Consider the possibility where you have lost your bodily functions, leading to being disabled for a period of time.

The disability is severe enough to prevent you from working normally, but not permanent enough to allow you to claim from your existing life policy under Total & Permanent Disability.

This inability to work leads to a loss of income, and subsequently an inability to carry out your financial expenses and responsibilities.

If you had been disabled due to an accident, all would be good assuming you have some Personal Accident coverage, and the payout from there could possibly help address some of your financial concerns. But what if the disability was not accident related? What if one day, you woke up to completely dead legs?

Disability Income plans aim to cover the gaps that are not provided by either life plans or accident plans, where specific occurrences must take place before one can claim payouts.

Paying a Portion of your Previous Income

One of the main considerations of disability income plans is that they will pay a portion of your previous income - capped up to 75% - per month. Unlike the previously mentioned life and accident plans which pay out as a lump sum amount, the disability income plan acts as an income provider for as long as you are unable to work.

Normally for disability income plans, there is an assessment period to determine the severity of one’s disability before payouts occur. This is anywhere between 3-6 months, depending on the provider. It is because of this gap in coverage, that we advocate one to always have an emergency fund consisting of 6-12 months of one’s income readily available in case of, well, emergencies. Once the assessment period is passed and one is determined to be still disabled, the payouts will begin until the disability is gone.

The Extent of Disability Coverage

Another consideration for disability income plans is the extent of disability coverage. There are a few stages of coverage:

• Unable to work in the same occupation as before

• Unable to work in similar scopes as the same occupation as before

• Unable to work in any occupation

Naturally, as the coverage extent widens, the more one has to pay for their coverage. Ideally, one should cover all bases (ie cover for the likelihood of not working in any occupation), as that also plays a part in ensuring the payouts past the assessment period as previously mentioned. Realistically, not everyone may have the budget to cover for any occupation - but the point to drive home here is to identify the ideal coverage that one should work towards having. Not having the budget now does not mean not having the budget at a later point in time.

Circumstances will change, and we must always be prepared and adjust accordingly.