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EXECUTIVE SUMMARY:-

The project focuses on the Disability Insurance in India- a unique sector which provides

income and covers the losses that occurs by the way of inability to perform ones job and

earn income due to the disablement.

In this project, different types of disability insurance prevailing in India are presented in the

light of rapid and dynamic changes. The researcher made a detail study on Indian disability

insurance. The benefits which, would help to magnetize more people are also stated in this

project.

The study also includes the meaning of disability and their growing popularity among the

masses spread far and wide. A concise comparison between group disability insurance and

individual disability insurance is also specified. This demarcation gives an idea about the

functioning this segment.

A detail analysis on LIC and Oriental General Insurance Company is an important element of

the project that wraps the various aspect of disability insurance. Finally the questionnaire has

been filed that emphasizes on the working of an insurance company with respect to providing

disability insurance.

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INTRODUCTION TO INSURANCE

INTRODUCTION

TO

INSURANCE

HISTORY OF WORLD

INSURANCE

HISTORY OF INDIAN

INSURANCE

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INTRODUCTION TO INSURANCE

INSURANCE, in law and economics, is a form of risk management primarily used to hedge

against the risk of a contingent loss. Insurance is defined as, the equitable transfer of the risk

of a loss, from one entity to another, in exchange for a premium, and can be thought of as a

guaranteed small loss to prevent a large, possibly devastating loss. An insurer is a company

selling the insurance; an insured is the person or entity buying the insurance. The insurance

rate is a factor used to determine the amount to be charged for a certain amount of insurance

coverage, called the premium. Risk management, the practice of appraising and controlling

risk, has evolved as a discrete field of study and practice

In some sense we can say that insurance appears simultaneously with the appearance of

human society. We know of two types of economies in human societies: The first type is

money economies and non-money or natural economies. The second type is a more ancient

form than the first. In such an economy and community, we can see insurance in the form of

people helping each other. For example, if a house burns down, the members of the

community help build a new one. Should the same thing happen to one's neighbour, the other

neighbours must help. Otherwise, neighbours will not receive help in the future. This type of

insurance has survived to the present day in some countries where modern money economy

with its financial instruments is not widespread (for example countries in the territory of the

former Soviet Union).

HISTORY OF WORLD INSURANCE:

Turning to insurance in the modern sense (i.e., insurance in a modern money economy, in

which insurance is part of the financial sphere), early methods of transferring or distributing

risk were practised by Chinese and Babylonian traders as long ago as the 3rd and 2nd

millennia BC, respectively. Chinese merchants travelling treacherous river rapids would

redistribute their wares across many vessels to limit the loss due to any single vessel's

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capsizing. The Babylonians developed a system which was recorded in the famous Code of

Hammurabi, c. 1750 BC, and practised by early Mediterranean sailing merchants. If a

merchant received a loan to fund his shipment, he would pay the lender an additional sum in

exchange for the lender's guarantee to cancel the loan should the shipment be stolen.

Achaemenian monarchs of Iran were the first to insure their people and made it official by

registering the insuring process in governmental notary offices. The insurance tradition was

performed each year in Norouz (beginning of the Iranian New Year); the heads of different

ethnic groups as well as others willing to take part, presented gifts to the monarch. The most

important gift was presented during a special ceremony. When a gift was worth more than

10,000 Derrik (Achaemenian gold coin) the issue was registered in a special office. This was

advantageous to those who presented such special gifts. For others, the presents were fairly

assessed by the confidants of the court. Then the assessment was registered in special offices.

The purpose of registering was that whenever the person who presented the gift registered by

the court was in trouble, the monarch and the court would help him. Jahez, a historian and

writer, writes in one of his books on ancient Iran: "Whenever the owner of the present is in

trouble or wants to construct a building, set up a feast, have his children married, etc. the one

in charge of this in the court would check the registration. If the registered amount exceeded

10,000 Derrik, he or she would receive an amount of twice as much."

A thousand years later, the inhabitants of Rhodes invented the concept of the 'general

average'. Merchants whose goods were being shipped together would pay a proportionally

divided premium which would be used to reimburse any merchant whose goods were

jettisoned during storm or sinkage.

The Greeks and Romans introduced the origins of health and life insurance c. 600 AD when

they organized guilds called "benevolent societies" which cared for the families and paid

funeral expenses of members upon death. Guilds in the Middle Ages served a similar

purpose. The Talmud deals with several aspects of insuring goods. Before insurance was

established in the late 17th century, "friendly societies" existed in England, in which people

donated amounts of money to a general sum that could be used for emergencies.

Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of

contracts) were invented in Genoa in the 14th century, as were insurance pools backed by

pledges of landed estates. These new insurance contracts allowed insurance to be separated

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from investment, a separation of roles that first proved useful in marine insurance. Insurance

became far more sophisticated in post-Renaissance Europe, and specialized varieties

developed.

Toward the end of the seventeenth century, London's growing importance as a centre for

trade increased demand for marine insurance. In the late 1680s, Edward Lloyd opened a

coffee house that became a popular haunt of ship owners, merchants, and ships captains, and

thereby a reliable source of the latest shipping news. It became the meeting place for parties

wishing to insure cargoes and ships, and those willing to underwrite such ventures. Today,

Lloyd's of London remains the leading market (note that it is not an insurance company) for

marine and other specialist types of insurance, but it works rather differently than the more

familiar kinds of insurance.

Insurance as we know it today can be traced to the Great Fire of London, which in 1666

devoured 13,200 houses. In the aftermath of this disaster, Nicholas Barbon opened an office

to insure buildings. In 1680, he established England's first fire insurance company, "The Fire

Office," to insure brick and frame homes.

The first insurance company in the United States underwrote fire insurance and was formed

in Charles Town (modern-day Charleston), South Carolina, in 1732. Benjamin Franklin

helped to popularize and make standard the practice of insurance, particularly against fire in

the form of perpetual insurance. In 1752, he founded the Philadelphia Contributionship for

the Insurance of Houses from Loss by Fire. Franklin's company was the first to make

contributions toward fire prevention. Not only did his company warn against certain fire

hazards, it refused to insure certain buildings where the risk of fire was too great, such as all

wooden houses. In the United States, regulation of the insurance industry is highly

Balkanized, with primary responsibility assumed by individual state insurance departments.

Whereas insurance markets have become centralized nationally and internationally, state

insurance commissioners operate individually, though at times in concert through a national

insurance commissioners' organization. In recent years, some have called for a dual state and

federal regulatory system (commonly referred to as the Optional Federal Charter (OFC)) for

insurance similar to that which oversees state banks and national banks.

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INSURANCE TRENDS IN INDIA

With the de-regulation in Indian Insurance industry, the monopoly of public sector companies

in life insurance and general insurance has come to an end. This has augmented the

innovative practices initiated by the private players. Growth in the interactive technology

such as internet has further created a wave of excitement in the insurance market. Indian

economy and Indian Insurance sector is committed to a double digit growth. Heres a glimpse

of Insurance Industry over 190 years.

BACKGROUND:

Insurance is an Rs 450 billion industry in India. The value of the market is determined by

gross premium incomes. The life insurance segment writes about 80% of the overall market

value. Indian Insurance market was at its all time high in 2003 with a growth of about 17.4%

over the pervious year. Since 2001 Insurance is growing at the rate of 15-20 % annually. The

growth in the insurance industry is affected by volatility in real estate rates, GDP rates and

long term interest rates. Fluctuations in exchange rates also affect the growth in this sector.

The gross premium as a percentage of the GDP has gone up from 2.3 in the year 2000 to 4.8

in 2006. Together with banking services, it adds about 7% to the countrys GDP.

