disability insurance

I listed purchasing a disability/personal accident insurance cover (for both D and myself) as one of my personal finance goals for 2011. I thought I had my thinking done with but the comments to that post got me thinking deeper. Primarily, the two questions to be answered now were:

  • Do we really need disability insurance cover?

  • If yes, how much?

A few basic thoughts to begin with:

Why do you need disability insurance?

You’d need disability insurance to help meet your monthly expenses since your ability to earn a regular income could be hampered were you to become partially/totally disabled.

When do you need disability insurance?

You’d need disability insurance when you become partially/totally disabled and your income (from whatever sources) isn’t adequate enough to meet your monthly expenses.

Now, how much disability insurance cover do you need?

I came up with a simple mathematical model – you can download the spreadsheet template here.


Note: The amounts shown are arbitrary in nature.

I ran the numbers on our situation and have come to the following conclusions:

  • Given our lifestyle, we certainly do face the risk of a disability-inducing event occurring.

  • We do need a fair amount of disability insurance (somewhere in the low seven-figures) since our passive sources of income aren’t yet adequate to meet the estimated monthly expenses.

  • Since both D and I work, I’ll buy a policy only in one of our names – this would cover us even in the worst scenario. But I plan to defer this purchase for some more time in order to let these thoughts percolate through my mind.

It’s seriously tough to think and plan ahead for such morbid situations.

What do you think of this approach?


Of late, I’ve been thinking quite a bit on what I’d do if the following scenario were to happen.

Suppose your ability to earn a regular income is hampered because you suffer a disability due to whatever reason (say due to an accident). How would you plan ahead and financially mitigate for this scenario? Remember, the younger you are the longer is the time frame that you’d need to plan for.

My thoughts.

  • The best solution for such a scenario would be long-term disability insuranceinsurance that, should you become disabled, replaces your income to a certain extent each month for a significant length of time. I’ve seen only one such disability insurance policy on offer in India: Tata AIG’s Secured Future Plan. As I’ve written before, the insurance payout scenario is excellent: at the highest level you get Rs 35,000 per month guaranteed for 20 years. I’m yet to go through the policy wording.

  • The other option is to opt for a regular personal accident plan which pays out a lumpsum in the event of a disability. The onus would then be on you to manage this money such that it can generate a steady income stream. I did peruse few such plans but the payout scenarios were quite complex.

What would you recommend? Are there other options that I could look at? And how have you planned for this scenario?


The only long-term disability insurance product that I have seen on offer by Indian insurance companies is Tata AIG’s Secured Future Plan. The insurance payout scenario is excellent: at the highest level you get Rs 35,000 per month guaranteed for 20 years.

However, no one at Tata AIG wants to sell you this policy!

I’ve tried multiple channels/approaches, but each time they act as if I’m speaking an alien language and then try their best to peddle one of their other lamer policies. I’ve now escalated this issue to the head of customer support. Let’s see what happens.

By any chance, have you purchased/researched this policy?