Disability Insurance, often called DI or disability income insurance, or income protection, is a form of insurance that insures the beneficiary's earned income against the risk that a disability creates a barrier for a worker to complete the core functions of their work. For example, the worker may suffer from an inability to maintain composure in the case of psychological disorders or an injury, illness or condition that causes physical impairment or incapacity to work. It encompasses paid sick leave, short-term disability benefits (STD), and long-term disability benefits (LTD).[1]Statistics show that in the US a disabling accident occurs, on average, once every second.[2] In fact, nearly 18.5% of Americans are currently living with a disability,[citation needed] and 1 out of every 4 persons in the US workforce will suffer a disabling injury before retirement.[3]

History

The Railway Passengers Assurance Company was founded in 1848 as the first company to provide accident insurance.

In the late 19th century, modern disability insurance began to become available. It was originally known as "accident insurance".[4][5] The first company to offer accident insurance was the Railway Passengers Assurance Company, formed in 1848 in England to insure against the rising number of fatalities on the nascent railway system. It was registered as the Universal Casualty Compensation Company to:

...grant assurances on the lives of persons travelling by railway and to grant, in cases, of accident not having a fatal termination, compensation to the assured for injuries received under certain conditions.

The company was able to reach an agreement with the railway companies, whereby basic accident insurance would be sold as a package deal along with travel tickets to customers. The company charged higher premiums for second and third class travel due to the higher risk of injury in the roofless carriages.[6] [7]

Individual Disability Insurance

Those whose employers do not provide benefits, and self-employed individuals who desire disability coverage, may purchase policies. Premiums and available benefits for individual coverage vary considerably between companies, occupations, states and countries. In general, premiums are higher for policies that provide more monthly benefits, offer benefits for longer periods of time, and start payments of benefits more quickly following a disability claim. Premiums also tend to be higher for policies that define disability in broader terms, meaning the policy would pay benefits in a wider variety of circumstances. Web-based disability insurance calculators assist in determining the disability insurance needed.[8]

High-Limit Disability Insurance

High-limit disability insurance is designed to keep individual disability benefits at 65% of income regardless of income level. Coverage is typically issued supplemental to standard coverage. With high-limit disability insurance, benefits can be anywhere from an additional $2,000 to $100,000 per month. Single policy issue and participation (individual or group long-term disability) coverage has gone up to $30,000 with some hospitals.

Business Overhead Expense Disability Insurance

Business Overhead Expense (BOE) coverage reimburses a business for overhead expenses should the owner experience a disability. Eligible benefits include: rent or mortgage payments, utilities, leasing costs, laundry/maintenance, accounting/billing and collection service fees, business insurance premiums, employee salaries, employee benefits, property tax, and other regular monthly expenses.

National Social Insurance Program

In most developed countries, the single most important form of disability insurance is that provided by the national government for all citizens. For example, the UK's version is part of National Insurance; the U.S.'s version is Social Security (SS)—specifically, several parts of SS including Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). These programs provide a floor beneath all other disability insurance. In other words, they are the safety net that catches everyone who was otherwise (a) uninsured or (b) underinsured. As such, they are large programs with many beneficiaries. The general theory of the benefit formula is that the benefit is enough to prevent abject poverty.

In addition to federally funded programs, there are five states which currently offer state funded Disability Insurance programs. These programs are designed for short term disabilities only. The coverage amount is determined by the applicant's level of income over the previous 12 months. The states which currently fund disability insurance programs are California, New York, New Jersey, Rhode Island, and Hawaii.[9]

Employer-Supplied Disability Insurance

One of the most common reasons for disability is on-the-job injury, which explains why the second largest form of disability insurance is that provided by employers to cover their employees. There are several subtypes that may or may not be separate parts of the benefits package: workers' compensation and more general disability insurance policies.

Refernced: https://en.wikipedia.org/wiki/Disability_insurance