HISTORY OF INDIAN INSURANCE:

A] ANCIENT HISTORICAL TIMES:

Insurance is as old as human society itself. The ancient origin of insurance is Emerigon,

whose brilliant and learned Traite des Assurances, first published in 1783, is still read with

respect and admiration. The result shows that insurances were known to the ancients such as

Romans, Phoenicians Rhodians, although the business of underwriting commercial risks was

probably not highly developed. The histories of Livy and Suetonius shows that the

contractors who undertook to transport provisions and military stores to the troops in Spain

stipulated that the government should assume all risk of loss by reason of perils of the sea or

capture and this was probably the first time when insurance process was known. There were

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friendly societies organized, for the purpose of extending aid to their unfortunate members

from a fund made up of contributions from all. These societies undoubtedly existed in China

and India in the earliest times. The earliest traces of Insurance in the ancient Indian history

was in the form of marine trade loans or carriers contracts, which can be found in Kautilyas

Arthashastra, Yajnyavalkyas Dharmashastra and Manus Smriti. These works show that the

system of credit and the law of interest were well developed in India. They were based on

clear appreciation of hazard involved and the means of safeguarding against it.

B] BRITISH-INDIA PERIOD:

Insurance in India without any regulations started in the nineteenth century. It was a typical

story of a colonial era where a few British insurance companies dominated the market serving

mostly large urban centers. Company started by Europeans in Calcutta was the first life

insurance company on Indian Soil.

Bombay Mutual Life Assurance Society indicated the birth of first Indian life insurance

company in the year 1870, and covered Indian lives at normal rates. 1930s was the last of the

old-style crises in the Indian economy because it marked the beginning of the end of the

colonial state and an acceleration of the pace of industrialization as entrepreneurs moved their

capital out of the countryside. Independent India reduced its vulnerability to external

economic shocks by close control of foreign exchange and by promoting a massive change in

the export schedule. Till the end of nineteenth century insurance business was almost entirely

in the hands of overseas companies.

C] POST INDEPENDENCE ERA OF INDIAN INSURANCE:

The insurance business grew at a faster pace after independence. Indian companies

strengthened their hold on this business but despite the growth that was witnessed, insurance

remained an urban phenomenon. During Mrs. Gandhis tenure (from 1966-1968), there was a

split within the business community of protectionists and those who wanted more open trade.

But what maintained the momentum was the commitment of Two Ministers, Ashok Mehta

and Subramaniam towards liberalization of the economy. This was seconded with high hope

of getting increased foreign aid.

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Deregulation actually helped the poorest in India as it would eventually create more

employment and faster growth. Yet the intense fears of liberalization in the lower middle

class and among working class employees of the state sector, pose serious risks in freeing the

economy. It might be preferable to introduce liberalization during an economic upswing

when the risk of switching jobs is less traumatic. The three liberalization episodes in Indian

economic policy have followed clear cyclical patterns. Economic policy has swung broadly

between controls and greater openness, with a tendency toward decontrolling larger and more

important segments of the economy.

D] NATIONALIZATION PHASE OF INDIAN INSURANCE:

1944: The Nationalization of insurance industry gathered momentum in 1944 when a bill to

amend the Life Insurance Act 1938 was introduced in the Legislative Assembly.

1956: 154 Indian insurance companies, 16 non-Indian companies and 75 provident societies

were taken over by the central government and nationalised. LIC formed by an Act of

Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 Crore from the

Government of India.

1972: The General Insurance Business (Nationalisation) Act, which nationalised the general

insurance business in India with effect from 1st January 1973. 107 insurers

amalgamated and grouped into four companies viz. the National Insurance Company

Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd.

and the United India Insurance Company Ltd.

Nationalization was accomplished in two stages; initially the management of the companies

was taken over by means of an Ordinance, and later, the ownership too was taken by means

of a comprehensive bill. However, it was only in 1956, LIC was nationalised, with the

objective of spreading life insurance much more widely and in particular to the rural areas

with a view to reach all insurable persons in the country, providing them adequate financial

cover at a reasonable cost. And as of 2007, LIC is Indias leading Insurance Company, with

2000 branches, which probably is the highest number of branches across India insurance

sector.

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E] LIBERALIZATION OF INDIAN INSURANCE:

1994: Insurance sector invited private participation to induce a spirit of competition amongst

the various insurers and to provide a choice to the consumers.

1997: Insurance regulator IRDA was set up as there felt the need:

a) To set up an independent regulatory body, that provides greaterautonomy to insurance

companies in order to improve their performance,

b) To enable them to act as independent companies with economic motives.

c) To protect the interest of holders of insurance policies.

d) To Amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the

General insurance Business (Nationalisation) Act, 1972

e) To end the monopoly of the Life Insurance Corporation of India and General

In the first year of insurance market liberalization (2001) as much as 16 private sector

companies including joint ventures with leading foreign insurance companies have entered

the Indian insurance sector. Of this, 10 were under the life insurance category and six under

general insurance. Thus in all there are 25 players (12-life insurance and 13-general

insurance) in the Indian insurance industry till date.

F] INDIAN INSURANCE IN 21ST CENTURY:

2000: IRDA starts giving licenses to private insurers: ICICI prudential and HDFC Standard

Life insurance first private insurers to sell a policy

2001: Royal Sundaram Alliance first non life insurer to sell a policy

2002: Banks allowed selling insurance plans. As TPAs enter the scene, insurers start setting

non-life claims in the cashless mode

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2007: First Online Insurance portal, https:/// set up by an Indian Insurance Broker, Bonsai

Insurance Broking Pvt Ltd.

The Government of India liberalised the insurance sector in March 2000 with the passage of

the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry

restrictions for private players and allowing foreign players to enter the market with some

limits on direct foreign ownership.

Minimum capital requirement for direct life and Non-life Insurance company is INR1000

million and that for reinsurance company is INR 2000 million. In the 2004-05 budget, the

Government proposed for increasing the foreign equity stake to 49%, this is yet to be

effected. Under the current guidelines, there is a 26 percent equity cap for foreign partners in

direct insurance and reinsurance Company.

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INTRODUCTION TO DISABILITY INSURANCE

DISABILITY INCOME INSURANCE: AN INTRODUCTION

Most people insure their material possessionstheir homes and cars, for example. But many

of these same people don't insure what is probably their most valuable asset their ability to

work and earn income. If one becomes sick or are injured and can't work, will he be able to

pay his bills and maintain his standard of living? If he depends on his income to pay the bills,

then he needs to seriously consider buying disability income insurance. Disability income

insurance can help one pay his bills by replacing a portion of his income. It can help him

maintain his current lifestyle and help protect him and his family from going into serious

debt.

His chances of being disabled at some time during his working career are probably higher

than he thinks. According to the Social Security Administration's Disability Benefits

brochure, "Studies show that a 20-year-old worker has a 3-in-10 chance of becoming disabled

before reaching retirement age". Of course, the chances that any one individual will be

disabled before retirement depends on many factors, including age, general health, and

occupation.

DEFINITION OF DISABILITY

Some policies pay benefits if you are unable to perform the customary duties of your own

occupation. Others pay only if you are unable to perform any job suitable for your education

and experience. Some policies define disability in terms of your own occupation for an initial

period of two or three years and then continue to pay benefits only if you are unable to

perform any occupation. "Own occupation" policies are more desirable, but more expensive.

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Disability insurance, often called disability income insurance, is a form of insurance that

insures the beneficiary's earned income against the risk that disability will make working (and

therefore earning) impossible. In other words, it answers the question, "How would I pay for

my living expenses if I became unable to work?"

BENEFIT PERIOD

The benefit period is the amount of time you will receive monthly benefits during your life.

Experts usually recommend that the policy you buy pay you benefits until at least age 65, at

which point Social Security disability will take over. If you are young, you may consider

buying a policy offering lifetime benefits because it will still be relatively inexpensive. A

policy that will replace from 60 percent to 70 percent of your total taxable earnings. A higher

replacement percentage, if available, is more expensive. Evaluate your other sources of

income before deciding how much disability coverage you need. Coverage for disability

resulting from either accidental injury or illness. An accident-only policy is less expensive

but does not provide adequate protection. Ideally, both accident and illness coverage should

be purchased.

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COST-OF-LIVING INCREASE IN BENEFITS

You are buying a policy today that may not pay benefits for a decade or more. Should you

need those benefits, you will want them to have kept pace with increases in the cost of living.

(Some companies also offer "indexed" benefits, keeping pace with inflation after benefit

payments begin.)

A policy paying "residual" or partial benefits

This type of policy is available so that you can work part-time and still receive a benefit

making up for lost income. A standard feature in some policies, and added by a rider to

others, a residual benefits policy pays partial benefits based on loss of income without an

initial period of total disability.

