What is Disability Insurance?

Disability Insurance, also known as DI, disability income insurance, or income protection, is a type of insurance that protects the beneficiary’s earned income against the risk of a disability that may prevent them from performing the core functions of their work. This may include an inability to maintain composure due to psychological disorders or physical impairment or incapacity to work due to an injury, illness, or condition. Disability insurance encompasses paid sick leave, short-term disability benefits (STD), and long-term disability benefits (LTD).

In the US, statistics show that a disabling accident occurs on average once every second. Nearly 18.5% of Americans are currently living with a disability, and 1 out of every 4 persons in the US workforce will suffer a disabling injury before retirement.

There are several types of disability insurance, including:

1. Individual Disability Insurance: This type of insurance is available for those whose employers do not provide benefits and for self-employed individuals who desire disability coverage. Premiums and available benefits for individual coverage vary considerably between companies, occupations, states, and countries. In general, premiums are higher for policies that provide more monthly benefits, offer benefits for longer periods of time, and start payments of benefits more quickly following a disability claim. Premiums also tend to be higher for policies that define disability in broader terms.
2. High-limit Disability Insurance: This type of insurance is designed to keep individual disability benefits at 65% of income regardless of income level. Coverage is typically issued supplemental to standard coverage and can provide benefits ranging from an additional $2,000 to $100,000 per month. Single policy issue and participation coverage has gone up to $30,000 with some companies.
3. Key-person Disability Insurance: This type of insurance provides benefits to protect a company from financial hardship that may result from the loss of a key employee due to disability. The company can use the benefits to hire a temporary employee if the disabled employee’s disability appears to be short-term or to help defray costs related to hiring a replacement in the case of permanent disability.
4. Business Overhead Expense Disability Insurance: This type of insurance reimburses a business for overhead expenses should the owner experience a disability. Eligible benefits include rent or mortgage payments, utilities, leasing costs, laundry/maintenance, accounting/billing and collection service fees, business insurance premiums, employee salaries and benefits, property tax, and other regular monthly expenses.

Contact us to learn more about finding the right disability insurance coverage for you.