Disability Insurance

Disability Insurance as the name suggests is one that brings you cash when you are unable to work because of becoming temporarily or permanently disabled. There are two parts to disability – Injury and Illness. There are some policies which cover both Injury and Illness at the same time while others give you a choice of adding illness to basic injury coverage if you desire. This is only to make it cheaper but the cost is bypassing the illness part of disability.

The cost of the disability policy depends mainly on:

• The definition of disability such as any occupation, regular occupation or own occupation.
• The coverage itself which could be 24 hours or Non-occupational.
• The waiting period before the policy starts to pay when disability kicks in ranging from 0 day going up to 120 days or even up to 2 years in some cases.
• The benefit period which could be 2 years / 5 years or long term until age 65 or 70. Some companies extend a part of the insurance till age 90.
• Your occupation – whether office job or field duties and risk involved.
• The age and health in case illness is being covered.
• Whether there is a return of premium included or not?

The chances of getting disabled are much higher than chances of death and if you multiply your current annual income by number of years you will get how much you would earn over your working period. Say a 35 year old person making $50,000 per annum would earn $ 1,500,000 till age 65 assuming no growth in income over the years. Isn’t this earning capacity worth insuring?

Disability Insurance is a vital part of any financial plan but it is all the more crucial if you are self employed because there is no coverage from work.

There are products that look at your income while issuing the policy and not at the time of claim but there are others that do want to see your income at the time of claim. The pricing and issue classes are different for these.

Some companies also offer minimum coverage for people who are not working and for students.