An insurance contract wherein an insurer undertakes to pay money (usually a proportion of the insured's most recent income) or some other benefits (such as retraining costs) in the event that the insured becomes disabled or unable to engage in his/her occupation as a result of bodily injury, disease or mental disorder.
May also be referred to as total or partial income replacement insurance.
Insurance contracts, also known as policies, differ from insurer to insurer, nowhere more so than with disability insurance. The distinctions are numerous: types of disability covered, proportion of pay covered, period or duration of coverage, evolution of a temporary to a permanent disability, and the various definitions such as "total disability".
In one sample disability policy, "total disability" is defined as:
"Totally Disabled means that due to a Sickness or Injury for which you are under the regular and personal care of a Physician, you are not gainfully employed and the Sickness or Injury prevents you from engaging in your regular occupation."
While insurance companies are adept at tailoring disability insurance policies to the needs of specific work groups, they are equally adept at keeping their payments down by the tough and assertive review of disability insurance claims, an area as plagued by fraud as it is for overly aggressive denials of benefits.