Types of Disability Insurance

Disability insurance can be structured in several ways depending on income type, occupation, business ownership, and overall financial planning goals. Understanding the different types of disability insurance helps ensure income protection is properly aligned with a client’s needs.

Below is an overview of the most common disability insurance structures and use cases.

Short Term Disability Insurance

Short term disability insurance provides income replacement for a limited period of time, typically covering the first few weeks or months following an illness or injury.

Benefits usually begin after a short waiting period and are designed to help bridge the gap before long term disability benefits begin or during a temporary recovery period.

Short term disability is often used to supplement employer benefits or as standalone coverage for individuals without group plans.

Long Term Disability Insurance

Long term disability insurance is designed to provide income replacement for extended periods of disability, often lasting several years or until retirement age.

This coverage is commonly used by professionals, business owners, and individuals whose income depends on their ability to work. Benefit design can vary based on occupation, income structure, and overall planning objectives.

Long term disability is the foundation of most income protection strategies.

Business Overhead Expense Disability Insurance

Business Overhead Expense disability insurance helps cover ongoing business expenses if an owner becomes disabled.

Covered expenses may include rent, payroll, utilities, loan payments, and other fixed operating costs. This allows the business to continue operating while the owner recovers.

This type of coverage is especially important for small business owners, medical professionals, and self employed individuals.

Loan and Practice Loan Disability Insurance

Loan related disability insurance is designed to help protect business or personal loans if a disability prevents the borrower from working.

This coverage is commonly used for practice loans, business loans, real estate financing, and other debt tied to earned income. Policies are often structured to match loan terms and repayment schedules.

Loan disability insurance helps protect both the borrower and the lender.

Key Person Disability Insurance

Key person disability insurance protects a business from the financial impact of losing a critical employee due to disability.

Benefits are paid to the business and can be used to offset lost revenue, cover replacement costs, or stabilize operations during a period of disruption.

This type of coverage is often used alongside key person life insurance as part of broader business continuity planning.

Buy Sell Disability Insurance

Buy sell disability insurance is designed to fund ownership transitions if a business owner becomes permanently disabled.

Rather than triggering a buy sell agreement upon death, this coverage provides liquidity if disability prevents an owner from continuing to operate the business.

Buy sell disability insurance is commonly used in partnerships and closely held businesses.

Impaired Risk Disability Insurance

Impaired risk disability insurance is designed for individuals who may not qualify for standard coverage due to medical history, occupation, or lifestyle factors.

These cases often require advanced underwriting strategy and access to specialty markets. Coverage may be structured differently than traditional policies but can still provide meaningful income protection.

Impaired risk planning plays an important role in comprehensive income protection.

Guaranteed Standard Issue Disability Insurance

Guaranteed Standard Issue disability insurance is offered through employers or organizations and provides coverage with limited or no medical underwriting.

This type of coverage is often used for executives, professional groups, and firms looking to provide disability benefits to key employees.

While benefit amounts and features may be limited, Guaranteed Standard Issue coverage can be a valuable planning tool when traditional underwriting is a concern.

Group Disability Insurance

Group disability insurance is typically offered through an employer as part of a benefits package.

Group coverage can provide a base level of income protection, but often includes benefit caps, taxable benefits, and limited customization.

Many individuals use individual disability insurance to supplement group coverage and better align income protection with actual earnings.

Loss of License

Flying is a career built on skill, precision, and regulatory compliance. Loss of License insurance provides pilots with financial protection if they are unable to maintain or renew their professional license due to medical issues, regulatory restrictions, or other qualifying circumstances. Key features and benefits include:

Income Protection: Safeguards your earnings if you can no longer operate aircraft professionally.
Flexibility: Coverage can be tailored to different types of pilot licenses and career stages.
Peace of Mind: Allows pilots to focus on performance and safety without worrying about career-ending setbacks.
Support for Career Transitions: Helps manage financial obligations while exploring alternate professional opportunities if your license is lost.