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Do you have disability insurance?

July 21, 2009 09:06 IST

Imagine a scenario where your livelihood comes from your ability to use your hands -- like if you are an artist or maybe even a software programmer -- and you lose your hands in an unfortunate accident.

What will happen? How will you take care of your expenses? In other countries, there are support systems for such people, either in the form of direct financial assistance or in terms of identification of opportunities.

However, such options are rare in India. Also, with the rising cost of medical treatment, it is a huge financial roadblock that one has to face in case of an unfortunate event. So how do we take care of such a situation?

Well, Disability Insurance is something that can help at such a time.

What is disability insurance?

Disability insurance, often called disability income insurance, is a form of insurance that insures the beneficiary's earned income against the risk that disability will make working (and therefore earning) impossible. It includes paid sick leave, short-term disability benefits, and long-term disability benefits.

In India, a separate Disability Insurance policy or programme is quite unheard of. However, normally life insurance policies have 'riders' and personal accident policy have add-ons, that compensate you in an event where you become disabled and are no longer able to earn.

But such riders come with additional premiums increasing the amount of premium you pay for the insurance.  Also, the premiums for disability insurance are based on the age, sex, occupation and the amount of potential lost income of the insured. If you have a higher chance of injury, then you have to pay higher premiums.

Limited options

Disability insurance policies in countries like the United States cover several perils, and give policyholders up to the age of 65 an amount of between 50 and 60 per cent of the monthly income they earned prior to the disability. This income is given over a period of six months or more, and the policies generally have special features like inflation-linked benefits.

In India, however, the insured gets a lump sum benefit and the policies cover only accidents, and not illnesses like a paralytic stroke that results in disability. Another factor is that there are no tax breaks for disability insurance policies.

It is mostly personal accident policies and critical illness policies that help a person in case of disabilities. Personal accident insurance covers the risk of bodily injuries arising directly from an accident that was caused by an external, violent and visible means and results in death or disability.

Better insurance products awaited

Disability insurance falls in the grey area between life and general insurance and both wait for the other to introduce this product. That is the reason such a policy cover is yet to make a foray into the Indian markets.

Therefore, the best thing to do is to opt for the disability rider in a health plan and get a premium waiver ride. Also, getting a critical illness policy cover will also help.

It would be a welcome relief, especially for people who wish to take such a policy if something suitable was available with one option instead of having to opt for more than one policy to be able to get protection from such a disaster.

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