Disability Insurance Cover Explained
Updated On Oct 15, 2020
What is Disability Insurance Cover?
Life is a bumpy ride, and everything cannot always be smooth. Accidents do occur and have a massive impact on one’s life. While some people go through mental trauma, yet some receive life-changing physical damages, such as a disability.
But one needs to struggle for existence and hence, work hard to improve the quality of life. Disability insurance offered by insurance companies can help a person who has a disability, to continue receiving financial support even if his/her professional life is hampered.
More About Disability Insurance Cover
The disability insurance policy protects the insured against disability risks that can act as an obstruction in one’s income and core life activities. Primarily, this insurance plan is designed to cover a disabled person’s lost wages due to discontinuity from his/her job.
Individuals facing accidents and receiving partial or permanent disabilities can receive significant help from a disability insurance cover. Such a policy would offer coverage in meeting the beneficiary’s medical expenses and reimbursing the lost income post-accident.
However, a disability insurance policy will take effect after a certain period until when the insured proves s/he has been disabled. This is called the elimination period, and before it gets over, the policyholder cannot receive the benefits.
Different Types of Disability Insurance Cover
There are two basic kinds of disability insurance are, namely:
- Short-Term Disability (STD): This plan offers the policyholder a certain portion of his/her salary if s/he is unable to work for a short time period, usually around 3-6 months. The waiting period for an STD plan is 0 to 14 days, having a maximum benefit period of not more than 2 years.
- Long-Term Disability (LTD): If the individual is unable to work for a much more extended period, that’s over 6 months, the LTD policy would offer a portion of your salary. The elimination period for this policy is between a few weeks to several months, offering a maximum benefit period between a few years to up to the rest of one’s life.
Additionally, one needs to learn about the protection features associated with a disability insurance policy:
- Guaranteed Renewal: It preserves one’s right to renew the plan and enjoy the same benefits, without having it cancelled by the insurance provider. However, the company has the authority to increase the premiums.
- Non-Cancelable: In this case, one’s insurance company won’t cancel his/her policy, unless on the occasion of non-payment of premiums. This, further allows the person to renew the policy each year without having a reduction in benefits or a raise in the premium amount.
Benefits of Having a Disability Insurance Policy
There are several advantages of having a disability insurance cover, including :
- Financial Stability: A disability caused to the earning member of a family impacts the finances of the individual and the dependents. A disability insurance policy offers security in such cases.
- Essential Expenses: A disability caused due to an accident makes it difficult for the individual to return to work for some time. The disability insurance cover can meet all his/her essential expenses in day-to-day lives.
Tax Saver: As per Section 80U of Income Tax Act, 1961, having a disability insurance policy can help the policyholder save taxes since the premium paid for this is exempted. Under Section 80U, the person declared as having a disability (by at least 40%) by the medical authority can claim tax benefits. The section defines disability as one of the following:
- Low vision
- Hearing impairment
- Mental illness
- Mental retardation
- Loco-motor disability
Individuals suffering from an ailment or disease can also receive tax benefits as per Section 80DDB of Income Tax Act, 1961.
To conclude, disability insurance cover can offer good financial and emotional help to disabled individuals and their family members. The reimbursed amount can keep them going for a significant period of time, thus facilitating continuity of life.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.