Disability Income Insurance

Demand for disability income coverage is on increase as family size and support declining with the economic development Advancement in medical care and technology unfortunately and fortunately have turned dreaded diseases into disabler diseases Advancement have substituted disability for death

Salient Features
Provides monthly benefits to compensate loss of income during the period of disability as a result of sickness or injury Non-cancelable Cannot cancel or refuse to renew the policy cannot change the premium of its own Guaranteed renewalability Monthly benefit of total disability Waiver of premium benefit Monthly benefit for residual disability

Definition of certain terminologies

Injury Accidental bodily injury occurring while the policy in force Accidental means clause In this case both the cause and result of the injury must be unexpected In accidental bodily injury claims are admissible even if the cause is intentional but the result is unintentional. Sickness- sickness or disease that manifest itself during the policy in force First diagnose or treated

Pre-existing Conditions
Medical Condition - Which exist on the effective day and during the past four/five years Caused one to received medical advise to cause symptoms that propel a reasonable man to look for medical advise or treatment Disability- Total disability in any gainful occupation Total disability in own occupation

An Own Occupation Disability

Totally disable when somebody cannot perform the major duties for their regular occupation ( the occupation in which the insured was engaged at the time of disability) Any gainful occupation cannot undertake major duties of any gainful occupation for which they are reasonably suited on the basis of education, training or experience Regular occupation is deemed as the recognized specialty/subspecialty in which say a medical or accounting professional engaged at the time of disability

Effect on Total Disability on Income and Expenses

$

Income Expenses Gap

Time

Presumptive Disability
It is a medical condition where a sickness or injury results in the loss of sight of both eyes, the hearing of both years, the power of speech or the use of any two limbs. These conditions are treated as total disability T

Components of Benefit
Elimination Period Benefit Period Amount of monthly indemnity Elimination period waiting period the no.of days when no benefits are paid Elimination period varies from 30days to 1 year Premium longer elimination period

The Benefit Period

It is the longest period for the which the benefits will be paid under the disability policy The sickness and injury benefits are same that is for a duration of 2 or 5 yrs to age 65 For live duration if continues total disability begins before age 55 98 % disable person recovered before1 year and most disable recovered within 6 months of time the disability began

The Benefit Period

Longer the benefit period higher the premium Recurrent period of disability Benefit is paid as a fixed monthly amount on an indemnity basis meaning thereby that the benefit given should be equal to actual monetary loss suffered by disabled insured Monthly indemnity is payable only when 1. The insured is totally disable while the policy is in force 2. The indemnity begins only on completion of elimination period 3. An indemnity is payable at the end of each month when the insured is disabled totally 4.Indemnity stops either at the end of benefit period or when the insured is not totally disable which ever is earlier

Waiver of premium
Waiver of premium is allowed to the insured when he is totally disabled This is normally for a period of a 90days or the elimination period which ever is shorter Premiums at time is waived to an insured who remains disable until the age of 65 years There is no waiver of premium after the age of 65

Residual Disability Benefit

This is provided in case of own occupation definition of total disability it means the insured has returned to his/her occupation at a reduced income The reduced income should be minimum 25% of the prior monthly income Residual benefits can be claim even without total disability Loss of income in excess of 75% of prior income would be considered 100% loss

Residual Indemnity
Loss of income Prior income Average monthly income for the tax year. It also takes into consideration the highest monthly earnings of the preceding 2 or 3 years just prior the date of disability. The increase cost of living is factored into the prior income. Monthly benefit

loss of income x monthly indemnity benefit

Residual indemnity = Prior income E.g- Prior income Rs. 20,000/- p.m , Loss of income Rs. 10,000/p.m, Monthly benefit Rs. 10,000/-