Disability insurance provides coverage for unexpected illnesses and accidents that may make you unable to work and thus without a source of income. Most disability insurance policies will cover 60% to 85% of the income you lose until a maximum amount is reached.
To be eligible for this benefit, you should be temporarily unable to work or have become permanently disabled due the injury or illness. Employers offer disability insurance to their employees. But you too can get your own insurance through either an insurance agent or a broker of insurance. Self Employed Persons can have disability insurances that cover the cost of their business expenses if they should be unable to work due to an illness or injury.
What to consider when buying disability insurance
Here are some things that you must consider while purchasing disability insurance.
- Ask your employer to see if they are already providing you with disability insurance coverage.
- Shop around when looking for private disability insurance, compare quotes, prices premiums, deductibles and different plans from different insurance providers.
- Your union, guild, or professional association or alumni association can together buy a group disability insurance. This is beneficial because premiums on group policies increase with your age. This, however, will require a renewal of policy after every few years.
Short-term disability insurance
A coverage of up to 6 months is provided by short term insurance. This is provided during the time you are unable to work and unemployed due to illness or injury. If your disability insurance provider is your employer, you will have to make a claim through your plan. It is not required of employers to give sick leave but each employer may choose to do so.
For details of rules, regulations and restrictions on sick time and vacation time, you must contact the human resource personnel of your workplace.
If insurance for disability is not made available to by your employer, you can check you are eligible to avail of the sickness benefits of Employment Insurance. To qualify for these sickness benefits you must have used up all your sick leaves provided by your employer. You must also have worked the number of hours necessary to be qualifying for Employment Insurance.
Long-term disability insurance
60% to 70% of your income will be replaced by the long term benefits of your disability insurance. Here is a list of benefits that must be exhausted before the long term benefits of disability insurance can begin.
- You must have stopped receiving the benefits of your short-term disability insurance.
- You must have exhausted all your sick leaves from your employer.
- You must either not be qualified for benefits of Employment Insurance or they must have ended.
Some plans may give you the benefits for up to two years when you become injured or sick to discontinue your job. After the two years are up and you are still not able to return to your job, you may continue to receive the benefits of the disability insurance.
Definition of disability
Disability can be defined differently by different policy providers. Even the same company could have different policies under disability. Some may state that you must join a rehabilitation center or program to help you get back to work. This must be checked with your insurance provider or Insurance agent. You must be sure of how your insurance policy defines the term disability, and which scenarios it will provide coverage for.
If your policy has any occupation plan, it means that you must be unable to work in any job to receive the benefits of the insurance. It means you are unable to perform any duty of a job to support yourself. If you are eligible or able to work in a different job using your training, skills and previous work experience, you can be denied benefits of the disability insurance.
Regular or own occupation
If you have a regular or own occupation disability plan, you will be eligible to receive the benefits of the insurance if you are unable to work in your own job because you are unable to perform the required duties.
This plan entitles you to benefits even if you can work at some other job using your skills, training and work experience. There are plans that do not give benefits if you can work another job or the benefits are reduced.
If you have a group policy, you must be prepared to receive the benefits for only a certain specified period of time. At the end of this time period, 2 to 5 years, the policy may become the “any occupation” type. If you wish for an own occupation plan, you may have to purchase one for yourself. They cost more than any occupation policies.
An “own occupation” plan is more beneficial if you are working in a specialized profession and your income would decrease significantly if you were to work in another profession due to injury or illness.
Other sources of disability benefits
Canada pension plan and the Quebec pension plan also provide benefits if you are unable to work. These benefits can be availed by only those who are not able to work in a job due to a disability brought on by an illness or injury.
Offsetting of benefits
If you receive benefits from another disability insurance plan, it can reduce or offset the benefits you receive from the first plan. Even with multiple insurances, you will not receive more than an overall 60% to 85% of your previous income.
Long term disability insurance benefits reduce if you begin getting disability funds from any other source. Find out how your insurance offsets the benefits.
Disability insurance benefits and taxes
If the premium of the disability insurance is paid for by you, the benefits of the insurance are exempt from taxes. This will help you have funds that match your income before disability. However, if your premium is paid for by your employer, the benefits of your disability insurance are not exempt from taxes. Make sure you know if you qualify for tax credits or dedications as a person with a disability.
What to ask when buying disability insurance
Asking the right questions while purchasing a disability insurance plan is important. Ask your insurance provider or Insurance broker anything or about any Claus in your policy that you don’t understand. We have prepared a list of things you must keep in mind while buying disability insurance.
- You must know the general terms as well as the general conditions applicable to your policy.
- You must know how the policy defines disability as.
- Ask about any exclusions in your policy.
- If there are clauses for pre-existing conditions, be aware of them.
- Make sure you are well-known of how much the policy will cost in premiums.
- Find out if you will be required to pay premiums when you are out of work due to disability.
- Find out how much monetary benefit you will receive each month.
- Ensure you know if those benefits are tax-exempt or not.
- Will your benefits increase with changes in inflation.
- Find out what will be the waiting time before you can receive the benefits of the insurance plan.
- Ask your insurance provider if they provide partial benefits.
- Find out if you can increase the amount of your coverage without having to take a medical exam.
- If you have an individual plan, find out if you can renew the policy without having to provide any additional evidence.
- If you have a group plan, find out if your insurance is provided by an insurance company or is funded by your employer.
- Find out that if your employer declares bankruptcy in the future, will you still be eligible to receive the benefits of the insurance policy.
- Find out if you can continue receiving coverage from your existing policy till you find a new policy when you leave your current job.