Graded disability insurance premiums start low and increase over time, while level premiums stay the same. For financially independent doctors, graded premiums can be cheaper upfront, but level premiums lock in your rate and protect you if your health changes.
One way to save money on your disability insurance policy is to get graded premiums. Not all policies offer this feature, but those that do charge you less in the first few years and more in later years. Level premium policies charge you the same amount in premium every year. Alternatively, a graded premium policy accounts for the fact that you become more likely to become disabled as you go through life. This can be very beneficial to you because your need for insurance actually falls continually throughout your life as you build your retirement nesting. Once you become financially independent you can drop the insurance completely. This is a good idea since the total benefits of policy could potentially pay are also dropping throughout your life since the policy will generally only pay until you're in your mid to late 60s. Many white coat investors who are great savers hit financial independence by mid career. If you're one of those, you're likely to come out ahead using graded premiums instead of level premiums.
Physician Takes a Youth Sports Team to the State Championship - MtoM Podcast #236
