Disability Insurance

Disability Insurance can be expensive. There are the costs of disability such as the extra costs of transport and the new home fittings needed. In most cases the more important issue is the income that is lost because the person can no longer work. Disability before the age of 65 is far more likely than death before the age of 65, but it is far less likely to be insured.

Disability income insurance is designed to replace income lost due to a disability. In the case of a debilitating disability which means that the insured person can no longer work, then the disability insurance policy will pay out an agreed proportion of the disabled person’s income. There is often a proportion held back if it is deemed that the insured person contributed to the events that caused the disability.

Disability insurance companies are often life insurance providers as well, and it is often called disability life insurance. As for a disability, life insurance also extensively uses actuarial tables. A disability insurance quote will often be dependent on various demographic factors such as age, gender and income. A particularly important area is occupation, with certain outdoor occupations having very high disability insurance quotes. In these cases there are often employer or union provided disability insurance schemes.

There are different types of disability insurance. Long term disability insurance is designed to cover the costs of disability over a working life. This takes the shape of income protection, or a payment of a monthly sum which is a proportion of the pre-disability income, usually worked out when the policy is taken out. This proportion is usually dependent on the premiums that were paid during the active stage of the policy.

Short term disability insurance tends to pay out in lump sums and is designed to cover the costs of the disability. Usually it pays out as a lump sum and is dependent on the injury suffered, with more serious injuries attracting higher payouts. The payment scheme is usually set at the time the policy is taken out, and will not be linked to inflation unless specifically stated (which means the pay outs can diminish in value over the years).

Disability insurance rarely covers a worsening of a pre-existing condition, particularly if it is already acute. There are also a large number of exclusions when the insurance company will not pay out if an injury occurs due to a prohibited activity. These prohibited activities tend to include dangerous sports but can also include some occupational related activities such as work in a mine or on a construction site. These exclusions have to be made known to the person being insured before they sign.

Another aspect to be considered is the time to payout, as this can be delayed for the first few months. A person may not be able to live on their savings for this delay.

Another problem is that many conditions can be excluded and this should be checked. There may be a case where employer supplied disability insurance is far less comprehensive than the employee would want.

Many disability insurance policies are provided through group insurance, where a group of people, usually employees, are covered. This tends to be the cheapest option for most people, but it tends to have poor coverage, particularly for those over 65.