Disability Insurance
Disability is more common than many realize, with 1 in 3 Canadians facing a long-term disability before age 65.
Protecting your income with disability insurance is essential to securing a strong, reliable financial plan.
What is Disability Insurance?
Disability insurance replaces a portion of your income with monthly benefits when a waiting period has passed, protecting you in the unlikely event that an injury, a significant disease, or a mental health problem prevents you from working and earning a living. The money can be used for your mortgage, regular living expenditures, and even retirement savings. Consider it your paycheck’s insurance.
Critical illness insurance, which pays you a tax-free lump sum payout after a predetermined survival period—typically 30 days—after being diagnosed with a life-threatening sickness or critical condition as stipulated by your insurance plan, should not be confused with disability insurance.
How Disability Insurance Works
Group disability insurance policies are typically provided by your business, union, or association as part of an employee benefits package that they pay for, or you can contribute through payroll deductions. It is frequently a taxable benefit for the worker. Both short-term and long-term disability coverage are typically included in group insurance plans.
If you are unable to work, short-term disability will cover you for a predetermined period of time. If you continue to be disabled after that point, your coverage expands to long-term disability, which provides coverage for up to two years in the event that you are unable to resume your employment. If you are unable to work in any occupation, your coverage may continue and be extended for more than two years. Depending on the kind of disability insurance plan you have, the duration of coverage may change.
Individual disability insurance plans are obtained outside your employment through a qualified life insurance broker and can be modified to match your individual “income replacement” needs. These plans feature customizable alternatives based on whether you’re employed, self-employed or a business owner that are best discussed by a professional life insurance broker.
Disability insurance is a solution if you’re…
Group disability insurance policies are typically provided by your business, union, or association as part of an employee benefits package that they pay for, or you can contribute through payroll deductions. It is frequently a taxable benefit for the worker. Both short-term and long-term disability coverage are typically included in group insurance plans.
If you are unable to work, short-term disability will cover you for a predetermined period of time. If you continue to be disabled after that point, your coverage expands to long-term disability, which provides coverage for up to two years in the event that you are unable to resume your employment. If you are unable to work in any occupation, your coverage may continue and be extended for more than two years. Depending on the kind of disability insurance plan you have, the duration of coverage may change.
Individual disability insurance plans are obtained outside your employment through a qualified life insurance broker and can be modified to match your individual “income replacement” needs. These plans feature customizable alternatives based on whether you’re employed, self-employed or a business owner that are best discussed by a professional life insurance broker.
Benefits of Individual Disability Insurance
For business owners or self-employed people who have no way to replace their income in the event of a disability, disability insurance is strongly advised. However, you can still profit from getting individual disability insurance even if you work for a company that offers group disability insurance.
Although they offer some security, group disability plans do not transfer coverage. You lose your coverage if you quit your job. You are no longer covered if your company discontinues providing the plan. Due to a wider range of exclusions and limits, you may also discover that you are not fully covered for specific disabilities or situations in which you become incapacitated.
Because individual disability insurance is unrelated to your place of employment and will continue to protect you regardless of where you move or who you work for, it offers you more long-term protection. Whether you work for yourself or as an employee, an individual disability insurance plan can be tailored to your unique requirements and allow you to keep a larger portion of your earnings. Additionally, your benefits are regarded as tax-free income because you pay the premiums for an individual plan.
Disability insurance is a solution if you’re…
- If you are a self-employed person, a small business owner, or an employee without a group insurance plan and you need to safeguard your earnings or company property.
- Has a government plan that pays for necessities rather than long-term medical expenses.
- A single parent on a single income who has dependent children.
Do you want to continue investing for your retirement after you stop working? - Making mortgage payments but not wanting to purchase mortgage insurance.