Some illnesses or accidents cause long term disability, from which recovery may seem remote. It is however possible to insure against a loss of income resulting from being unable to work because of the disability.
Long term disability income protection would pay a monthly benefit until you reached the end of a pre-selected term, such as retirement age. The maximum benefit is a proportion of your pre-disability income, usually 50% – 60%.
There are a number of definitions of being unable to work through disability. It could mean you cannot do your original job, which might be due to the job being quite specialised, or it could mean you cannot do any job, in which case you would have to be very poorly. If your disability means you could do a lower paid job to which you are suited through training and education etc., then a ‘suited occupation’ definition could apply. The insurance may pay you a proportionate benefit related to your reduction in earnings. If you found that at some point you could return to work, the benefit would stop, but you would be able to claim later if you suffered a relapse or a new illness.
The monthly cost of disability income protection schemes is based on a number of factors:
- Your age. Older people tend to have more illnesses and so pay more.
- Your health. If you have existing health problems you may pay more.
- Your job. Some jobs are more risky and so likely to contribute to illness, such as very physical occupations and those working at heights so expect to pay more. Surprisingly, Teachers are higher risk due to stress related illnesses.
- Lifestyle and hobbies. Smokers pay more, as do those with riskier hobbies such as motor bike racing, private flying, mountaineering etc.
- Waiting (or ‘deferred’) period. The longer you can go without benefits, the lower the premiums.
If you rely on state benefits to support you through long term disability then the illness maybe even more life changing than it needs to be. Disability income protection might at least help you and your family to maintain much of the lifestyle you enjoyed before the illness and should form part of your overall protection planning.