What Is Disability Income Insurance?

Disability income compensation insurance, also known as incapacity income insurance, income loss insurance, income insurance, etc., is for the insured who is unable to obtain normal income or make labor due to disability, loss of part or all of his working ability due to illness or accident Compensation insurance for loss of income. It does not cover medical expenses incurred by the insured as a result of illness or accidental injury.

Disability income compensation insurance

Disability income compensation

Disability income insurance contract except when the insured is totally disabled

Purpose of disability income compensation insurance

Is due to illness or

In disability income compensation insurance, the definition of related concepts is the most important, and the most critical point is the definition of total disability.

Every disability

The benefits provided by disability income compensation insurance do not fully compensate the insured for loss of income due to disability. In fact, there is a limit for disability income insurance, which is generally lower than the normal income of the insured before the disability. Without this restriction, it may lead to the loss of motivation of the insured with a disability to return to work, or even the intentional extension of disability. Therefore, the purpose of disability income insurance is only to protect the normal life of the insured.

Determination of the amount of disability income compensation insurance benefits

Disabilities can generally be classified as total or partial. Total disability means that the insured person permanently loses all labor capacity and cannot participate in work to obtain work income. Partial disability means that the insured is partially incapacitated, and can only take up occupations other than the original occupation, and the new occupation may reduce income. Therefore, the loss of income may be in whole or in part, and may be long-term or short-term in time.

There are two types of benefits for income loss insurance: fixed benefit and proportional benefit:

(1) Individual disability income compensation insurance usually adopts a fixed payment method. Fixed payment refers to the insurance parties negotiated and agreed on a fixed amount of insurance (usually monthly) when they conclude the insurance contract based on the income status of the insured. When the insured loses his ability to work due to an insured accident during the insurance period, the insurer shall pay insurance premiums regularly at the amount agreed in the contract. In this way, regardless of whether the insured person has other income sources and income during the period of disability, the insurer must pay the insurance money according to the contract. In order to prevent the emergence of moral hazard, the insurer needs to consider the following aspects when determining the maximum limit of disability income insurance premiums for each insured: normal labor income before taxation of the insured; non-labor income such as dividends, Interest, etc .; other sources of income during the disability period, such as group disability income insurance or insurance provided by the government disability income plan; the current applicable income tax rate, because the normal labor income of the insured is taxable income, and insurance benefits are not Taxable income.

(2) Group disability income compensation insurance usually pays proportionally, which means that after the insured accident occurs, the insurer pays a certain percentage of the insurance premium corresponding to the original income of the insured according to the disability of the insured. For group long-term income insurance policies, this ratio is usually between 60% and 70%; group short-term insurance policies usually provide a higher ratio.

The specific methods of proportional payment are: (1) For the insured person with total disability, the insured person pays a certain percentage of the original income of the insured person, such as 70% or 80%; (2) For the insured person If the person is disabled, the insurer pays a certain percentage of the total disability insurance benefit of the insured person. The formula is generally:

Partial disability benefit = Full disability benefit × (income before disability-income after disability) / income before disability

How to pay disability income compensation insurance

(1) One-time payment

1) The insured is totally disabled. The insured is completely disabled due to illness or accidental injury. At the same time, the insurance policy stipulates that the payment method of the insurance premium is a one-time payment, then the insurance company usually pays the insured according to the contract amount.

2) The insured is partially disabled. If the disability income compensation insurance contract stipulates that the insured person can receive part of the disability income compensation insurance premium, then the insurance company generally pays the insurance premium according to the insured person's disability level corresponding to the payment proportion.

(2) Payment by installments

1) Pay monthly or weekly. According to the choice of the insured, the insurer provides monthly or weekly income compensation in the amount agreed in the contract. Payment is started by the insurance company at the end of the waiting period, up to the maximum payment period.

2) Pay according to the payment period. The payment period is divided into short-term and long-term. Short-term payment compensation is compensation for loss of income that the insured cannot work before the body recovers, and the term is generally 1 to 2 years. Long-term payment compensation is income compensation for the insured who cannot return to work due to total disability. It has a long payment period and is usually required to be paid until the insured reaches the age of 60 or the retirement age. Termination.

3) Pay according to the postponement period. The period after the disability of the insured person is a postponement period, usually 90 days or half a year, during which the insured person cannot get any payment compensation. If the insured is still unable to work normally after the postponement period, the insured person begins to bear the liability for payment of insurance benefits. The stipulation of the postponement period is because the insured person can usually maintain a certain amount of life in the short term; at the same time, setting the postponement period can also reduce insurance costs, which is conducive to providing better protection for those who really need insurance assistance.