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Disability income insurance replaces a portion of an insured's earnings when sickness or injury prevents them from working. This chapter introduces the core principles of disability coverage: the conditions that must be met to qualify for benefits, how individual and group policies are underwritten, the provisions and riders attached to a typical policy, and the disability benefits available through Social Security and Workers Compensation. Throughout, the key questions to keep in mind are what qualifies as a disabling injury or sickness, how much the policy will pay, and how long those payments will last.
| Term | Definition |
|---|---|
| Benefit period | The span of time during which benefits are payable under a disability policy |
| Earned income | Salary, wages, or commissions earned from work — not income from investments, unemployment compensation, or similar unearned sources |
| Overinsurance | Coverage that exceeds the actual value of the insured person or property, or that is greater in amount than the insured can reasonably afford |
| Social Security Disability Insured Status | A worker's standing as fully insured or currently insured under Social Security, based on the number of work credits earned |
| Tax deductible | A qualified expense that may be subtracted from income subject to taxation |
| Taxable | Subject to taxation |
| Total disability | The insured's inability to perform any occupation for which they are reasonably suited by education, training, or experience |
Terms to Know