Premiums and The Student Loan Rider.

With an individual Disability Insurance Plan, you have the option to choose between two types of premiums:

  1. Level Premiums or
  2. Graded Premiums  

Level Premiums (also known as “fixed” premiums) do not increase in cost throughout the life of your disability plan.  This ensures that you will pay the same rate month after month and year after year, making it easy to budget and also the most cost effective plan throughout the entire span of your career.

Conversely, Graded Premium Plans offer the same benefits as Level Premium Policies but Graded Premiums starts out at a significantly lower rate that increases annually.

Due to the initial lower cost, Graded Premiums can prove much more affordable for medical students or residents that are still in school or training.  While some carriers do not offer the Graded Premiums option, many do and most Graded Premium Plans also provide the option to convert your plan from “graded” to “level” premiums when you are ready to do so.  In most cases, it makes sense to do this once you are finished with training, since with the Level Premium plan, your rates will never increase once your policy is converted.

Student Loan Rider

A select number of carriers also offer an option for a supplemental Student Loan Rider.  If you are encumbered with a significant amount of student loan debt, a Student Loan Rider is worth examining as it will reimburse you for the cost of your student loans each month (up to s specified maximum reimbursement amount).

This rider is structured to pay an additional monthly benefit (on top of your regular monthly benefit) so that you can repay student loans as well as pay your bills in the event that you become disabled. The Student Loan Rider does come with a slightly higher premium on your plan.  Yet, it may be worth the cost until your student debt is paid down or paid in full, especially if it will take several years to accomplish this.  At that time, you have the flexibility to drop the Student Loan Rider from your plan.

The Graded Premium option and the Student Loan Rider are both great strategies for younger professionals still in the beginning stages of their career.  But, as mentioned earlier, the Level Premium plan still tends to be the most cost effective option over the entire span of your career since your rates will never increase once your  Level Premium policy is in place.  

As always, we’re here to help!

Chris Wimberly

The Disability Doc

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*This information is solely used for general market educational purposes.  It does not provide legal rights or actual carrier policy language.  Please review the respective policies for the complete terms and conditions.