Understanding Disability Insurance

Disability Insurance, also known as DI, disability income insurance, or income protection, safeguards the policyholder’s earned income against the risk of a disability preventing them from performing essential tasks in their job. Disabilities can stem from psychological disorders, injuries, illnesses, or conditions that result in physical impairments or incapacity to work. Disability insurance covers paid sick leave, short-term disability benefits (STD), and long-term disability benefits (LTD).

Types of Disability Insurance

Individual Disability Insurance – For those who do not receive benefits from their employers or self-employed individuals seeking disability coverage, individual policies can be purchased. Premiums and available benefits for individual coverage vary greatly across companies, occupations, states, and countries. Generally, premiums are higher for policies providing more monthly benefits, longer benefit durations, and quicker benefit payments following a disability claim. Policies with broader disability definitions, which pay benefits in a wider range of situations, also tend to have higher premiums.

High-limit Disability Insurance – This type of insurance is designed to maintain individual disability benefits at 65% of income, irrespective of income level. High-limit coverage is typically issued as a supplement to standard coverage. With this insurance, benefits can range from an additional $2,000 to $100,000 per month. Some companies offer single policy issues and participation (individual or group long-term disability) coverage up to $30,000.

Key-person Disability Insurance – Key Person Disability Insurance provides benefits to protect a company from financial difficulties that may arise due to the loss of a crucial employee as a result of disability. The company can utilize the benefits to hire a temporary employee if the disabled employee’s disability appears to be short-term. For permanent disability cases, the benefits help cover costs related to hiring a replacement, such as recruitment, training, startup, revenue loss, and unfunded salary continuation expenses.

Business Overhead Expense Disability Insurance – Business Overhead Expense (BOE) coverage reimburses a business for overhead expenses if the owner becomes disabled. Eligible benefits include rent or mortgage payments, utilities, leasing costs, laundry/maintenance, accounting/billing and collection service fees, business insurance premiums, employee salaries, employee benefits, property tax, and other regular monthly expenses.

Contact us to learn more about the most suitable disability insurance coverage for your needs.