Most people don’t give disability insurance much thought. Some people might not even be aware that it exists. But roughly one-third of all Canadians will suffer a disability that lasts 90 days or more by the time they turn 65, and a surprising number of these disabilities last up to several years or even longer. Other types of insurance sometimes provide coverage, but they have limitations that do not apply to disability policies. Workers’ compensation covers you only if you are injured at work — if you suffer injury when you are not at work you won’t be covered. Unemployment insurance might cover you, but only for a limited period of time. Some employers offer group policies, but benefits through these are often minimal.
If you suffer a disability that makes it impossible for you to work for months or even years, how will you and your family survive? Disability policies offer long-term coverage — an entire lifetime in some circumstances — that other types of insurance do not provide. A typical policy runs only about 1% to 3% of income your income. A disability policy is an affordable way to protect you and your family from financial disaster.
Disability insurance prices are based on:
|As your age changes, so does the pricing for a new disability policy. While you can't change your age, you CAN change other elements of a disability policy to ensure it meets your needs and budget.|
|Females generally have to pay more for disability insurance than males.|
Also called "Elimination Period", this is the time you have to wait from when you are injured until you start to receive disability benefits. A disability policy with a longer waiting period will cost less than a policy with a shorter elimination period.
Think of this like a deductible - you can adjust you monthly premium based on which level of waiting period you choose. Common time frames are 30, 60, 90 and 120 days.
|This is the duration that you will receive monthly disability benefits for, in the event of a longer lasting disability. Common benefit periods are 2 and 5 years as well as 'up to age 65'. Shorter benefit periods cost less than longer periods.|
Type of Occupation
|The way that your occupation is defined in the disability contract is very important, and will influence the premiums a lot. In disability insurance, moreso that life and critical illness, the contract wording is extremly important as to how, when and if policies pay out. Make sure you understand what you're paying for.|
Type of Disabilities that are Covered
|An "injury only" policy will cost a lot less than full protection disability policies. The downside is that it will only cover injuries and not things like mental health conditions. If that's all you want, great. However, we recommend a conversation with an insurance broker so you understand the different options.|
Future Purchase Option(s)
|If you're young and healthy, getting disability in place now makes sense. But what if you anticipate that your income will increase? A policy that includes 'Future Purchase Options' will enable you to increase the benefit amount at a later time when your income has increased.|
Are There Exclusions for Disability Insurance?
Sometimes. With any insurance product, it’s important to understand the benefits and limitations of what the policy covers. During the application or underwriting part, you may learn that conditions you have had in the past are not covered.
What Is a Waiting Period for Disability Insurance?
Yes, all disability contracts have waiting periods, but they will be different. Commons times are 30, 60, 90 and 120 days. This is essentially the time from when you are injured or ill, until the time that you will receive a benefit payment. It’s kind of like a deductible option on car insurance, it’s the part you will cover yourself, until your insurance starts to pay. A disability insurance policy with a longer waiting period costs less than an policy with a shorter waiting period. However, in the event that you need to make a claim, you may need to dip into your savings during that time. Make sure you look for a balance between those.
What is a good amount of disability insurance to have?
Disability insurance is based on how much money you earn as well as your health. It’s different than life insurance in that there are more financial questions in the application.
This is because most companies will allow you to get up to 70% of your income (remember that it’s a tax-free benefit though!).
What If I Have A Pre-Existing Condition?
Virtually all policies exclude pre-existing conditions. In some cases you might be required to undergo an examination by a doctor before an insurer will write a policy. If you have significant pre-existing conditions you still might be able to get coverage, but issues related to the pre-existing condition will be excluded
TIP: An excellent time to buy a disability policy is while you are healthy and YOUNG. It’s easy to get coverage then. Don’t wait until you have suffered a disability before deciding that you need a disability policy
How Much Disability Coverage Should I Get?
You can buy any amount of coverage that you want, up to your earning capacity, but how much is recommended? Typically the average family needs about 70% of their income to cover their essential expenses. If you can afford more coverage than this, great! If your budget is limited and you are having trouble paying for this much coverage, the waiting periods and maximums discussed about can be set to save you on your monthly premiums. A longer waiting period or a cutoff that is set at a lower age will reduce the premiums. Skilled and experienced agents such as those at Dickson Insurance know the ropes on how to get you the coverage you need at a price you can afford. In any case, a policy that provides less than the optimal level of protection is far better than no coverage at all.
Do I Have To Pay Taxes on Disability Payments?
If you make a disability claim and receive payments, do you have to pay taxes on the money you receive? No (phew).
If you pay the entire premium yourself, payments are not taxed. Thus, if your coverage is 70% of your income, you will actually end up with more than 70%.
How Does Personal Disability Compare to Government Plans?
Private/personal policies provide greater benefits and broader coverage. Relying solely on other options has much bigger risks.
What’s the bottom line?
Don’t wait until you become injured to realize how important disability coverage is. A disability, even one that only lasts a few months, can cause financial hardship for you and your family. Private disability policies are affordable and can provide broad coverage.
Contact Dickson Insurance for a free, full explanation of what you can get, at a price you can afford.
Disability is more common than you think. Do you want to learn more about the realities and risks for Canadians?