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Disability Income Insurance
Protect your paycheque
When you can't, disability insurance functions. If an illness or accident prevents you from working, it might provide you with monthly income free from taxes to assist cover expenditures.
What Is Disability Income (DI) Insurance?
Disability Income insurance is a type of insurance policy that provides income replacement benefits to an individual in the event that they become disabled and are unable to work due to illness or injury. The purpose of DI insurance is to provide financial support to an individual in the event that they are unable to work and earn an income due to a disability, allowing them to maintain their lifestyle and pay for essential expenses.
It can give you a tax-free monthly payment to help replace your income and cover your expenses if an illness or injury keeps you from working.
Even while a handicap is frequently obvious to the unaided eye, not all disabilities are. A mental health condition or chronic discomfort may also be considered disabilities.
How would you cope with a disability?
- Only 47% of self-employed workers think they’d be able to cover their expenses while off work.
- Half of Canadians would have to take out a loan or sell their home within six months of going off work.
- 1 in 4 Canadians couldn’t scrape together $2,000 to deal with an emergency.
- 45% of Canadians between the ages of 35 and 49 have no emergency savings.
How does it work?
- Choose the amount you want and add optional benefits to customize your coverage.
- Pay your monthly premium.
- File a claim if you become disabled.
- Receive your monthly payments when the waiting period ends. The waiting period is the number of days from the date you’re disabled until the benefit start date.
- Your payments stop when your benefit period ends or you return to work.
How much does it cost?
Premiums often range from 1-9% of your salary, but each case is different. Here are some factors that can affect cost:
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Coverage amount
The more you’d like to receive, the more it will cost.
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Benefit period
It’ll cost more the longer you want to receive payments.
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Waiting period
Your premiums will be less expensive if you’re willing to wait longer to receive payments.
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Age
Disability insurance may be less expensive when you’re young.
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Health
Your costs will be lower the healthier you are.
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Occupation
If you have a dangerous job, your premiums can be higher.
Why do you need disability insurance?
It’s more common than you think
Up to 40% of Canadians become disabled for 90 days or longer before age 65.
Replaces most of your paycheque
Potentially receive up to 80-90% of your take home pay.
Protect your retirement savings
Disability insurance can help you meet your financial obligations so you may be able to avoid dipping into your retirement savings.
Types of Disability Income Insurance
Short-term disability insurance
This type of insurance provides benefits for a short period of time, usually between three to six months. The waiting period is typically shorter than with long-term disability insurance.
Long-term disability insurance
This type of DI insurance provides benefits for a longer period of time, usually until retirement age, if you are unable to work due to a disability. The waiting period is usually longer than with short-term disability insurance.
Own-occupation disability insurance
This type of DI insurance provides benefits if you are unable to perform the duties of your own occupation, even if you are able to work in a different capacity.
Any-occupation disability insurance
This type of DI insurance provides benefits if you are unable to perform any occupation for which you are reasonably qualified based on your education, training, and experience.
Group disability insurance
This type of DI insurance is typically offered through an employer as a group benefit. Premiums are often lower than for individual policies, but the coverage may be less comprehensive.
Individual disability insurance
This type of DI insurance is purchased by an individual and can provide more comprehensive coverage than group disability insurance, but premiums are usually higher.
CRITICAL ILLNESS INSURANCE V/S DISABILITY INSURANCE
Critical illness and disability insurance have some similarities that may help you and your family through turbulent times due to health problems, but they function differently and offer solutions for different financial needs.
Disability insurance provides monthly payments that replace part of your income if you are unable to work due to injury or illness. This insurance covers your living expenses and allows you to maintain your standard of living while you are disabled or for the period you choose with your insurance.
Acute illness can lead to unexpected expenses which can affect your long-term savings. Disability insurance only applies to meet your lifestyle expense. Critical illness insurance provides an immediate lump sum in case of diagnosis of one of the critical illness conditions covered by the insurance policy. A lump sum payment can be used at your convenience, such as medical expenses for illness or nursing care for family members.
Many ill people can continue to work but are not eligible for disability insurance benefits.
