Disability Insurance
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Disability Insurance, often called DI or disability income insurance, or income protection, is a form of
insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to protect ...
that insures the beneficiary's earned income against the risk that a
disability Disability is the experience of any condition that makes it more difficult for a person to do certain activities or have equitable access within a given society. Disabilities may be Cognitive disability, cognitive, Developmental disability, d ...
creates a barrier for completion of core work functions. For example, the worker may be unable to maintain composure in the case of psychological disorders or sustain an injury, illness or condition that causes physical impairment or incapacity to work. DI encompasses paid sick leave, short-term disability benefits (STD), and long-term disability benefits (LTD). The same concept is instantiated in some countries as
income protection insurance Income Protection Insurance (IPI) also known as loss of earnings insurance is an insurance policy paying benefits to policyholders who are incapacitated and hence unable to work due to illness or accident. This is typically a replacement for lost ...
.


History

In the late 19th century, modern disability insurance began to become available. It was originally known as "accident insurance". The first company to offer accident insurance was the Railway Passengers Assurance Company, formed in 1848 in
England England is a Countries of the United Kingdom, country that is part of the United Kingdom. It is located on the island of Great Britain, of which it covers about 62%, and List of islands of England, more than 100 smaller adjacent islands. It ...
to insure against the rising number of fatalities on the nascent
railway Rail transport (also known as train transport) is a means of transport using wheeled vehicles running in railway track, tracks, which usually consist of two parallel steel railway track, rails. Rail transport is one of the two primary means of ...
system. It was registered as the Universal Casualty Compensation Company to: :...grant assurances on the lives of persons traveling by railway and to grant, in cases, of accident not having a fatal termination, compensation to the assured for injuries received under certain conditions. The company was able to reach an agreement with the railway companies, whereby basic accident insurance would be sold as a package deal along with travel tickets to customers. The company charged higher premiums for second and third class travel due to the higher risk of injury in the roofless carriages.


Individual disability insurance

Those whose employers do not provide benefits, and self-employed individuals who desire disability coverage, may purchase policies themselves. Premiums and available benefits for individual coverage vary considerably between companies, occupations, states and countries. In general, premiums are higher for policies that provide more monthly benefits, offer benefits for longer periods of time, and start payments of benefits more quickly following a disability claim. Premiums also tend to be higher for policies that define disability in broader terms, meaning the policy would pay benefits in a wider variety of circumstances . Web-based disability insurance calculators assist in determining the disability insurance needed.


High-limit disability insurance

High-limit disability insurance is designed to keep individual disability benefits at 65% of income regardless of income level. Coverage is typically issued supplemental to standard coverage. With high-limit disability insurance, benefits can be anywhere from an additional $2,000 to $100,000 per month. Single policy issue and participation (individual or group long-term disability) coverage has gone up to $30,000 with some hospitals.


Business overhead expense disability insurance

Business Overhead Expense (BOE) coverage reimburses a business for overhead expenses should the owner experience a disability. 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.


National social insurance programs

In most developed countries, the single most important form of disability insurance is that provided by the national government for all citizens. For example, the
United Kingdom The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Northwestern Europe, off the coast of European mainland, the continental mainland. It comprises England, Scotlan ...
's version is part of
National Insurance National Insurance (NI) is a fundamental component of the welfare state in the United Kingdom. It acts as a form of social security, since payment of NI contributions establishes entitlement to certain state benefits for workers and their famil ...
; the
United States The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...
' version is Social Security (SS): specifically, several parts of SS including Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). These programs provide a floor beneath all other disability insurance. In other words, they are the safety net that catches everyone who was otherwise (a) uninsured or (b) underinsured. As such, they are large programs with many beneficiaries. The general theory of the benefit formula is that the benefit is enough to prevent abject poverty.


Employer-supplied disability insurance

One of the most common reasons for disability is on-the-job injury, which explains why the second largest form of disability insurance is that provided by employers to cover their employees. There are several subtypes that may or may not be separate parts of the benefits package: workers' compensation and more general disability insurance policies.


Workers' compensation

Workers' compensation (also known by variations of that name, e.g., workman's comp, workmen's comp, worker's comp, compo) offers payments to employees who are (usually temporarily, rarely permanently) unable to work because of a job-related injury. However, workers' compensation is in fact more than just income insurance, because it compensates for economic loss (past and future), reimbursement or payment of medical and life expenses (functioning in this case as a form of
health insurance Health insurance or medical insurance (also known as medical aid in South Africa) is a type of insurance that covers the whole or a part of the risk of a person incurring medical expenses. As with other types of insurance, risk is shared among ma ...
), and benefits payable to the dependents of workers killed during employment (offering a form of
life insurance Life insurance (or life assurance, especially in the Commonwealth of Nations) is a contract A contract is an agreement that specifies certain legally enforceable rights and obligations pertaining to two or more parties. A contract typical ...
). Workers compensation provides no coverage to those not working. Statistics have shown that most disabilities occur while the injured person is not working and therefore not covered by workers' compensation. ''
Newsweek ''Newsweek'' is an American weekly news magazine based in New York City. Founded as a weekly print magazine in 1933, it was widely distributed during the 20th century and has had many notable editors-in-chief. It is currently co-owned by Dev P ...
'' magazine's cover story for March 5, 2007 discussed the problems that American veterans of Afghanistan and Iraq wars have faced in receiving VA benefits. The article describes one veteran who waited 17 months to start receiving payments. Another article, in ''
The New York Times ''The New York Times'' (''NYT'') is an American daily newspaper based in New York City. ''The New York Times'' covers domestic, national, and international news, and publishes opinion pieces, investigative reports, and reviews. As one of ...
'', points out that besides long waits, there is also variation based on the veteran's state of residence and whether he/she is a veteran of the Army, National Guard, or Reserves. The ''Newsweek'' article says that it can be difficult for a veteran to get his or her claim approved; ''Newsweek'' described the benefits thus: :"A veteran with a disability rating of 100 percent gets about $2,400 a month—more if he or she has children. A 50 percent rating brings in around $700 a month. But for many returning servicemen burdened with wounds, it is, initially at least, their sole income." The 2007 figures cited above correspond in 2012 to $2,673 a month (more with children) and, for the 50% rating, $797 a month for a single veteran. According to a sidebar in the same Newsweek article, the Americans injured in these wars, for all the obstacles to proper care, will probably receive much better compensation and health care than equally injured Afghan or Iraqi soldiers .


See also

* Business overhead expense disability insurance * Disability pension * Health insurance in the United States * Right to social security * State Disability Insurance (California) *
State disability benefits State disability insurance is a type of insurance for workers who are ill, unable or injured. It partially replaces wages in the event a worker is unable to perform their work due to a disability. In some states, there are many types of organisat ...
* Social Security Disability Insurance * Total permanent disability insurance


References


External links


Social Security Administration (US)
* {{Authority control Health insurance Employee benefits Disability