TRANSITION BENEFITS

Offered by some companies, it can offset financial loss during a post-disability period of

rebuilding a business or professional practice.

ONGOING COVERAGE

A non-cancelable policy which will continue in force as long as the premiums are paid;

neither the benefit nor the premium can change. A guaranteed renewable policy keeps the

same benefits but may cost more over time since the insurer can increase the premium if it is

increased for an entire class of policyholders.

FINANCIAL STABILITY

Check the financial ratings of an insurer. Your insurance agent or company representative

should provide this information or check with the following companies, which rate insurance

company strength:

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WAITING PERIOD

Every disability policy imposes a waiting period, also known as the elimination period. This

is the n umber of days you must be disabled before receiving benefits. If you are disabled

during the elimination period, you will not receive any benefits, even though you are not able

to work. If the elimination period is short, such as 30 or 60 days, the premium will be higher.

A longer elimination period may strain your finances more when you need it, but you will be

charged a lower premium. Most experts recommend that you select an elimination period of

60 to 90 days. The first check is usually paid 30 days after the waiting period.

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CAUSES AND STATISTICS OF DISABILITY INSURANCE

STATISTICS

CAUSES

DISABILITY

INSURANCE

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CAUSES OF DISABILITY

Many professionals and business people think they're "exempt" from the possibility of

becoming disabled. The following list of actual claimants is taken from a major insurance

carrier's disability files. What could prevent you from working?

CAUSE OF DISABILITY AGE OCCUPATION

Acute Myocardial Infarction 42 President-Executive

Cervical and Lumbar Back Sprain 34 Advertising Consultant

Anxiety Disorder, Depression 30 CPA

Neurotic Depression 35 Insurance Broker

Severe Headaches, Anxiety 42 CPA

Coronary Artery Disease 62 Executive - Vice President

Degenerative Disc Disease 54 Veterinarian

Uncontrolled Diabetes 31 Attorney

Multiple Trauma-Accident 38 President - Construction

Company

Cancer of Lung 48 General Sales Manager

Bipolar Disorder, Manic Depression 38 Director of Advertising

Acute Myocardial Infarction, Acute Encephalopathy 51 Attorney

Coronary Artery Disease, Acute Myocardial

Infarction, Angina

55 Accountant

Cerebral Aneurysm 55 Psychiatrist

2 Lumbar Laminectomies 42 ER Physician

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Severe Coronary Artery Disease 58 Ophthalmologist

Degenerative Disc Disease 59 Manufacturer's

Representative

Carcinoma Lung 60 Orthopedic Surgeon

Lou Gehrig's Disease (ALS) 36 Dentist

Lumbar Nerve Root Irritation 55 Orthopedic Surgeon

Alzheimer's Disease 58 Pathologist

Brain Tumor 48 Medical Doctor

Multiple Sclerosis 58 Vice President

Left Brachial Plexus Compression Syndrome 34 Dentist

Parkinson's Disease 62 CPA

Acute Myocardial Infarction 45 Owner / Manager

Myocardial Infarction, Coronary Artery Disease 62 OB/Gyn

Pancreatitis, Neuropathy, Diabetes, Angina 52 Pediatrician

Fracture, Elbow-Radial Head and Neck 55 General Surgeon

Parkinson's Disease 59 Vascular Surgeon

Multiple Sclerosis 37 ER Physician

Peripheral Myelopathy 30 Dentist

Arteriosclerotic Heart Disease, Angina 44 Thoracic Surgeon

Malignant Fibrous Histiocytoma 48 Plastic Surgeon

Crohn's Disease 43 Surgeon

Obstructed Right Lateral Ventricle, Seizures 31 Orthopedic Surgeon

Post Traumatic Stress Disorder, Panic Disorder 54 Neurosurgeon

DISABILITY INSURANCE STATISTICS

WHAT ARE THE ODDS OF A DISABLING INJURY OR ILLNESS?

Many people probably insure their home, car and other personal assets. But what about the

income that provides those assets? Many of them might be surprised to learn what poses the

greatest threat to most people during the course of one year.

Consider these statistics:

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Odd for risks Covered by Insurance

1 out of 5 That your auto will be damaged in an accident

1 out of 21 That you will have a disabling accident

1 out of 96 That you will have a fire

1 out of 114 That you will die

Did you know: During the course of ones career, one may be three and a half times more

likely to be injured and need disability coverage then one is to die and need life insurance?

Did you know: Approximately 30% of all people ages 35 to 65 will suffer a disability for at

least 90 days, and about one in seven can expect to become disabled for five years or more.

WHAT IS THE LIKELIHOOD OF DISABILITY?

One of the biggest myths about disability is that it doesnt happen to younger people. See the

chart below showing the odds of having a long term disability (one lasting more than 90 days

before age 65) along with average duration of disability.

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LIKELIHOOD OF DISABILITY BEFORE AGE 65 AT DIFFERENT

AGES

Your Age Likelihood of long term disability Average Duration

30 1 in 3 32 months

40 3 in 10 42 months

50 5 in 22 50 months

60 1 in 10 54 months

DISABILITY PLAYS NO FAVORITES

With Disability Income Insurance one can feel secure in knowing that a person is protected

from the most valuable asset your ability to work and earn an income. Avoid the financial

strain even a short-term disability can cause when a person is sick or hurt to work.

DISABILITY INSURANCE FACTS

1. Someone who is 35 years old has a 50% chance of disability for 90 days or more

before they turn 65.

2. People in India are better prepared financially in case of death (usually with life

insurance) than if they get disabled, even though the chances are at least three to five

times greater (depending on age) that a disability will occur.

3. Upwards of 375,000 Indians become totally disabled every year.

4. Approximately one out of seven people who are between the ages 3565 can expect to

become disabled for five years or longer.

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5. Almost 30 percent of the people who are between the ages 35 and 65 will experience

a disability that lasts at least 90 days during their working careers.

6. About 110 million Indians do not have long term disability insurance.

7. About 8 million adults have some disability that limits or prevents them from

working.

8. 46 percent of all foreclosures on conventional mortgages are brought about by a

disability. Approximately 2 percent are caused by the death of the homeowner.

9. Benefits from an employer plan are taxable. Individual policies, purchased as an

individual pay benefits free of income tax.

10. Most people, no matter their income, spend 65 percent to 75 percent of their cash

flow. In thinking about this, this means a person should aim toward securing as much

disability income insurance they can toward the goal of replacing such income.

11. If you put away 10 percent of your income each year, then simple arithmetic says that

one year of being totally disabled could wipe out the 10 years of principal that you put

into your savings.

12. How good is social security disability income? Anyone at any income level can apply

for Social Security Disability Insurance but one requirement is that you have to have

worked at least 10 years before becoming disabled.

13. The most common chronic conditions listed for limitation on working are back

disorders (21 percent), followed by heart disease and arthritis.

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TYPES OF DISABILITY INSURANCE

TYPES OF DISABILITY

INSURANCE

LONG TERM

DISABILITY INSURANCE

SHORT TERM

DISABILITY INSURANCE

INDIVIDUAL

DISABILITY INSURANCE

GROUP

DISABILITY INSURANCE

DISABILITY BUY-OUT INSURANCE

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TYPES OF DISABILITY INSURANCE:

1. LONG TERM DISABILITY INSURANCE:

Provides monthly benefits for employees who are totally or partially disabled by a

covered injury or illness.

Benefit periods of 2 years, 5 years and to age 65

Elimination periods from 30 days to 2 years

Coverage up to 70% of income

"Own Occupation" definition of disability plans available

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There are basically two types of long term disability insurance:

NON-CANCELABLE LONG TERM DISABILITY INSURANCE-

Under this policy if one pays required premium at time, then one has extra security

that premiums can never be raised over and above of that shown in the policy

document.

GUARANTEED RENEWABLE LONG TERM DISABILITY

INSURANCE- The premiums under this policy can be raised only if the change

affects an entire class of policy holders. So guaranteed renewable policies usually cost

less than Noncancelable policies in terms of premium.

