Disability Insurance

Doesn’t the government take care of that?

Thankfully we live in a great country that provides everyone with some disability coverage.  Employment Insurance (E.I.) is something that every employee pays into.  It offers some coverage.  However, it only lasts for 119 days and then you are on your own.  CPP also has a disability component to it, but the definition is fairly narrow and the amount payable is usually quite small.

So where does that leave us?

Some employer sponsored health plans offer short and long-term disability coverage.  If you’re lucky enough to work for one of these employers you may be fully covered.  Most, but not all, union jobs offer some kind of coverage for disabilities.

The largest sector of the workforce that purchases private disability coverage is the self-employed.  Anyone that works for themselves will need to make arrangements to get private coverage.  The majority of self employed individuals don’t pay into the EI system (although it has now become an option for some).  Even at that, EI only pays out for a maximum of 4 months.  In the event of a long term disability; a self-employed person can find themselves in real trouble.

So what kinds of plans are available?

The list is endless, so the best thing to do is to talk to an advisor.  Just to give you an idea, below is a list of some of the common plan types:

-Accident only

-Non occupational

-regular occupation

-any occupation

-own occupation

-guaranteed non-cancellable

-30 day waiting period

-60 day waiting period

-90 day waiting period

-step up plans

-return of premium plans

And others…

The number one thing to be concerned with when it comes to purchasing disability coverage is the wording of the policy.  This is where the advice of a professional is needed.  The words “own occupation” and “regular occupation” may sound the same but there is a big difference.

The premiums for disability policies are based in a large part on the definition of disability found in the policy; the better the definition, the higher the premium.

An “accident only” policy will cost far less than a policy that pays out regardless of whether the disability is the result of an accident or an illness.  These are all things that an experienced advisor can help explain.

Many self-employed individuals can get coverage through an association or set up their own employee benefit package that has a disability component built in.  The main thing is to get something in place.  Many people get caught up in the dizzying amount of choices and in the end do nothing.

“If you had a machine in your living room that made $50,000 a year would you insure it?… You do, and you haven’t.”

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