Disability Insurance

Disability insurance is a type of insurance that pays you a monthly income if you become disabled and unable to work due to an illness or injury. It can help you cover your living expenses, pay off your debts, and maintain your lifestyle while you recover.

According to Statistics Canada, one in five Canadians aged 15 and over have a disability that limits their daily activities. Moreover, the average duration of a disability claim is about three years. If you are unable to work for a long period of time, how would you support yourself and your family?

You may think that you have enough savings or other sources of income to cope with a disability, but consider the following:

Your savings may not last as long as you think. According to a survey by the Canadian Payroll Association, 47% of Canadians say they would find it difficult to meet their financial obligations if their paycheque was delayed by even a single week.
Your other sources of income may not be enough or reliable. For example, your employer may offer some sick leave or short-term disability benefits, but they may not cover your full income or last long enough. You may also qualify for some government benefits, such as Employment Insurance (EI) sickness benefits or Canada Pension Plan (CPP) disability benefits, but they may have strict eligibility criteria, waiting periods, and maximum amounts.
Your expenses may increase due to your disability. You may need to pay for medical treatments, medications, assistive devices, home modifications, or personal care services that are not covered by your provincial health plan or private health insurance.

Therefore, having disability insurance can give you peace of mind and financial security in case of a disability. Disability insurance policies can vary depending on the insurance company and the specific policy. However, common features of disability insurance policies include:

Definition of disability: This defines what qualifies as a disability and under what circumstances the policyholder is eligible to receive benefits.
Benefit period: This specifies the length of time for which the policyholder is eligible to receive benefits.
Waiting period: This is the period of time that the policyholder must be disabled before becoming eligible to receive benefits.
Benefit amount: This specifies the amount of money that the policyholder is eligible to receive as a benefit.

What are the types of disability insurance?

There are two main types of disability insurance: short-term and long-term.

Short-term disability insurance provides you with a partial income replacement for a short period of time, usually between three and six months. It can help you cover your immediate expenses while you recover from a minor illness or injury.
Long-term disability insurance provides you with a partial income replacement for a longer period of time, usually until you recover, reach a certain age, or die. It can help you cover your ongoing expenses while you cope with a serious or permanent disability.

You can buy disability insurance from various sources, such as:

Your employer: Some employers offer group disability insurance as part of their employee benefits package. This can be a convenient and affordable way to get coverage, but it may have some limitations, such as lower benefit amounts, stricter definitions of disability, or termination when you leave your job.
Your professional association: Some professional associations offer group disability insurance to their members at discounted rates. This can be a good option if you belong to a specific occupation or industry, but it may have similar limitations as employer-sponsored plans.
An insurance company: You can buy individual disability insurance from an insurance company through an agent or broker. This can give you more flexibility and control over your coverage, such as choosing your benefit amount, waiting period, benefit period, definition of disability, and optional features. However, it may also be more expensive and require medical underwriting.

Who Should Consider Getting Disability Insurance?

Disability insurance can be a valuable type of insurance coverage for individuals who are concerned about the financial impact of an illness or injury that could prevent them from working. It can provide financial support during a time of hardship and help to ease the burden of medical bills and other expenses.

Individuals who may want to consider getting disability insurance include those who:

Have a job that may not provide adequate disability coverage
Are self-employed or own their own business
Have a high level of debt or financial obligations that would be difficult to meet if they were unable to work due to disability
Have a family history of illnesses or conditions that could lead to disability

It is important to note that disability insurance is not a substitute for other types of insurance coverage, such as health insurance or life insurance. It is important to evaluate your insurance needs and consider all types of insurance coverage when making decisions about your financial planning.