Disability Income Insurance provides periodic payments (like periodic income payments) to the person
insured when he or she is unable to work because of illness or injury.
It may pay benefits for disabilities resulting from accident only or for
disabilities resulting from both accidents and illness.
The insurance premiums
(that is the cost of insurance) depend on the
plan design (waiting period, benefit period, amount of benefit,
definition of disability, other features),
occupation class, as well as the insured's age, gender and smoke status.
Elimination (waiting) period
The elimination (waiting)
period is a period between the onset of a disability and the
commencement of the disability income benefit payments. If the
insured recovers during this period, no benefits are payable. The
insurance companies offer the applicant for disability insurance to
select, at issue, the waiting period, which may be 0, 14, 60
days and so on up to 720 days. The waiting period allows to reduce
the cost of insurance so that the policy could be affordable: the
longer the waiting period the lower the disability insurance
The benefit period
determines the number of month or years that disability benefits
will continue to be paid while the insured is disabled.
Insurance companies offer a wide range of benefit periods. Typical
ranges include benefit periods of two years, five years, to age 65
– the maximum Benefit Period is from 1 to 5 years from
the end of the elimination period.
Long-term disability –
the minimum Benefit Period is 5 years, the maximum benefit is to the
insured's age 70 ( or, in some limited cases, for life).
Amount of the Benefit
You can choose the amount of benefit but it
cannot exceed your income. The insurance company will also consider
other sources of income that would be available to the applicant
even after he or she suffered a disability. The purpose of the
coverage is to replace earned income that is lost because of a
disability, not to make the disabled person better of financially as
a result of a receiving a disability income benefit. The amount of
benefit may be based on Gross
Business Revenue (for self-employed people) or Earned Income.