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What is the function of disability insurance?

Last Updated: 03/08/2011 02:37 PM

Disability insurance is meant to protect you against loss of income due to partial, or full disabilities. It works for both temporary and permanent disabilities, and acts as a replacement income rather than a supplemental one. Disabilities can be physical or mental, and include such problems as broken bones, ADHD, and disabling diseases such as cancer. Personal disability insurance may disqualify conditions that were present before the insurance was secured, while other forms of disability insurance provide coverage equally for all policyholders.

Persons who are receiving disability insurance may be restricted from working in certain occupations or for more than a limited number of hours. Total disability means that you are allowed no external income, and your disability benefits could be forfeit if you take on any type of job. Under partial disability, you are allowed to work under certain provisions, such as working from home in a virtual office environment, but the amount of income you are allowed to earn is limited.

Government sponsored disability insurance generally pays a fixed monthly amount based on your tax records for your working career, or based on current minimum statistics if you have insufficient working history. This type of insurance is far more minimal than private insurance, but it is an option when nothing else is available.

Private disability coverages include full reimbursement of costs and expenses, including mortgage payments, car payments, and utility bills. Some forms of private disability provide for food and travel allowances as well, if they were written into the plan. This type of plan is offered by companies such as AFLAC, and are riders that can be added onto health insurance, usually through employer sponsored benefits programs.

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