What would happen if you were suddenly disabled in some way, and unable to continue your regular work or activity? What if you no longer had an income to meet ongoing expenses? How would this loss affect your dependents?
Disability strikes far more frequently than premature death. Temporary or long-term disability can happen at any age. It can come suddenly from an accident, or severe mental or physical illness, or develop over time. A third of all people now aged 35 will be unable to work for at least six months before reaching age 65.
Having adequate disability insurance is crucial. It can mean the difference between low-income future employment, and having the funds needed to prepare for a new career. Your family can be financially ruined, or financially secure.
Adequate disability insurance should be a part of your financial plans, for yourself and for your family.
Close to eight million Canadians have disability insurance coverage through group plans, often through work. However, many people are not covered adequately, and some are not covered at all. There are various limits in group policies. The plan may pay only a percentage of your gross salary, or it may have a maximum payout that doesn’t meet your needs. It may only cover your inability to perform “any” work, rather than your “own occupation,” or have a restrictive definition for partial disability.
Group plans also generally terminate when you leave an employer for any reason. This can be a major cause of concern for many Canadians. Even if you start a new job right away, you may have to wait several months to join your new employer’s plan (assuming there is one).
Some employers offer “top-up” disability insurance policies to add to the standard coverage provided in most group policies. These are suitable for those who need more extensive coverage. However, you should check closely to determine how a top-up policy will affect your group plan benefits.
Nearly 2.3 million Canadians, or almost 17 per cent of the total workforce, are now self-employed, and that number is growing rapidly. Provincial workers’ compensation programs or the federal employment insurance program provide basic disability coverage. However, these plans provide limited coverage, with relatively low benefits. Most self-employed people need additional income protection insurance. Older self-employed persons may find it difficult and expensive to obtain individual disability insurance. It’s obviously better to buy such a policy when you are younger.
What is a disability?
Look carefully at how your policy defines a “disability.” The best policies, and the more expensive ones, offer “own occupation” or “regular occupation” coverage. In these policies, disability is defined as being unable to perform the duties of your usual job. People in professions demanding special education or experience should look for this type of policy.
Under some policies, you are disabled only if you are unable to work at any job for which you are qualified by education, training, or experience. This is an “any occupation” definition. The least comprehensive policies cover only “total disability,” or the inability to work at any job at all.
Accident or illness?
Some policies cover disability arising from accidents or illness. Some will protect you only from injuries and not illness. Check that you are covered both on the job and in your leisure hours.
Many self-employed people run into affordability problems when they try to arrange disability coverage. As the policies become more comprehensive, they also become more expensive. Your insurance advisor can help you find a policy that will adequately protect you and your family.