Definition of Disability Income Insurance
Health insurance may help to defray the cost of getting sick or injured, but for most people it will not replace income that may be lost if they are unable to work for an extended period of time. Disability income insurance is a type of insurance policy that provides regular payments equal to a specified percentage of the insured's gross income in the event of a debilitating injury or illness.
Other People Are Reading
-
Significance
-
According to the National Association of Insurance Commissioners, as of 2009, male workers in America who are older than 35 years of age have a 20 percent chance of becoming disabled for at least 90 days prior to retiring. Female workers past the age of 35 have an almost 33 percent chance of becoming disabled for at least 90 days before reaching retirement age. The National Association of Health Underwriters estimates the risk of a worker experiencing a long term disability during his working years to be greater than his risk of premature death.
Identification
-
As of 2006, the most frequent cause of long term disability among workers was injury, which may be sustained either at work or away for the workplace. According to the National Association of Insurance Commissioners , injuries account for approximately 27 percent of long term disability situations. Cardiovascular problems account for another 13 percent of long term disability situations followed by back problems, cancer, poisonings and mental problems.
-
Types
-
There are two primary types of disability income insurance. Short term disability income insurance typically provides income insurance for disabilities lasting up to six months although coverage periods may vary. Payments typically range from 75 percent to 90 percent of the insured's gross income. Policies that cover disabilities lasting longer than six months are typically referred to as long term disability income insurance. Benefits of long term policies typically range from 45 percent to 60 percent of the insured's gross income.
Features
-
Most short term disability income insurance policies are provided by the worker's employer. Some states require employers to provide such insurance for their workers. According to the National Association of Health Underwriters, there is no state or federal regulation that requires employers to provide long term disability income insurance to their workers, however, it notes that approximately one-third of all American workers are offered access to employer sponsored, long term disability income insurance. Private disability income insurance policies are also offered by many insurance companies.
Considerations
-
The federal government provides a type of disability income insurance through the Social Security Administration. The Social Security Disability Insurance (SSDI) program provides disability benefits for disabled workers who have earned enough credits to qualify. The National Association of Health Underwriters warns that SSDI benefits may be difficult to obtain, and it may take months or years before benefits are approved.
-
References
Resources
- Photo Credit disabled sign image by Warren Millar from Fotolia.com
