Disability Income Insurance definition

An insurance product that protects income should the worker be unable to continue to perform their job due to risk of disability or accident. Common occurrences that may cause disability income insurance to come into play include mental health disorders, which may make it difficult to come to work, or an industrial accident.

There are number of variants on disability income insurance. Individual disability insurance is purchased by the employee – these vary massively in the benefits they offer, when they are paid following the accident or disability-causing incident, how long they continue for, and how broad the definition of the term ‘disability’ is.

High-limit disability insurance is designed to protect a substantial part of the monthly income as well as supplementary income – this type of policy is generally an ‘add-on’ to standard disability income insurance policies and is subject to much higher premiums.

Key-person disability insurance is a policy purchased by the employer which protects the company against the loss of income should a crucial employee, often a director or other senior leader, become unable to work due to disability or accident.

Some employers provide disability income insurance as part of a benefits package – these can vary in value and may include compensation as well as general income protection.

A related term is workers’ compensation, which provides compensation to employees that are temporarily unable to work due to an injury sustained during the line of work (most injuries that cause disability and therefore may be covered by disability income insurance occur outside of work). Workers’ compensation may also provide life insurance should a worker be killed in the line of duty.

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