Policies other than the above mentioned types are also available. These can be either a

variation or a mix of these two types. Policies that replace a greater percentage of

one's lost salary are more expensive.

Points to Remember before taking Coverage under Long Term

Disability Insurance:

Before applying for long term disability insurance one must calculate the amount of

alternative income he has. Sometimes employer pay a part (50%-60%) of the income

if an employee becomes disabled and can't work for about 6 months or more. Also the

total income of the family be enough to cover the expenses incurred by the family.

Having diversified sources of income may obviate the need of long term disability

insurance.

It is of utmost importance to read the plan document carefully before taking cover.

For instance, some policies pay benefits only against injuries that are quite serious. So

one must know the definition of disability offered by the insurer.

Long term disability insurance is sold through insurance agents as well as directly by

insurance companies. So shopping around before buying is important.

It is crucial to check whether the company and agent are licensed in the state to which

the insurance seeker belongs. Also one should check the repute and financial

condition of the insurance company.

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2. SHORT TERM DISABILITY INSURANCE

Provides weekly benefits for employees who are totally or partially disabled by a

covered injury, illness, pregnancy or mental disorder.

Benefit periods up to 52 weeks

Elimination periods as little as 0 days for an accident and 3 days for an illness

Coverage up to 70% of income

3. INDIVIDUAL DISABILITY INSURANCE

An individual disability insurance policy is a disability insurance offered to an individual

who is not enrolled by the employer. Self-employed individuals, who desire disability

coverage, may purchase their own policies on the open market. Premiums and available

benefits for individual coverage vary considerably between different companies, for

individuals in different occupations, and by State and Country. In general, premiums are

higher for policies that provided more monthly benefit, pay the benefit for a longer period of

time, and start payments for benefits more quickly following a disability. Premiums also tend

to be higher for policies that define disability in broader terms, meaning the policy would pay

benefits in a wider variety of circumstances.

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Individual insurance plans can be of the following types:

INDIVIDUAL DISABILITY INSURANCE GUARANTEED NON

CANCELABLE:

Under this type of individual disability insurance plan an applicant's past medical history,

occupation, proof of income is taken into consideration prior to approving the application

form of individual disability insurance policy.

INDIVIDUAL DISABILITY INSURANCE NON TRADITIONAL

DISABILITY POLICY:

This type of individual disability insurance is meant for those who are not registered with the

Worker's compensation.

Individual disability insurance non traditional disability policy does not cover benefit

coverage for certain diseases like stress, depression, fatigue, excessive burn out, nervous and

mental ailments, anxiety.

Applicants of Individual disability insurance non traditional disability policy buy this for

availing tax benefits also.

Individual disability insurance non traditional disability policy is more expensive than a

group disability insurance policy due to the under mentioned reasons: Under Individual

disability insurance non traditional disability policy, each risk needs to be separately

underwritten. The cost involved in underwriting each risk is very expensive. The cost of each

risk being underwritten gives little scope to the applicant to avail of too many options.

Individual disability insurance is more expensive. The reason being that the cost of billing

premium, for those disability insurance policy holders under one contract is easier and less

time taking.

Premium of individual disability insurance is level under during the entire term of the policy.

o Individual disability insurance policy holders are in an advantageous position

regarding the portability of the Individual disability insurance.

In case the employee or the individual wants to go for a large number of jobs.

Portability of Individual disability insurance policy is a very big advantage.

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A part time or a contract worker can be insured under an Individual disability

insurance policy.

In case of Individual disability insurance there is less restriction for the eligibility criteria for

availing an Individual disability insurance.

4. GROUP DISABILITY INSURANCE

DEFINITION - The most common definition we see is a "modified" own-occupation for

the first two years of a claim, then a change to the restrictive "gainful" occupation definition

for the rest of the benefit period.

TAXABILITY OF BENEFITS - If your company pays the premiums for the LTD

coverage, if you go on claim the benefits are taxed as ordinary income to you. That 60%

benefit is truly much less after you pay taxes on it

RESIDUAL/PARTIAL BENEFITS - Some group LTD plans make no provisions for

partial coverage; some pay partial benefits for up to 2 years, and very few have extended

partial benefits to 65.

MENTAL & NERVOUS RESTRICTIONS - Group plans typically limit claims

paid for any mental and nervous disability to 2 years. Many will also limit claims paid for

drug and alcohol abuse to one year.

MONTHLY MAXIMUMS - Every group plan has a monthly maximum benefit. Two

of the most common maximums are $5,000 and $10,000. A group LTD policy will typically

pay 60% of base salary to a monthly maximum of 5K / 10K a month.

COVERED INCOME - Many group LTD plans only cover base salary, and leave out

commissions and bonus income. Anybody in sales, or who depends on bonus money for a

portion of their income has even less LTD coverage than they think.

27

5. DISABILITY BUY-OUT INSURANCE

Statistically, a person is up to ten times more likely to become disabled than they are to die.

In the case of businesses and their owners, this means that is especially important to insure

against one owner becoming disabled and unable to continue running the business. A

disability buy-out insurance policy enables either the remaining owners, or the business entity

itself, to buy-out the disabled owner's share of the business at an agreeable price.

THE BENEFITS OF DISABILITY BUY-OUT INSURANCE

Disability buy-out insurance provides benefits for all parties.

The disabled owner is guaranteed a buyer willing to pay a reasonable price for their

share of the business. Because a formula is already put in place to determine a

reasonable price, it also negates the need for litigation or for negotiation on the price.

Furthermore, it enables the individual to concentrate on recovering from illness or

injury without the added concerns of running the business or finding a suitable buyer.

The remaining owners are enabled to purchase the shares in their business without

having to seek an outside investor. This ensures that they are able to continue in the

normal operation of the company without having to relinquish any control. Continuity

in daily operations is guaranteed and the remaining owners are provided with

adequate funding to buy out the disabled partner.

The business itself would normally continue to pay the disabled partner an income, or

return on their investment. This financial drain can cause serious problems for the

remaining partners, especially, who will need to pick up the pace to meet the

28

increased demands. With a buy-out policy in place, this does not have to be the case

because the insurance is used to cover against this liability.

WORKERS' COMPENSATION

Workers' compensation (also known by variations of that name, e.g., workman's comp,

workmen's comp, worker's comp, compo) offers payments to employees who are (usually

temporarily, rarely permanently) unable to work because of a job-related injury. However,

workers' compensation is in fact more than just income insurance, because it may pay

compensation for economic loss (past and future), reimbursement or payment of medical and

like expenses (functioning in this case as a form of health insurance), general damages for

pain and suffering, and benefits payable to the dependents of workers killed during

employment (functioning in this case as a form of life insurance).

OTHER

These policies offer payments to employees who are (usually temporarily, rarely

permanently) unable to work because of any injury or illness, even if it is not job-related.

Unlike workers' compensation, this coverage may not involve any aspect of health insurance,

life insurance, or payments for pain and suffering. Similarly to most employer-supplied

health insurance, these plans are essentially just open-market plans with the advantage of a

negotiated group rate. That is, they are similar to what an individual would buy, but they are

purchased with a volume discount. Another general fact about them is that they tend to offer

rather basic, low-end coverage, essentially because most people balk at paying for anything

more. Sometimes each employee has the option to buy upgraded coverage if they are willing

to pay for it.

29

COST OF DISABILITY INSURANCE

PREMIUMS DETERMINED IN

DISABILITY INSURANCE

WILL EMPLOYER

PROVIDE

DISABILITY

COVERAGE?

HOW CAN ONE SAVE

MONEY?

30

HOW ARE DISABILITY PREMIUMS DETERMINED?

Disability premiums are based on ones age, sex, occupation and the amount of potential lost

income that a person is trying to protect. In general, the lower the chance that the occupation

puts a person in harms way, the lower the premium. The higher the chance of injury, the

bigger the premium. So, for instance, an accountant working in an office would have much

lower disability premiums than a construction worker.

How can one save money?

There are two ways to keep the cost of disability insurance down:

Electing a longer waiting period before benefits begin

If a person has enough resources to cover expenses during the first three months of disability,

the premium will be lower than with coverage that starts after 30 days.

