Disability Insurance
What
is it?
If your ability to work is impacted by injury or illness, Disability Insurance will provide a monthly benefit until you have recovered and are able to resume your responsibilities. Some policies will pay you a benefit until you turn 65 if you remain disabled.
While under the care of a physician, you will have to wait a period of time between the incident causing you to stop working and receiving benefits. After satisfying this elimination period1, you will receive monthly benefits for as long as the benefit period2 you choose.
Many disability contracts will provide partial benefits if you try to return to work but are unable to work full time or if your monthly income is still impacted by the injury or illness.
Why
is it important?
Being injured or ill is difficult on its own - not being able to work and bring in an income can make the situation feel overwhelming.
Having a policy which guarantees you will receive an income each month while you are unable to work gives you peace of mind knowing that you and your loved ones will be able to maintain your lifestyle until you recover.
While things like Workers Compensation3, Employment Insurance4 and Canada Pension Plan5 can all provide assistance, qualifying for these programs is not guaranteed and the length of time you can receive benefits varies.
Things to know
Maximum coverage
Protecting all of your income with disability insurance is not possible (generally 80% of your income is the most that can be insured). The sources of your income must be provided via tax receipts or financial statements in order to be insured.
Occupation classes
Insurance companies classify each occupation with a ranking from 1 to 4 based on the type of work activities normally undertaken. Occupations with a higher chance of injury (based on previous claims experience) are given a lower rank and subsequently charged more for coverage.
- 1. The Elimination Period can be as short as 30 days or longer than 120 days. Shorter waits will result in higher premiums because you will be able to claim more often.
- 2. Benefit Periods can range from 1 year, 2 years, 5 years or up to age 65 depending on the company and occupation you work in.
- 3. Workers Compensation only protects you if the illness or injury was work related.
(see https://www.worksafebc.com/en/claims/benefits-services/determining-eligibility) - 4. Employment Insurance has a maximum benefit period of 52 weeks.
(see https://www.canada.ca/en/services/benefits/ei/ei-sickness/after-applying.html) - 5. Canada Pension Plan defines disability "a medical condition that is severe and prolonged. Severe means that you have a mental or physical disability that regularly stops you from doing any type of substantially gainful work. Prolonged means your disability is likely to be long-term and of indefinite duration or is likely to result in death."
(see https://www.canada.ca/en/employment-social-development/programs/pensions/reports/disability-benefits.html)