How to Insure Your Income: Other Factors

Another factor that impacts how much a disability insurance company will charge for coverage is how much -- and what kind of -- other insurance a person carries. The insurance company's goal in this process is to prevent overinsurance.

Once it has obtained accurate information regarding the amount, elimination period and benefit period of other coverage you carry, the company will price its policy accordingly. It wants to avoid giving a policyholder the incentive to make a disability claim.

The company also wants to make sure that it generates enough premium income from the policy to cover -- on average -- a maximum benefit claim.

Finally, your total net worth also may affect the amount and price of disability income coverage a company will sell you. A person with $1 million in the bank simply doesn't need disability income insurance!

The total net worth and the liquidity of assets will determine whether a reduced amount of disability income will be issued -- or no coverage at all. If a person's assets are easily marketable and/or if the total net worth reflects a large amount of unearned income, then the underwriter may decide that the applicant is not eligible for coverage.