Electing a shorter benefit period

In this case, benefits are payable to age 65the age at which one would normally retire

instead of for a lifetime. However, choosing a benefit period of two-to-five years, ending

before normal retirement age, could be penny-wise and pound-foolish. He might save money

on premiums, but he could be without coverage when you need it most. Disability of long

duration poses the greatest financial hardship.

Will employer provide disability coverage?

Most employers offer some kind of disability insurance, but one should find out exactly what

the employer offers before one has to file a claim. Most allow some short-term sick leave,

which might last from a few days to as much as six months. In some cases, the employer

requires to provide disability benefits for up to 26 weeks.

So the employee needs to check with his benefits department to see if he is covered and if so,

how long he must wait before benefits begin and how long payments will last while he is still

disabled. Also, ask if the employers disability plan takes other disability programs, such as

Social Security, into account when calculating your disability pay.

31

No laws require employers to offer long-term disability (LTD) coverage, but about half of

large and mid-sized employers offer it to their workers. Typical group long-term disability

benefits replace about 60 percent of the workers usual salary. These benefits usually start

when short-term benefits are exhausted and continue from five years to life. Usually, group

long-term disability insurance is fully paid for by employers, with no contribution expected

from employees. When you receive employer-paid disability income, you must pay federal

and state income tax on the benefits, unless your company pays it for you.

DISABILITY INSURANCE COST

Disability insurance cost is the cost which one has to bear for buying or availing a disability

insurance. Disability insurance cost varies depending upon the type of disability insurance

opted for.

One should not compromise with the disability insurance cost. The reason being a disability

insurance can be of immense help in the event when one falls sick and is out of job due to an

injury, which is not related to work.

In case of group disability insurance the employer usually pays the amount needed to pay

premium. The employees usually are not required to pay.

If however the norm of a company desires so, a very small fraction is required to be paid by

the employee.

Not compromising with the disability insurance cost does not necessarily mean that one has

to accept whatever the disability insurance provider quotes. There are several factors to be

kept in mind while calculating the disability insurance cost.

One should opt for group disability insurance than an individual disability insurance policy.

Group disability insurance cost is much less than an individual disability insurance cost.

Although the group disability insurance cost is less but group disability insurance policy

offers much less benefit and flexibility.

One has to find out from the disability insurance agent which policy suits him the best.

32

In the event when a group disability insurance policy cannot be availed of, one may adopt of

the following measures to enroll oneself with an individual disability insurance policy.

Reducing the disability insurance cost:

The individual disability insurance cost can be reduced in the following manner.

One can reduce ones monthly benefit offered by the disability insurance provider in

the event of sickness or injury leading to disability.

In order to lower disability insurance cost one can increase the waiting period prior to

the disability insurance policy which becomes equivalent to a short term disability

insurance policy.

Waiting period can vary widely. A waiting period can range from a year to many

years.

If one plans to increase the waiting period to lower the disability insurance cost one should be

prepared with sufficient money in the event of an emergency arising out of disability.

A disability insurance policy holder can also find out if the disability insurance policy

being held includes any coverage which is optional or facultative.

To lower the disability insurance cost one can do without the optional coverages.

To lower the disability insurance cost, one should cut the benefit period short. This

method of lowering the disability insurance cost may not be very much advisable. The

risk lies in the fact that the benefit one is availing for disability may cease to exist

even before the disability gets over.

An individual intending to buy a disability insurance policy should weigh the advantages and

disadvantages before deciding upon lowering the disability insurance cost.

There are people who feel that buying a disability insurance policy is of no use and there are

yet others who tend to buy policies with disability insurance cost on the lower side.

33

CLAIMS IN DISABILITY INSURANCE

CLAIMS

IN

DISABILITY INSURANCE

DISABILITY INSURANCE

ATTORNEY

34

DISABILITY INSURANCE CLAIM

Disability insurance claim can be simple or difficult depending upon the extent of damage.

Almost 86% of the disability insurance claims are caused by illness. Almost all private

employee benefit plans are regulated and enforced under the law by Employee Retirement

Income Security Act (ERISA) of 1974. Claims arising from group plans or employer

provided disability plans are governed by ERISA whereas State Law is applied for settling

claims in private individual disability plans.

ASKING FOR DISABILITY INSURANCE CLAIM:

Disability is a physical or mental impairment (temporary or permanent) that prevents one

from working efficiently in the particular occupation he is involved. There are three different

definitions of disability:

OWN OCCUPATION- The person is unable to perform the important duties

related to his own occupation.

MODIFIED OWN OCCUPATION- The person is unable to perform the

important duties and on top of that he is refraining from his work.

ANY OCCUPATION- This disability renders the person unsuitable for any

occupation where otherwise the person may find worth according to his education and

experience.

The HIAA Source Book of Health Insurance depicts 'back problems' as the major reason for

asserting disability insurance claim. Surprisingly the second major reason for claiming

benefit is psychiatric and emotional disorders. This might occur because one saw his 10 year

old child going through chemotherapy or due to a tense situation at office or home. A claim

depends on the type of coverage on has bought. Another factor is the type of disability i.e.

whether the disability is partial, full or residual. One just has to complete a form and return it

to the insurance company. One portion of these forms is to be filled by the physician treating

the disabled. In case of a group plan an employer also has certain obligations. The claim must

be substituted within a specified period of time (30 days) of being disabled. In case of short

term disability insurance plans one must be disabled for at least 8 consecutive days and must

35

either be employed or seeking job in an active manner.

POINTS TO REMEMBER BEFORE FILING DISABILITY INSURANCE

CLAIM:

First things first. One must understand the precise definition of disability in his policy

to determine whether his condition qualifies for benefits.

Most disability policies require one to be under the care of a doctor. So it is

mandatory that the doctor treating the disabled confirms and explains the problem in

writing.

The answers given in the disability insurance claim form must be true to the

maximum extent. An unsure question must be marked unsure. In case an answer

contradicts the medical record that the insurer will obtain, the insured must have a

comprehensive explanation for that.

Almost all disability policies incorporate an elimination period. An elimination period

is the period of time one remains disabled before receiving benefits. So one must

arrange for enough money to meet usual expenses.

A disability insurance claim must be filed as soon as one discovers his disability. A

failure to do so can lead to the insurance provider denying the claim.

Under no circumstances should the insured give up his rights. An offer to compromise

by accepting less can lead to worse consequences.

Under an own occupation policy, one can collect benefits if he can no more continue

his own job but can get employed in another kind of job.

Insurance companies can videotape a person who has filed a disability insurance

claim to record him doing something that he claims he is unable to do.

One must not keep any stone unturned in understanding the policy and disability

insurance claims. So he must not bother asking questions that look stupid.

36

DISABILITY INSURANCE ATTORNEY

Disability insurance attorney refers to the law firms or lawyers who negotiate the settlement

or handle the litigations of disabled professionals or corporate executives. Insurance

companies have multiple reasons for delaying and denying the claims of disability insurance

beneficiaries. Someone can also contact a disability insurance attorney if he is interested in a

lump-sum buy-out of his disability policy.

APPLICABILITY OF DISABILITY INSURANCE ATTORNEY:

The insurer and the insured enter into a contract while buying a disability insurance policy.

The insurance company promises pays to (usually partially) cover the lost wage if the insured

gets disabled according to the terms of disability income policy. The insurer's failure to cover

the loss is a breach of contract. This generally happens mostly in the case of physiological

and psychological ailments when the claimant has suffered an illness or an injury which

involves only subjective symptoms and is hard to diagnose. Many people give up after the

denial of their claim. Disability insurance attorney are law firms which provides the harassed

persons options to file a lawsuit against the insurance provider. Nowadays disability

insurance attorney also has alternatives whereby the law firm enters into a communication

with the insurer and gets the claim re-evaluated. These services are available both for short

and long term disability plans.

CHECK OUT MORE BEFORE AVAILING DISABILITY INSURANCE

ATTORNEY SERVICE:

Short and long term disability plans are usually governed by Employee Retirement

Income Security Act (ERISA). One has a full range of rights when ERISA applies but

there are many hidden dangers also. For instance a review becomes impossible if an

ERISA appeal is unsuccessful and a lawsuit is necessary. Many lawyers do not

understand ERISA. So it is utmost important that previous success rate is examined to

avoid further litigation.

