Disability Insurance

Disability Insurance

Disability
insurance is a form of insurance designed to provide periodic income to
a policyholder in the event of his/her inability to work as a result of
sickness or injury. Disability insurance with coverage for periods
longer than six months is termed long-term disability insurance.
Typically, disability insurance policies are designed to pay forty to
sixty percent of an insured persons actual earnings on tax-free basis.

Disability
insurance may be purchased by individuals, provided by the government,
or included in insurance packages provided by employers. Most
employer-provided disability insurance coverage ends in the event of
termination or change of a job. Several states in the U.S. manage a
public disability insurance coverage scheme, which is funded by payroll
taxes.

Among the most important factors to be considered while
opting for a disability insurance policy are definition of total
disability and renewability. The three basic definitions of total
disability are own-occupation disability insurance, income-replacement
insurance, and gainful-occupation coverage. The basic types of
renewability features widespread in disability insurance policies are
non-cancelable and guaranteed renewable, guaranteed renewable, and
conditionally renewable.

Other fine points to be evaluated for a
disability insurance policy are residual disability insurance for
persons actively engaged in their jobs but restricted due to sickness
or injury; presumptive disability insurance that offers protection in
the event of severe disabilities; and recurrent disability insurance
for protecting against disability occurring soon after recovery from
disability. Details such as elimination period, benefit period, and
policy exclusions must be carefully addressed. Optional riders commonly
available with disability insurance are cost-of-living adjustment,
future-increase option, automatic-increase rider, and
socialinsurance-substitute rider, in addition to residual-disability
insurance.

powered by performancing firefox