What is Disability Insurance and How does it work?


Disability insurance is the type of insurance protecting against loss of income due to disability. Disability insurance is available through both the private and public sectors. Often, insurance products will protect against a specific loss, such as when a property and casualty insurance plan compensate the policyholder for the stolen property’s value. In case of the disability insurance, the compensation relates to the income loss caused by the disability.

How to select a disability insurance cover?

Choose the right coverage amount:

Income and age are the main factors that play an important role in determining the sum insured. Determine your needs and select the sum assured accordingly. Getting this step right will ensure that you and your family can continue maintaining your current lifestyle even if your income dries up.

Compare plans against disabilities covered:

It is essential to compare the degree and types of permanent disabilities covered across products and opt for the widest coverage. Even though comprehensive coverage is more costly, it is more effective than limited disability coverage. For instance, if a policyholder with total disability cover loses his index finger and his hospital gives him a certificate of 15% disability, his insurer might deny his claim as he is not totally disabled.

Read the fine-print:

Policies are distinguished in the degrees of disability that they cover and the percentage of the sum insured they pay. In case of partial disability, the percentage of the amount you are paid depends on what is stated in the policy document.

Buying Tips:

You can either choose a standalone disability insurance policy or go for disability cover riders along with an insurance plan. If you are looking for essential protection, you may opt for the disability/accidental death riders you can buy as an add-on to your life insurance cover.

There are mainly two types of disability insurance, i.e., short term disability insurance and long term disability insurance. Short term disability insurance policy comes with a waiting period that can last anywhere between 0 to 14 days. With long term disability insurance, you also get coverage for a lifetime – one of the primary reasons it is a popular form of insurance.

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