What is Individual Disability Insurance?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 23 January 2020
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Individual disability insurance is a type of disability coverage that is offered to individual policy holders, rather than as a group insurance plan offered through an employer. People who are self-employed or work for employers that do not provide any type of disability coverage may find that securing an individual policy is a good idea. The scope of coverage provided in an individual disability insurance policy will vary, making it important to read the provisions within a policy very carefully before choosing to buy the plan.

The idea behind individual disability insurance is to provide a partial replacement of the insured party’s gross income in the event he or she is disabled due to a covered event and is unable to work. Events may include injuries that occur at or away from the workplace, sudden health issues that require an extended period of convalescence, or even injuries that render the individual permanently unable to return to work. Since the terms and conditions will vary from one policy to another, the exact amount of income replaced will not be the same under all insurance plans. Typically, an individual disability insurance policy will allow for anywhere between 40% to 60% of the insured party’s gross salary at the time the covered event takes place.


As with many types of insurance plans, individual disability insurance requires the regular payment of premiums to keep the policy in force. The premiums may be due on a monthly, quarterly, or semi-annual basis. The scope of coverage may focus on providing assistance for a limited period of time, or include provisions for long-term compensation. Rates vary from one provider to another. While it is not always the case, premiums for long-term disability insurance are often a little higher than the premiums for policies that provide short-term disability insurance protection.

Since individual disability insurance plans will vary in terms of which events are covered, how much of the gross income is replaced, and what must be done to file claims for the coverage, it is important to look closely at the contract associated with the coverage. Compare those terms with disability plans offered by other providers, and take the time to look into the reputation of the providers before making a final decision. Spending time and effort researching on the front end will result in faster response and processing of the claim in the event that the insured party does become disabled and needs the benefits in order to maintain a decent standard of living.



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