The term disability insurance is used to describe an insurance policy that provides coverage in the event the policyholder becomes disabled, or is no longer able to perform work necessary to earn income. Disability insurance is a source of income that allows the policyholder to both provide for their family and maintain home ownership.
Disability insurance policies are designed to replace anywhere from 40 to 60% of income on a before or after-tax basis. Policy terms and conditions will vary from company to company, so careful comparisons should be made to understand the features offered.
Before purchasing a disability insurance policy, the consumer should consider:
- Renewals: provisions under which the policy can be renewed.
- Definitions: the qualifying circumstances under which the policyholder is entitled to payments.
- Residual Disability Benefits: the conditions under which the policyholder is entitled to partial payments.
Social Security Disability Insurance is a federal program designed to provide supplemental income to individuals that are physically restricted and are unable to be employed.