Choosing a law firm having good repute pays because insurance companies respect

good law firm's abilities and are almost submissive from the beginning.

37

Many disability insurance attorney law firms don't charge any attorney fees unless they can

work out a successful recovery for clients. Choosing such a firm can prevent an additional

pecuniary loss if the claim fails.

Therefore choosing to use disability insurance attorney to get back the claim is always a

rational decision but care must be executed.

38

DISABILITY INSURANCE IN WESTERN COUNTRIES

Disability Insurance has been a huge success in Western Countries especially in countries

like U.S.A & U.K. There people have understood the importance of getting a disability

insurance and hence the policies sells like a hot cake over there. Many insurance companies

such as MetLife Insurance Company, Prudential financial, New York Life & Abbott

DISABILITY INSURANCE

IN

WESTERN COUNTRIES

DOCTOR

DISABILITY

INSURANCE

RETIREMENT PROTECTION

DISABILITY INSURANCE

39

Insurance Agency have come up with innovative schemes in Disability Insurance which has

made sure that they have helped Hundreds of people in hundred different ways.

For an Insurance company its important to know what type of a cover does a person needs to

exactly want and they have to set up plans accordingly. In America, surveys and reports have

shown that people face a most crunch situation when the earning person himself gets ill or

disabled leaving his entire family into disarray. Studies have shown most of the homes in

America gets foreclosures due to disability and not much due to death.

So it was imperative for the Western Society to understand the fact that disability cover ought

to be there. The Government has also been supportive for the same and there are schemes in

which the employer himself insures his employees, in certain cases it is mandatory as well.

Most employers offer some kind of disability insurance, but you should find out exactly what

your employer offers before you have to file a claim. Most allow some short-term sick leave,

which might last from a few days to as much as six months. In some states, such as Hawaii,

New Jersey, New York and Rhode Island, state law requires employers to provide disability

benefits for up to 26 weeks.

There has been lot of innovative ideas that has been introduced in Western Countries I would

like to highlight some of the innovative insurance schemes.

DOCTOR DISABILITY

MEDICAL STUDENT DISABILITY INSURANCE

Could one continue to support his family and pay his bills if he were unable to work for any

length of time because of illness or injury? If one were to become disabled, do you know how

much money would be coming in each month and from what sources?

Some people hope that group disability coverage provided by their employers, government

disability income programs or worker's compensation will cover them. But, for many

physicians and dentists, a disability that stops their paycheck would leave them - and their

families - in financial hardship. Individual disability income insurance is designed to replace

a significant portion of income lost when illness or injury prevents the policyholder from

40

earning a living. It is designed to help pay ongoing bills while the policyholder is

recuperating and unable to do his or her job.

Last year the Association of American Medical Colleges (AAMC) said that schools should

require disability insurance for all medical students and provide access to policies. Medical

students are particularly vulnerable to the financial hardships that may result from a

disability. Medical student disability insurance protects students from possible fiscal disaster

and is also a prudent investment. Purchasing a policy while still in medical school presents

tremendous advantages that can save students money after graduation and provide the peace

of mind necessary to focus on the demands of a career in medicine.

Most medical students do not generate income while in school, but instead accumulate debt at

staggering rates. In 2005, medical school graduates who took out loans started their

residencies with an average debt of $100,000, a figure that does not include undergraduate

debt. Only the expected future income from a career in medicine makes such exorbitant debt

palatable; however, a student that suffers a disability may never realize that income.

According to the 1994 Statistical Abstract of the United States, in the course of a year, 1 in 10

people between the ages of 25 and 64 will suffer a disability. When comparing that ratio to

the odds of being victim of a house fire (1 in 122); injured in an automobile accident (1 in

160); or even of death (1 in 117), the value and protection offered by medical student

disability insurance is clear.

A student who suffers a disability and is unable to complete their education will be saddled

with student loan debt and may not be able to work in any field depending on the disability

and its severity. Repayment of student loans combined with medical expenses and lack of

income due to disability can destroy a financial future. Even a student that is able to continue

medical school could face the burden of simultaneously repaying loans and paying tuition.

Advantages of purchasing a medical student disability policy:

Rates are based on age the younger a person when the policy is purchased, the less

expensive it will be.

A persons health status effects eligibility and premiums - obtaining insurance at a

younger age may protect the policyholder from the difficulties of securing a policy

later in life when other health issues may affect insurability.

41

Medical students can purchase up to $2,100/month of benefit

The policy benefit can be increased in the future regardless of health status.

The Liaison Committee on Medical Education (LCME) is the sole accrediting authority for

medical education programs leading to the M.D. degree in the United States. Accreditation

standard MS-28 states, all students must have access to disability insurance. Simply

allowing access to disability insurancea minimal requirement placed on accredited medical

schoolsor even recommending it, is not enough to save students from the risks of not

protecting their future income. In light of the monetary investment that students make to

medical schools, it should be the responsibility of each school to promote and educate its

students about the benefits, value, and importance of medical student disability insurance.

RESIDENT PHYSICIAN DISABILITY INSURANCE

Dr. Romans was in her third year of emergency medicine residency when the unthinkable

happened. After a long shift in the ER she left the hospital and on her way home was rear

ended while waiting to make a left turn. The impact pushed her car into opposing traffic and

an oncoming vehicle struck her broadside. The impact caused a compression in her lower

back that six months later still causes her excruciating pain. Most days Im in so much pain

that I wonder how Ill be able to complete my residency, let alone get a job after graduation,

said Dr. Romans in an interview with Doctor Disability. Between medical school and

undergrad, she is in debt over $130,000 and because of her injury, can no longer qualify for

individual disability coverage.

According to the 1994 Statistical Abstract of the United States, in the course of a year, 1 in 10

people between the ages of 25 and 64 will suffer a disability. When comparing that ratio to

the odds of being victim of a house fire (1 in 122); injured in an automobile accident (1 in

160); or even of death (1 in 117), the odds of being out of work due to an injury or illness are

very high.

With average salaries that are roughly a quarter that of a physicians median salary, resident

physicians are treading water until their full income potential is realized. Insuring the ability

to earn that future income with medical resident disability insurance is crucial, especially as a

42

recent medical school graduate. According to the Association of American Medical Colleges

(AAMC), if medical school tuition continues to increase at its current rate, the projected

median indebtedness for 2007 medical school graduates will be over $120,000 for those who

went to public school and just shy of $160,000 for private school attendees. While repayment

of Stafford loans may be deferred in a case of economic hardship, many residents must begin

to repay student loans six months after graduation. Regardless of whether these loans are

deferred, an injury or illness to a medical resident with substantial debt could have

debilitating long-term financial effects.

Many residency programs offer group disability insurance, but these plans can have major

limitations. Group plans can be changed or canceled at any time, and most do not extend past

residency. A physician under one of these plans would have to purchase disability insurance

again after residencywhich is still a wise decisionbut would likely miss out on lower

premiums that were available as a resident. In addition, by waiting, any medical conditions

that emerged as a resident could make the future purchase of an individual policy very

difficult. Finally, many group plans only offer coverage for a total disability. If a resident or

intern under a plan that only offers total disability coverage is partially disabled and still able

to perform any type of work, the benefits may not be payable.

The simple solution to protecting future income and eliminating the risk of being unable to

repay student loans is purchasing an individual disability insurance policy. Rates are based on

age and health status, so it is advantageous to purchase a policy sooner rather than later. A

policy purchased by a resident has the flexibility to meet changing needs of the insured after

residency and offers significant financial advantages. Buying disability insurance at a

younger age and while healthy will get a medical resident or intern the best policy and rate.

There are several features and terms to be aware of when looking for a good disability

insurance policy. The first is an own occupation definition of disability. With own occupation

coverage, if the insured becomes disabled, benefits are still payable even if he or she is able

to gain employment in another profession. Group or individual plans that are not own

occupation specific may only cover total disability and not pay benefits if the policyholder is

partially disabled or can do other work. For example, Social Security Disability Insurance

(SSDI) only covers total disability and the inability to adjust to other work because of

medical conditions. Because the average income of a physician is notably higher than the

43

income for most other occupations, an own occupation plan is the only way to protect a

resident physicians true future earning power.

