Disability insurance is a special type of insurance policy that offers a monthly income to the policy holder in case he/she is not able to go to work because of disability caused due to illness or accident. Basically there are two types of disability insurance based on the coverage; one is the short term disability insurance that offers short term disability coverage and the other is the long term disability insurance that offers lifetime disability coverage.

What does disability insurance cover?

There are many different types of disability insurance available in the market today and they will provide different coverage depending on the type of insurance you opt for. For instance a TPD or total and permanent disablement insurance will have a different coverage than a temporary disablement insurance policy. In many cases the insurance will cease as soon as an employer starts to provide some kind of contributions to the disabled person; like providing compensation or arranging for alternate mode of work

How much disability insurance to take?

Generally it would be best to take disability insurance that is sixty to seventy percent of your income before the taxes are deducted i.e. your pretax income. In case you have a higher income then it would be better to consider a percentage of 80 to 85. For lower income the percentage may to go for would be 50 to 60. Anyway it is a bit difficult to estimate exactly how much insurance for disability you should take. The best thing to do in this situation is to consult an insurance advisor who will guide you effectively through the process.

Short term and long term disability insurance

Often there is confusion as which type of insurance policy to take. Short term disability insurance is low on rates but covers only for a specified time where as long term disability insurance (LTD) is high on rates but offers comprehensive coverage. But the recommended type of policy to take would be a LTD because this type of insurance protects the policy holder against disabilities that may last for a lifetime or for many years together.