9 out of 10 people I speak to have not heard about Disability Income Insurance (DII).
They assume that Total and Permanent Disability (TPD), which almost all of them have in their life coverage, is the blanket disability definition across all life insurance products. But they are wrong.
Many folks have different enhancements (i.e.riders) to TPD like Enhanced TPD, Deferred TPD in their insurance policies but they do not necessarily understand exactly what these do for them. And these enhancements are certainly not the same as the claim definition for disability in a Disability Income plan.
These riders typically refer to how the benefit will be paid out, for example, the number of installments and the number of years payment will spread out. In some cases, it is a lump sum. Insurers have also capped the total aggregate payout for TPD to $X million (so buying in excess is not necessarily a good thing).
Yes, you have TPD coverage but what is the probability of you making a successful claim for it?
What is Total and Permanent Disability (TPD)?
First, you need to understand the difference between TPD and the definition of disability applied in Disability Income Insurance.
The definition of Total & Permanent Disability (especially in older life policies) refers to:
To date, some insurers have also included ElderShield Activities of Daily Living (ADLs) into its TPD definition.
What then is the definition of disability in Disability Income Insurance (DII)?
The definition of disability in DII is tied closely to one’s ability to fulfill the material duties of one’s occupation. Here are the different types of disability and their corresponding severity levels:
Analysis of the Levels of Severity
Other things to note for Disability Income Plans
The level of awareness of DII is low as compared to other life insurance products as not all insurers carry DII and insurance agents prefer to sell whole life, endowment and ILP products for obvious reasons. Well, my readers, do not be deceived by ‘fancy’ TPD rider names – seek qualified and comprehensive financial advice to protect your best interests.
A real life story:
Here’s a real life story of JJ who would have benefited from Disability Income Insurance.