Choosing a policy that is guaranteed renewable and non-cancelable is also important. These

policies cannot be canceled or altered due to change in health status or age, and can be

renewed at the same premium for as long as the policyholder desires. By investing in an own

occupation policy as a resident physician, the insured can protect future income while

acquiring guaranteed coverage that is locked in at a lower rate.

With flexible premiums and the benefit of longer coverage at a less expensive rate, there is no

reason for a resident physician or intern not to inquire about a disability insurance policy

today. Even group discounts are available when three or more doctors from a residency

program apply.

Doctor Disability offers the following benefits for medical residents:

Own occupation coverage of up to $3,700 for residents and $5,000 for fellows

Group discount plans when three or more doctors from your residency program apply

Flexible premium plans to fit your budget

Quotes from the top companies

RETIREMENT PROTECTION INSURANCE

What would happen to ones ability to save for retirement if he were hurt or too sick to work?

Most people in this situation, with no income and increased medical bills, are forced to use

their savings to meet everyday living expenses. Its important to put a fallback plan in place

to ensure that money continues to be put away for ones retirement even if he becomes

disabled.

44

Retirement Protection Disability Insurance helps you continue saving for retirement in the

event of a disability. If you become disabled, the policy pays a benefit in the amount of your

retirement plans monthly contribution into a special trust. The money in the trust is invested

at your discretion until you reach age 65 and then distributed to help supplement your

retirement income. It is not a pension plan. Rather, it is a program that provides disability

income insurance to ensure your ability to make retirement plan contributions until the age of

65. The goal: to provide you with close to what you could have expected from the retirement

plan if you had not become disabled. In addition to protection for your own retirement, it also

makes an excellent benefit for select employees or your entire staff.

Retirement Protection Disability Insurance Features:

Monthly benefits up to $3,800/month

Coverage can be added to an existing individual or group disability insurance plan to

cover more of your annual income

Non-cancelable, guaranteed renewable coverage to age 65, which means your policy

cannot be changed or canceled except for non-payment of premiums

Portable, individually-owned coverage

Tax-free benefits (when premiums are paid by the insured with after-tax dollars; investment

earnings within the Trust are taxable)

45

DISABILITY INSURANCE IN INDIA

In India, Insurance has a long history it has increased by leaps & bounds, people in India

have understood the importance of having an insurance policy. But Disability Insurance is

still alien to India. Disability Insurance policies are still not familiar to Indian people. Though

they prefer taking life insurance but they have negated the fact that disability insurance is

equally important. Disability can come to a person anytime in his life and that can seriously

hamper his earning capacity. I would like to illustrate some of the real stories and expert

opinions about the same.

NEW DELHI: Rahul (name changed) was abandoned at an orphanage in New Delhi four

years back. The reasons are obvious - he is disabled. Hundreds of babies like him are deserted

every year by parents who can make no place in their lives for disabled children.

In India there are at least four companies that have insurance policies for unborn children that

covers them for disability after birth. But unfortunately, there are few takers.

AGM, New India Assurance Company H P Singh says, "There is a policy that we offer that

protects children against disabilities, but we have sold very few because Indian parents are

very superstitious by nature and they think that by going in for a policy like this would mean

bad luck."

Take New India Assurance Company for example. Their Unborn Child Welfare Insurance

scheme has been around since 1987. But to date, they have hardly sold more than 200

policies.

The policy offers an insurance of Rs 75,000 for a one time premium of Rs 1,500. And the

policy covers a range of disabilities for new born babies from lung and heart defect to

physical disabilities.

However, parents like Pooja and Pankaj Sharma who have just had baby Ananya are not

convinced that such policies do expectant parents any good.

46

"There is such a positive energy all around when you're expecting a baby. The last thing you

need is a policy like this to put that seed of thought in your mind that some thing might go

wrong," says Pankaj Sharma.

Paediatricians are stunned are what they call a typical situation where superstition prevails

over logic especially since treating disability in children runs into lakhs and a little monetary

help would always be welcome. With most parents unable to afford the expensive medical

treatment, it's the children who have to pay the price. To make matters worse, companies who

offer such policies haven't made much of an effort to market them.

Says Paediatrician A K Gulati, "I think it is ridiculous to say that its bad luck because one in

three live births are disabled children. Also these insurance companies need to approach

doctors instead of parents because hardly any one knows about these policies"

There are lakhs of children who are born with some kind of disability every year in India.

Their lives could have been much better if their parents had taken out disability insurance.

But hope of new perfect life inevitably overrides caution. When shopping for coloured

clothes for a baby to come, disability insurance probably seems far too gloomy.

NOVEMBER 12, 2007

When Sunil Kumar Sinha, 34, lost his left hand in an accident, he felt completely desolate.

An engineer by profession, Sinha had got married recently, was planning to purchase an

apartment soon and then there were other financial goals that he wanted to attain in the years

to come. But all seemed lost now.

A sad story that can happen to any of us. In advanced countries, there are support systems for

people like Sinha, either in the form of direct financial assistance or in terms of identification

of opportunities.

For instance, in New Zealand, if you are above 16 years of age and have been permanently

and severely incapacitated, the government has schemes under the head of disability

allowance and sickness benefits.

However, in India, there is no protection available for such people. Also, with the rising cost

of medical treatment, it is a huge financial hit that one has to incur in case of an unfortunate

event. Thus, it is always prudent to plan for such issues in advance.

47

In order to plan for your financial support in case of disability you need to look into:

Cost of medical treatment: First, you should be aware of the insurance cover

that your employer provides for you and your family. If this cover is not enough, you

need to buy additional cover.

Ideally, the total insurance should be to the tune of Rs 300,000 to Rs 500,000 per

head. The expense is also not too much. For a 30-year old, health cover of Rs 300,000

would cost only about Rs 3,000 per year. Of course, the premiums are higher for older

citizens.

It is also important that when you are taking additional cover, mention the existing

cover from your employer in the application form. Most insurance agents may ask

you not to do it or may not even bring up the subject. But this is important because

such hidden facts may allow the insurance company to reject your claim at the time of

need.

Transfer of other expenses: If your life insurance policies offer premium

waiver benefit, take it. Essentially, these waivers are offered in case you are

incapacitated. Here, the insurance company, on your behalf, will pay for the

premiums, either till the disability continues or the end of the policy term, whichever

comes earlier.

The cost of such riders is not very high. For a 30-year old taking a policy of Rs 50

lakh (Rs 5 million) for 20 years, the premium waiver option comes for a mere Rs 490

a year.

Compensation: While expenses covered above are useful, they do not help in

running a household. Here too, there are some good policies available. Almost all

policies have a critical illness plan as well as a disability rider.

If you are diagnosed with critical illness like paralysis, stroke, heart attack etc, you

will get the entire assured sum. For a 30-year old, a critical illness policy of Rs 10

lakh (Rs 1 million) would cost Rs 3,000 a year.

48

Likewise, with the disability benefit rider with your life insurance, the company (depending

on type of plan) will pay you regular installments. For instance, Reliance [Get Quote] Life

Insurance pays you basic sum assured in ten equal annual installments.

However, while all these policies sound great, it is important to remember that it is cheaper to

create safety nets through investment rather than insurance plans. So, it would be great if you

can get rid of such insurance policies as you grow older because the premiums are much

higher.

That is, a Rs 10 lakh (Rs 1 million) health cover costs just Rs 3,000 for a 30-year old but the

same policy costs Rs 30,000 for a 55-plus person. It is the same case with other policies as

well. Moreover, it is at this later age where your chances of such illness or disabilities are

higher.

If you plan your finances well, you will be able to knock off the critical illness cover much

before your retirement. Later, if need be, you can get rid of other covers as well. The idea is

to get rid of these covers as soon as possible. This is because you save the premiums which

can be directly used to invest in income generating assets. Also, since these premiums get

higher with age, it becomes particularly difficult to pay them during retirement years when

income is practically zero.

