What is income disability protection insurance?

income insurance

One of the main reasons why people lose the ability to earn a living is when they encounter an accident or illness that leads to disability. Illness or accidents can occur suddenly and leave you reeling especially if you don’t have a financial fallback in place This is the reason why disability income protection insurance is one of the most important things you can get for yourself.

Disability income (DI) insurance is insurance coverage that provides supplemental income in the event of an illness or an accident that prevents the insured person from working. Unlike traditional insurance policies, the benefits are paid monthly to meet the regular needs of the insured. Coverage can be used to take care of living expenses as well as medical care as the insured recovers from his illness or injury.

Why is disability income insurance important?

Disability insurance is crucial because you need a source of income even if you are not able to work due to an illness or an accident. Without insurance to tide you over during these tough times, you run the risk of going into debt or losing important assets such as your house, investments, and other properties. You also put a huge burden on family members to support you financially during the time when you are unable to earn a living. All these can be avoided if you are covered by insurance.

What does income disability insurance cover?

Most policies can cover up to 65% of the insured’s gross income before the disability. Coverage duration can vary from as short as a couple of months to up to 2 years after the disability. There are policies that cover the insured for up to 65 years of age or the normal age of retirement.

Disability income insurance pays for total disability. Total disability may be defined by most insurers as the inability to perform the duties required of his or her occupation. This definition is often used in the first year of disability. In the following years, if the insured is still unable to work at any occupation suitable for the insured’s education, training, and experience, he or she may still be eligible for continued coverage.

There are policies that cover partial disability along with total disability coverage. Partial disability applies when the insured is capable of performing some of his duties and can earn income but is unable to work full-time. In cases like these, the insured still suffers loss of income and therefore eligible for coverage.

What is not covered under a disability income protection plan?

Coverage does not extend to those conditions that were pre-existing before the policy was activated. Only accidents, injuries or illness that occurred after the policy was purchased will be considered covered under the policy.

What is the cost of disability income insurance premiums?

There are a number of factors that can affect the price of premiums, but on average, premiums range from 1.5% to 3% of the insured’s gross income. Age is one of the most critical factors considered for premium pricing. For example, those closer to 60 years old may pay higher premiums than those who are in their early 20s. State of health and the insured’s gender also affect premium pricing. Occupation is also another factor that insurers will consider. Those with occupations with relatively low risk can expect to pay lower premiums than those in higher-risk occupations. The length of coverage is also another factor. Policies that offer coverage through retirement will naturally come with higher premiums.

What is a waiting period?

The waiting period is the time between the filing of the claim to the determination of the eligibility to receive benefits. The insurer uses this time to determine if the insured is eligible for benefits based on the illness or injury suffered. Most companies have a 30-45 day wait time before the first benefit is available.

Disability Income Protection as a Rider

If you already have life insurance, you can pay for disability income insurance as a rider. You can find riders that pay a specified amount per $1,000 of life insurance, subject to certain maximum limits.

Accidents and illness can leave you unable to continue to make a living and earn what’s needed to support yourself and your family. Whether this is a temporary setback or one that prevents you from returning to work for a longer period of time, you can benefit from having disability income coverage to tide you over. Know more about this type of coverage so you can get the protection you need from unexpected emergencies. Talk to your agent today.