Your Guide to Disability Insurance

What is Disability Insurance?

Disability Insurance provides financial coverage for the loss of income due to the inability to work because of a permanent or temporary disability. In simple words, it replaces your lost income if you are unable to work for a short or long-time due to an accident or sickness, along with covering the actual medical expenses.

While Life Insurance provides financial security to your family in case of an unfortunate demise of the policyholder, Health Insurance covers the cost of medical expenses arising out of an accident or illness. However, none of these provides you with financial assistance for the lost income due to a permanent or temporary inability to work, which is essential as a person may lose his/her ability to work for a short or long-time due to an accident or illness. Although the health insurance plan covers the medical expenses, a disabled person will still have fixed expenses like rent, children's school fees, loan EMIs, etc., which can become a financial burden when the income suddenly stops.

What are the types of Disability Insurance?

Disability can be partial or complete and temporary or permanent. Disability cover is typically offered as short-term and long-term.

1. Short-term Disability Insurance:

• In the case of short-term disability insurance, the policyholder can get an insurance cover for up to 2 years.

• The waiting period can be anywhere from 0 to 14 days.

• Short-term disability insurance typically covers injuries caused by an accident or ailment.

2. Long-term Disability Insurance:

• Most financial advisers advise this plan as the policyholder gets the disability insurance coverage for a lifetime.

• Long-term disability insurance extends its coverage to accidental injuries and critical illnesses that can force the policyholder to discontinue their work.

• The waiting period varies from case to case and can range from a couple of weeks to several months.

• Long-term disability insurance covers major illnesses, such as cancer, tissue rupture, mental illnesses, etc.

• The premium of this insurance is higher than the premium of short-term insurance. However, the extra premium you pay is worth the peace of mind of knowing that you will continue to earn even if you become terminally ill or permanently disabled.

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How Does the Disability Insurance Cover work?

The disability insurance cover depends upon the policy you purchase. However, it typically works as mentioned below:

• Like any other type of insurance, to keep the disability insurance cover uninterrupted, you need to pay the premiums regularly.

• The compensation is offered as a percentage of your earned income, typically 60% to 80% of your income, depending on the type and degree of disability.

• In the case of a short-term disability, a weekly benefit is offered as compensation for the lost income of the policyholder. The amount of this benefit and the period is specified in the policy, which varies from insurer to insurer.

• In case of a permanent complete disability due to an accident, insurers typically offer 125% of the sum insured.

• Some insurers offer a waiver on the premiums in case of partial disability.

• The insurers provide the details of the percentage of sum insured offer based on the type of disablement, such as loss of sight of one eye, loss of sight of both the eyes, loss of one limb, loss of two limbs, loss of one eye and one limb, loss of hearing (one ear and both the ears), loss of speech, etc., which is advisable to check before buying the plan.

• The minimum and maximum sum insured varies from insurer to insurer.

What are the eligibility criteria for Disability Insurance?

The eligibility criteria may vary from insurer to insurer, but most insurers typically have these criteria:

• You should be an Indian resident

• Your age should be in between 18 years to 70 years.

Who should buy the Disability Insurance Cover?

The disability insurance cover is ideal for anyone who depends on their income for day-to-day and fixed monthly expenses, as they cannot afford to lose their income.

What are the factors affecting the Premium of Disability Insurance?

Different insurers charge different premiums for disability insurance. However, the premium is affected mainly by the following factors:

• Sum insured

• Age

• Occupation

• Employment status (salaried or self-employed)

• Health history

• Income

• Smoking habit

What are the benefits of buying a Disability Insurance Policy?

• The permanent or temporary disability of an earning member of the family has an enormous impact on the family budget and lifestyle. Having a disability insurance cover ensures you and your family will not have to compromise on the regular needs in case of an unfortunate injury or illness that could stop your income.

• Disability insurance not only provides you with compensation for the lost income, but it also covers the essential medical expenses in case of an accident.

• The premiums paid on disability insurance are tax-deductible under the Income Tax Act, 1961.

• It gives peace of mind to the policyholder, which helps them focus on their recovery rather than worrying about the finances.

What are the exclusions of the Disability Insurance Cover?

Like any other insurance, disability insurance also comes with a list of exclusions and exemptions that are not covered under the policy. Before buying the policy, you should always check the list of inclusions (what is covered under the policy), the list of exclusions (what is not covered under the policy), and general policy exemptions to avoid future disappointments and disputes. Some of the general disability insurance exclusions are:

• Pre-existing medical conditions

• Any disabilities caused by suicidal attempts or are intended

• Any disabilities caused by war or war-like conditions

• Any disabilities caused due to incarceration

What are the things you should consider while buying a Disability Insurance Policy?

1. Adequate Coverage:

The sum insured is generally decided based on your earned income and age. It is essential to assess your requirements and choose adequate coverage to help you meet all your needs when taking advantage of the insurance. Not having an adequate sum insured will not serve the purpose of buying insurance. If you do not get sufficient compensation to meet all your requirements, you will keep worrying about the finances rather than focusing on your recovery.

2. Plan Benefits:

There are a plethora of disability insurance plans offered by different insurance companies. Although the primary objective of all these plans is the same, the features and benefits may vary depending on the type of plan and the insurer's policies. The degree of disability and the percentage of the sum insured offered varies from insurer to insurer. Therefore, it is advisable to check and compare different plans and choose the one that is best suited to you.

3. Claim Settlement Ratio and Reviews:

While choosing the policy, you must check the Claim Settlement Ratio and actual customer reviews. Instead of buying the policy solely trusting the salesperson or on the recommendation of your friend or family member, do your research to find the best insurer and a plan that matches your requirements.

4. Read the Fine Print:

Different policies come with different terms and conditions, a list of inclusions, exclusion, policy exemptions, etc. Before purchasing the policy, it is advisable to read all the terms and conditions and disclaimers, if any, to avoid disputes in the future. Moreover, it would help you read the fine prints of the policy as soon as you receive it.

How to buy a Disability Insurance Policy?

You can buy a standalone disability insurance policy or buy a disability rider along with your life insurance policy or health insurance policy. However, you should know that the disability rider provides only the basic cover, whereas a standalone policy offers comprehensive coverage. It is advisable to buy a standalone disability insurance policy to get the maximum benefits of disability insurance.

You can buy a disability insurance policy online from the comfort of your home, which is the advisable option as you can easily compare different plans and buy the policy within a few minutes at a discounted premium. However, if you are not comfortable purchasing insurance online, you can also visit the nearest branch of your preferred insurer and purchase it offline.

How to claim Disability Insurance?

In case of an unfortunate event when you are in a situation where you can claim disability insurance, you or your close relative should immediately call the customer care of the insurer to inform you about the incident. The insurer representative will explain the claim settlement process and the documents required. The insurer will typically require the following documents:

• Claim Form (duly filled and signed by the policyholder or close relative)

• Hospital bill

• Discharge summary

• Certificate of disability (issued by the medical board)

• Medical fitness certificate

• Policy document

To Conclude:

In today's fast-paced lifestyle, Disability Insurance is a necessity for all the earning members of the family. Before buying the policy, it is advisable to compare the different types of disability insurances and insurance providers and choose the right policy for you. Furthermore, thoroughly read the terms and conditions and exclusions to avoid any disappointments or disputes in the future. In order to get a quick claim settlement, make sure you inform the insurer immediately after the incident and do not fail to provide all the correct information at the time of purchasing the policy and filing the claim.

Warm Regards,
Ketki Jadhav
Content Writer