Disability Income Insurance – What Is It And Who Needs It?

Disability Insurance, commonly called DI or disability income insurance, or income protection, is a form of insurance that protects the income earning capacity of a beneficiary from the risk that the disability will pose an obstacle to performing essential job functions.

This insurance plan replaces a substantial part of the income earned by the insured person through periodic compensation payments during periods when the insured is disabled due to sickness or injury.

Are you protected through other insurance types?

Several other insurance types may provide coverage if you are unable to work. You may already be covered by a group disability insurance through your employer or qualify for disability benefits through your job, government, or other programs. In addition, social security disability insurance pays benefits to you and some members of your family if you are insured, meaning that you have worked enough and have paid social security taxes. Social security disability and supplemental security insurance (SSI) pay benefits to covered individuals and their families. 

However, many individuals find these insurance types insufficient to cover their income in case of a disability. This is where disability income insurance steps into play. It can give individuals and their families the peace of mind that their valuable sources of income are protected even if the individual is unable to work. 

Does disability income insurance help? 

Getting disability income insurance can help individuals reduce losses due to a medical condition or an accident resulting in short-term or long-term disability. While they may provide some coverage, employer-sponsored group disability insurance policies, social security disability benefits, and personal savings may not be enough to cover all the income you depend on. 

By adding personal disability income insurance, you are helping round out your substitute income and bridge gaps. If you lose your job or decide to change posts, you would lose the coverage provided through other sources, but this is not the case with disability insurance policies. The disability income insurance policy is individual, which means it follows you wherever your career takes you.

This arrangement can even pay benefits if a disabling condition lowers an insured individual’s earnings by a specified amount. Once the long-term disability policy begins paying, you can rely on that income to meet his expenses until you are ready to return to work.

Short-term or long-term disability income insurance? 

Short-term disability insurance provides coverage for three to six months. This means it would protect you only if you cannot work for a short period. If your job puts you at the risk of a more severe injury that would prevent you from working for a more extended period, long-term disability income insurance would be the better option. 

Long-term disability insurance (LTD) is sometimes offered as a workplace benefit but is usually purchased as an individual policy. Long-term disability insurance coverage may be extended over a certain number of years or until the policyholder retires or attains the age of 65, depending on the policy selected. Because long-term medical disabilities can be financially devastating, it is wise to choose long-term benefits when possible.