But remember, this can only be achieved if you have planned your finances properly and

amassed enough resources to take care of any contingency.

TO DO LIST:

Buy insurance of Rs 3 lakh to 5 lakh per person

Opt for the disability rider in a health plan

Get a premium waiver rider in the health plan

Get a critical illness policy

MORTGAGE DISABILITY INSURANCE

Mortgage Disability Insurance is a special type of life insurance policy and is gaining huge

popularity in the Indian mortgage industry. The mortgage disability insurance is a special

type of life insurance policy that guarantees repayment of a mortgage loan in the event of

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disability of the person who borrowed the mortgage. Further, the mortgage lender can also

protect his loaned capital through these special type o f insurance instruments.

.

These types of specialized mortgage disability insurance products are of two types, viz

Private Mortgage Insurance

Mortgage Insurance Premium

PRIVATE MORTGAGE INSURANCE - They are mortgage disability

insurance products that protects the borrower from the lender in the event of default

which generally, covers a substantial portion of the capital borrowed. They are

insurance products of private insurance companies.

MORTGAGE INSURANCE PREMIUM - They are mortgage disability

insurance products that also protects the lender in the event of non-payment due to

disability of the mortgage borrower. This life insurance products are generally

government insurance products.

The predominant market leaders in organized Indian mortgage industry are housing finance

companies like LIC Housing Finance, HDFC, ICICI Home Finance etc and they are the main

facilitator of mortgage disability insurance in India. This mortgage disability insurance

products comes as a package with mortgage life insurance products as whole, where the

mortgage borrower or the insured is also covered for life. This is the most popular type of

mortgage loan prevalent in India. The government of India, Life Insurance Corporation of

India enjoys complete market leadership in this sector.

The estimated size of the organized mortgage industry in India account only for 25% of the

total housing investment in India. Private financial institutions like, commercial banks both

National and Foreign Banks along with Cooperative banks and other non-banking financial

companies are also registering steady growth since 2000. The Indian mortgage loan industry

is consistently registering 20-50 % growth on year-on-year basis, from the year 2000

onwards. Much of the success of the growth of this industry in India can be attributed to the

Government of India liberal economic policy promulgated in the early 1990s

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The business of mortgage life insurance is mainly concentrated in the urban India only. This

is because the semi-urban or semi-rural India communities are still ignorant and skeptical

about its advantages in owning a house. The main bottlenecks that are hampering smooth

growth of this industry in semi-urban India, are as follows -

Ignorance amongst masses

Poor accessibility

Lengthy processing time

Elaborate documentation

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CASE STUDY

NEW INDIA ASSURANCE COMPANY LTD

New India Assurance is currently the largest Non-Life Insurance Company in India. It is

one of the five Public Sector Insurance Companies in India with its headquarters in Mumbai.

Previously it was a subsidiary of the General Insurance Corporation of India (GIC). But as

GIC became a reinsurance company as per IRDA Act 1999, all of its four primary insurance

subsidiaries (New India Assurance, United India Insurance, Oriental Insurance and National

Insurance) got autonomy.

New India Assurance has been operating both in India and foreign countries. In the recent

past it has succeeded in forging tie-ups with some of the leading public sector banks in India

such as State Bank of India, Central Bank of India, Corporation Bank and United Western

Bank to increase its distribution network.

HISTORY

Established by Sir Dorab Tata in 1919, New India is the first fully Indian owned Insurance

company in India. New India was a pioneer among the Indian Companies on various

fronts, right from insuring the first domestic airlines in 1946 to satellite insurance in 1980.

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The latest addition to the list of firsts is the insurance of the INSAT-2E.

With a wide range of policies New India has become one of the largest non-life insurance

companies, not only in India, but also in the Afro-Asian region

In 1919 The New India Assurance Company Ltd. was first incorporated in Bombay, now

known as Mumbai in India, initially as composite company for both life and general

insurance business. As of 1956 New India Assurance converted to an Exclusive General

Insurance Company and today it is a leading worldwide general insurance brand catering to

the communities of 27 countries with a large network of offices staffed by committed and

enthusiastic workforce that aims to please.

New India Assurance Aruba opened her doors to the local community on July 1st,

1963 by initiative of the founder, the late Mr. C.H. Raghunath.

Currently New India Assurance Aruba is directed by the founders youngest daughter, Ms.

Joy Raghunath whom together with the entire Team New India strives to maintain and

improve on the proven reliability and sustainability which has been carefully nurtured for

almost half a century.

NEW DEVELOPMENTS

Corporation Bank, a premier government of India Enterprise, has entered in to an

Agreement to-day, i.e. 28th October, 2003 with The New India Assurance Co.Ltd. in

continuation to their Memorandum Understanding signed earlier to provide Non-life

insurance products to its customers. Corporation Bank has been consistently in the

forefront to provide new value added services to its customers. Constant innovation has

been its forte and it has spared no efforts to provide the best of service to its clientele. It

may be recalled that the Bank is already action as Corporate Agent for Life Insurance

corporation of India for life insurance business. At present, the Bank has 700 branches and

88 extension counters and 555 ATMs across the country.

The New India Assurance Co. Ltd. is the largest Non-life Insurance Company in the Indian

Market and the first Indian Non-life Insurance Company to cross global direct premium of

Rs. 4812.79 crores in Indian and Abroad. The Company has been re-affirmed 'A' Excellent

rating by A.M.Best (Europe) for fourth consecutive year for its superior capital base,

strong presence in domestic market and conservative investment portfolio. New India's

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range of 180 products caters to the needs of various cross section of society, trade,

industry and commerce in rural and urban sectors. Both the Institutions are known for their

sound Management Policies and long term commitments. Corporation Bank envisages vast

scope in insurance penetration and immense potential to boost its revenue income through

Corporate Agency.

DISABILITY INSURANCE IN NEW INDIA ASSURANCE

Like any industry, the industry providing Disability Insurance has it's own unique terms. The

definitions of these terms are general in nature, and may vary by company and/or state

insurance regulations. At New India Assurance Company they have provided these terms

and definitions so that one can make the best choice for his family or business. Therefore

they have provided some glossary of the same.

AVAILABILITY

Generally", individuals 25 to 50 years old employed in blue, gray, and white collar

occupations earning from Rs.60,000 to Rs. 25,00,000 annually. Small business (under 100

employees) owners, managers, and/or employees.

AUTOMATIC BENEFIT INCREASE RIDER

This rider provides for an annual increase equal to 5% of the original Base Policy Monthly

Benefit amount on each anniversary of satisfying the elimination period. The lifetime cap on

Monthly Benefit amounts is two times the original base policy Monthly Benefit. If the

Insured recovers from Total Disability and there was a Monthly Benefit increase under this

rider, the Insured can increase the base policy Monthly Benefit to the amount of the last

Monthly Benefit payment. To obtain the increase, the Insured must: .be under age 60, .apply

within 90 days of the end of Total Disability, and .have a full-time job. A new premium for

the increase will be charged, based on our then current rates and the Insureds attained age.

The new premium must be paid within 31 days of the increase.

BUSINESS IN THE HOME

Persons who work at a business in their home are not eligible for disability income coverage,

unless at least 50% of the job duties are performed away from the home.

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CATASTROPHIC DISABILITY RIDER

"Generally", available in all Classes to Standard and Substandard.

Issue Ages 18-55 for 1-, 2-, and 5-year Benefit Periods; 56-60 for 1- and 2-year Benefit

Periods. Generally not available with 30 day elimination periods. This rider will provide a

Disability Benefit if the Insureds Total Disability continues beyond the Maximum Benefit

Period of the Policy, and the Insured requires assistance or supervision with at least two of

six Activities of Daily Living (bathing, toileting, transferring, continence, eating, dressing),

OR is Cognitively Impaired, and is not engaged in any job for wage or profit, and a

Physician has certified the Catastrophic Disability with a plan of treatment. The rider extends

the total Benefit Period payable under the base policy to a total of 5 or 10 years.

DEFINITION OF TOTAL DISABILITY

The best policy definition of total disability will state that you are unable to work at your

regular occupation because of sickness or injury.

EARNED INCOME

Earned income is the gross income from the applicants occupation, including salary, wages,