Definition
Disability Income Insurance
Disability income insurance pays a regular income to replace lost earnings if the insured becomes unable to work due to illness or injury.
Unlike a lump-sum personal accident benefit, disability income (or income protection) cover provides a periodic payout, replacing a portion of salary, while the insured is disabled and unable to earn, often until recovery, retirement age or a maximum benefit period.
It addresses the long-tail risk of lost income, which can be more financially damaging than the medical bills themselves. While more developed abroad, dedicated income-protection cover is still emerging in India, where disability protection more often comes via riders on life policies or personal accident plans.
Related terms
- Critical Illness CoverCritical illness cover pays a lump sum on first diagnosis of a listed serious illness such as cancer, heart attack or stroke, regardless of treatment cost.
- Personal Accident CoverPersonal accident (PA) cover pays fixed benefits for death or disablement caused by an accident, on a benefit (non-indemnity) basis.
- Waiver of PremiumWaiver of premium is a rider under which the insurer pays future premiums on the policyholder's behalf if a defined event such as disability or critical illness occurs.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.