Disability Income Insurance provides periodic payments (like periodic income payments) to the person insured when he or she is unable to work because of illness or injury.  It may pay benefits for disabilities resulting from accident only or for disabilities resulting from both accidents and illness.

The insurance premiums (that is the cost of insurance) depend on the plan design (waiting period, benefit period, amount of benefit, definition of disability, other features), occupation class, as well as the insured's age, gender and smoke status.

Elimination (waiting) period

The elimination (waiting) period is a period between the onset of a disability and the commencement of the disability income benefit payments. If the insured recovers during this period, no benefits are payable. The insurance companies offer the applicant for disability insurance to select, at issue,  the waiting period, which may be 0, 14, 60 days and so on up to 720 days. The waiting period allows to reduce the cost of insurance so that the policy could be affordable: the longer the waiting period the lower the disability insurance premiums.

Benefit Period

The benefit period determines the number of month or years that disability benefits will continue to be paid while the insured is disabled.  Insurance companies offer a wide range of benefit periods. Typical ranges include benefit periods of two years, five years, to age 65 or 70.

Short-term disability  –  the maximum Benefit Period is from 1  to 5 years from the end of the elimination period.

Long-term disability – the minimum Benefit Period is 5 years, the maximum benefit is to the insured's age 70 ( or, in some limited cases, for life).

Amount of the Benefit

You can choose  the amount of benefit but it cannot exceed your income. The insurance company will also consider other sources of income that would be available to the applicant even after he or she suffered a disability. The purpose of the coverage is to replace earned income that is lost because of a disability, not to make the disabled person better of financially as a result of a receiving a disability income benefit. The amount of benefit may be based on Gross Business Revenue (for self-employed people) or Earned Income.

Insurance companies define "disability" for the purpose of providing benefits under a disability income policy in different ways, depending on the occupation class assigned to the insured person. 

The definition of total disability found in virtually all individual disability contracts may be some version of one of the following :

1. Own occupation: the insured cannot perform the important duties of his or her own occupation while he/she  can work full or part-time in another occupation.

2. Regular occupation : the insured cannot perform the essential  duties of his or her regular occupation and he or she is not engaged in any other  gainful occupation. Benefits may be reduced or discontinued if the insured begins to work in another occupation while disabled in his her regular occupation, but the insured is not compelled to work in another suitable occupation simply because he or she is able to do so.

3. Any occupation : the insured cannot perform the duties of any occupation, for which he or she is reasonably suited by education, training, or experience; and he or she is not engaged in any other occupation for remuneration or profit.

Often, policies include a combination of  the definitions mentioned above.

Insurance companies assign a classification to various categories of occupations based on the potential for work related disabilities, as well as an individual's likely work incentive or work ethic.

For example, a lawyer practicing corporate law  is more likely to have a lower exposure to a work related disability than an assemble line worker. Also, because of the efforts  required to establish his or her career, the corporate lawyer will most likely have more incentive to work and will likely experience shorter periods of disability than the assembly line worker, whose job is much less rewarding.  So highest occupation classes (professionals: doctors, lawyers, etc.) can obtain higher amounts of coverage and, often, at a premium (per $1 000 of benefit) lower than that charged to the lower classifications, who may obtain the same coverage.

This classification system is reflected throughout many of the features and benefits of disability insurance.