Disability Insurance

What is Disability Insurance?

Disability Insurance, often referred to as DI, is a type of income protection insurance that can be paid to workers that experience a disability and are no longer able to perform the functions of their job. Policy benefits are generally limited to the policyholder, but there are some policies that have been offering benefits to spouses and dependents as well.

Do Employers Provide This Insurance?

Almost all employers provide this insurance in the form of worker’s compensation. Worker’s compensation is a less thorough form of DI, however, in that only injuries occurring at work are eligible for payment.

Some employers offer DI to their employees outside of normal worker’s comp through their regular insurance programs. Employees often must pay a premium monthly out of their paychecks for this insurance.

How Does It Work?

When you are injured or otherwise disabled and are no longer able to work at your place of employment, or must work a different job with a lower salary, you are eligible for the benefits from your DI policy. After working with your agent, you can start getting insurance payments from your policy up to the amount that you would have been getting from work. If you are able to work a different job, your insurance will cover the difference between the amount you used to make and the amount you are making now.

Generally, there are limits on when are able to collect this insurance. Short term disability policies will pay out for the first three to six months of your disability. Long term policies will not start paying until about the sixth month of your disability, and most policies allow you to collect until you are of retirement age (65 years old in most states).

Other Types of DI Policies

As well as short term and long term DI policies, there are also several specialized forms of DI insurance. Individual DI Policies are often an option for those who own a business or are self-employed. There are even Business Overhead Expense DI polices available, which will pay business expenses if an owner becomes disabled. Most people opt to go with their employer provided DI policies.