What is Disability Income Insurance?

Health insurance that is paid to a policyholder who experiences a loss of income due to an injury or an illness. Disability insurance plans pay a portion of the salary of a disabled worker until his/her retirement age. Typically, benefits are paid monthly which allows the insured to maintain a similar standard of living.

Disability income (DI) insurance should cover between 45% and 65% of the insured's gross income on a tax-free basis. It varies by policy, however, some will include bonuses and commissions as income. Self-employed individuals and small business owners do not receive the same level of financial protection. Even if an injury is work-related, these independent workers/ owners can not claim Worker's Compensation for themselves.