Disability Insurance Explained

 

Simply put, Disability Insurance covers your loss of income if  you become disabled due to an illness or injury and are unable to work. It generally consists of 3 components which are the main feature of this type of insurance. This includes paid-sick leave, short term, and long term disability payments.

Some policies also offer a lump sum death benefit if you expire as a result of the illness or injury. However, the policy ceases in effect when the death benefit is paid.

For those individuals who are self-employed, small business owners, or those not covered by an employer, this type of insurance is an excellent choice. It is also handy for part-time or seasonal workers, and people who do not work such as retirees or homemakers.

Why should get you Disability Insurance? If you fall in any of the above categories, then statistically there is a 1 in 3 chance that you will become disabled for 90 days or longer before you reach the age of 65. This type of insurance also nicely complements what you may derive from Employment Insurance. You can also get a policy which specifically covers your mortgage payments only.

Policies cover both accidents and ailments. However, you should be aware that most policies will exclude you coverage for any pre-existing conditions.

There are a vast range of disability plans available so you have many options to choose from and find a plan that best suits your particular circumstances.

The amount of Disability Insurance you can carry may be dependent on the type of occupation in which you are employed. If you are employed in a more dangerous occupation the premium will be higher than those who are employed in more sedate occupations. The amount of coverage generally covers you up to from either 50 % to a maximum of two-thirds of your current annual income, even if you work at more than one job. The amount of coverage may also have a ceiling limit such as $3000 per month for example.

The benefits that you are paid are tax free, and the benefit periods may range from 2 years up until you reach 65 years of age. You can still receive coverage past your 65th birthday so long as you are still gainfully employed.

Short term benefits are usually paid when you are temporarily disabled and can eventually return back to work. There is usually a waiting period before the benefits will kick-in and the company begins payments. The longer the waiting period you select will reduce the cost of your premium

Short term disability generally lasts from anywhere from 2 weeks up to around five months. If you continue to be disabled after this period, long term benefits can take effect and generally last up to five years. Disability payments are usually paid as either weekly or monthly.

The Government of Canada has a National Benefit Authority which offers disability benefits and tax credits to individuals who have been disabled.