Ancillary Products
How to Calculate Premium
for Life, Accidental Death & Dismemberment (AD&D) and Disability Insurance
To calculate premium due, multiply the benet amount by the premium rate set forth in your policy. Be sure to apply
salary denitions, benet maximums, rounding rules, age reductions, guarantee issue limits, and spouse coverage
limitation or restrictions. These are set forth in your policy. Please see the examples below to calculate premium. The
volumes and rates are for illustration purposes only.
Life and Accidental Death & Dismemberment (AD&D) Insurance
Premium for Life and AD&D coverage is based on the full benet amount. The premium rate is expressed per $1,000 of benet
EXAMPLE: Benet equals $15,000 with a rate of $0.20 per $1,000 of coverage.
Benet
÷
Rate Units
=
Units
x
Rate
=
Monthly Premium
$15,000 1,000 15 $0.20 $3.00
Salary Based Life and Accidental Death & Dismemberment Insurance
Premium for Life and AD&D coverage is based on the full benet amount. The premium rate is expressed per $1,000 of benet
EXAMPLE: Life benet equals 2 times salary to a maximum of $100,000 with a rate of $0.10 per $1,000 of
coverage. If the employee’s annual salary is $25,250, premium is calculated as follows:
Annual
Salary
x
Salary
Multiplier
=
Benet
=
Benet
(Rounded to the Next $1000)
÷
Rate Units
=
Units
x
Rate
=
Monthly
Premium
$25,250 2 $50,500 $51,000 1,000 51 $0.10 $5.10
Using the previous example, if the annual salary is $65,000, premium is calculated as follows:
Annual
Salary
x
Salary
Multiplier
=
Benet
=
Benet Limit
(Maximum Benet Allowed)
÷
Rate Units
=
Units
x
Rate
=
Monthly
Premium
$65,000 2 $130,000 $100,000 1,000 100 $0.10 $10.00
Dependent Life Insurance
Premium for Dependent Life is based on either a rate per $1,000 of benet or a family unit. If based on a rate per $1,000, you
may use the above examples for calculating premium
NOTE: The dependent rates are regardless of the number of children the employee is covering. If the benet is $10,000 and the
employee has 5 children, you calculate premium based on $10,000 only, not $50,000. If the rate is based on a family unit, use
the example below:
EXAMPLE: If 50 of your employees elect dependent life coverage and the dependent life rate is $1.25 per
family unit, premium is calculated as follows:
Employees
x
Rate per Employee
=
Monthly Premium
50 $1.25 $62.50
Insurance products issued by Dearborn Life Insurance Company, 701 E. 22nd St. Suite 300, Lombard, IL 60148.
For illustrative purposes only. May not be available in all jurisdictions. Coverage may be subject to limitations, exclusions and other coverage conditions contained in the issued policy. Please consult the policy
for the actual terms of coverage. If there is any discrepancy between this benet description and the policy, the terms of the policy will control.
If you need assistance calculating premium, please contact your Blue Cross and Blue Shield of Illinois ancillary
account representative.
Short-Term Disability Insurance
Premium for STD is based on the weekly benet amount. The premium rate is expressed per $10 of benet.
EXAMPLE: STD benet equals 60% of weekly salary to a maximum of $500.
If the employee’s weekly salary is $400 and the STD rate is $0.80 per $10, premium is calculated as follows:
Weekly Salary
x
Benet Percentage
=
Weekly Benet
÷
Rate Units
=
Units
x
Rate
=
Monthly Premium
$400 60% $240 10 24 $0.80 $19.20
Using the previous example, if the employee’s weekly salary was $1,200, premium is calculated as follows:
Weekly
Salary
x
Benet
Percentage
=
Benet
=
Benet Limit
(Maximum Benet Allowed)
÷
Rate Units
=
Units
x
Rate
=
Monthly
Premium
$1,200 60% $720 $500 10 50 $0.80 $40.00
Long-Term Disability Insurance
Premium for LTD is based on the monthly salary (also called covered payroll). Premium is not based on the benet amount. The
premium rate is expressed per $100 of monthly covered payroll.
EXAMPLE: LTD benet equals 60% of salary to a maximum monthly benet of $5,000.
If the employee’s monthly salary is $2,538, and your LTD rate is $0.65 per $100, the benet and premium are calculated
as follows:
BENEFIT
Monthly Salary
x
Benet Percentage
=
Benet
$2,538 60% $1,522.80
PREMIUM
Monthly Salary
÷
Rate Units
=
Units
x
Rate
=
Monthly Premium
$2,538 100 25.38 $0.65 $16.50
The LTD benet was calculated to verify the employee had not reached the maximum benet of $5,000 allowed under the
policy. The LTD benet is not part of the premium calculation.
Using the previous example, if the employee’s monthly salary was $9,000, the benet and premium are calculated as follows:
BENEFIT
Monthly Salary
x
Benet Percentage
=
Benet
=
Benet Limit
(Maximum Benet Allowed)
$9,000 60% $5,400 $5,000
PREMIUM
Maximum
Monthly
Benet
÷
Benet
Percentage
=
Maximum Monthly
Covered Payroll
÷
Rate
Units
x
Units
x
Rate
=
Monthly
Premium
$5,000 60% 8,333 100 $83.33 $0.65 $54.16
Blue Cross and Blue Shield of Illinois is the trade name of Dearborn Life Insurance Company, an independent licensee of the Blue Cross and Blue Shield Association. BLUE CROSS
®
, BLUE SHIELD
®
and the Cross
and Shield Symbols are registered service marks of the Blue Cross and Blue Shield Association, an association of independent Blue Cross and Blue Shield Plans. 242425.0421
