Disability insurance provides an income when you cannot work to earn an income due to an unexpected illness or accident. Disability is not uncommon, with one in three people experiencing a period of disability for 90 days or longer before they reach the age of 65. The Canadian Life and Health Insurance Association Guide provides information on what to consider when buying disability insurance.
Types of Disability Insurance
Short-Term Disability Insurance
- This typically provides benefits for up to six months.
Long-Term Disability Insurance
- This will usually begin after other sources of disability coverage have reached an end, including:
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- short-term disability insurance
- sick leave from an employer
- federally funded Employment Insurance (EI) sickness benefits
- Most plans will replace 60 to 70 percent of normal income.
- Each plan may differ but usually provides benefits for up to two years. An assessment often takes place after two years.
Types of Disability Insurance Plans
Individual Plans
- Close to a million Canadians have individual plans purchased through a life or health insurance agent.
- Terms may be more closely aligned with individual needs.
- The benefit is that the plan outlasts employment with any one employer.
Group Insurance Plans
- Group disability coverage plans are often available through an employer.
- There are usually variable levels of coverage depending on the plan offered.
Factors to Consider When Evaluating Disability Coverage Need
The amount and type of insurance you may need could be determined by assessing the following factors:
- Lifestyle – current costs and how much reduction in income would be acceptable.
- Family Responsibilities – how many are in the family, and are there dependents?
- Employment Flexibility – is there the ability to change jobs if required?
- Debt – what is owed monthly, and can anyone continue those payments?
- Financial Dependence – to what degree is there financial dependence on your employment income? Are there savings or other investments that would tide over a disability? How long would they last?
Considerations When Selecting Disability Insurance
It’s important to understand what you are purchasing.
- How much will the policy cost?
- What is the waiting period before benefits begin?
- Are premiums due when living with a disability?
- What will the income be from the disability coverage?
- Are benefits adjusted for inflation?
- Does the plan provide partial disability benefits?
- Can coverage be increased without a medical exam?
Disability coverage can be as varied as the insurance carrier and the type of plan selected. It’s important to talk to a Campbell and Haliburton insurance representative to understand your requirements and provide the best option to meet your needs.