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# Disability Insurance: How does it work?

Sep 28, 2021

 

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. 


If you meet with an accident that leads to disability, you will receive payments to cover actual expenses and loss of income. Disability insurance can aid you to meet your financial obligations and maintain your current lifestyle. It will cover paid sick leave, short-term disability benefits, and long-term disability benefits. Disability insurance covers temporary and permanent total disability due to an accident. If you are disabled fully or permanently, you will receive the entire sum assured. In case the disability is partial, the policy will pay a percentage of the amount insured, depending on the severity of disability.


How to select a disability insurance cover?


There are few points you should keep in mind before you sign up for a disability insurance cover:

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.

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.

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. So, we always recommend you pay attention to the clauses.


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. However, if you would like an insurance that provides comprehensive coverage, go for a standalone policy.


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. It covers injuries and critical illnesses because of which your work is discontinued.