How does a longer benefit period affect the premium of a disability policy?

A longer benefit period in a disability insurance policy typically increases the premium. The rationale behind this is that a longer benefit period means the insurance company may have to pay out benefits for an extended duration. This raises the potential financial risk for the insurer because the longer an individual may be disabled, the more they may claim under the policy.

As a result, to account for this increased liability, the insurer adjusts the premium accordingly. In essence, the premium represents the cost of the coverage and the risk associated with that coverage; therefore, a longer benefit period leads to a higher risk and, consequently, a higher premium.

In terms of other options, a decrease in the premium would occur with a shorter benefit period or reduced risk factors, while having no change in the premium or eliminating it entirely are not typically feasible scenarios for a policy that provides meaningful coverage.