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Disability insurance can help offer you the protection you need if you are injured or become ill and can no longer work. A freak accident or unforeseen event could impair your ability to work or function for weeks, months, years or even permanently. During the time you take to recover your bills will keep coming in. This coverage can help ensure you have financial means during this time.

The need for this insurance is more common than most realize. It is estimated that about 2 in 5 Canadians become disabled for 3 months or more before they reach retirement age. Below we will provide you with more information about what disability insurance is, why you should consider it, and what it covers. You’ll also receive answers to common questions about this type of insurance.

What is disability insurance?

Your ability to earn an income over your career is one of your most valuable assets. Protecting your ability to earn is vital for your financial security. Disability insurance provides you with financial relief when you cannot work because of an injury or illness. It provides you with regular payments to help replace your income when you cannot earn. Plans cover between 60-85% of your income, subject to a payment limit and for a defined time.

What are the types of disability insurance?

There are two main types of disability insurance – short-term disability (STD) and long-term disability (LTD):

Short term disability insurance

Short-term policies are for individuals who fall ill or are injured and cannot work temporarily. It commonly lasts for up to 6 months, but some pay benefits for up to a year. It may be offered by your employer, but you can purchase additional coverage. There could be up to a 14-day waiting period to receive benefits.

Long term disability insurance

Long-term policies are for people who are unable to return to their job. It kicks in after short-term disability expires. You can receive benefits for 2 to 5 years, depending on your plan. After this time is up, if you can no longer work, you will still receive benefits. A waiting period of a few weeks to several months is common before you receive payments.

How does disability insurance work?

Here is a brief summary of how it works:

Select a policy: Choose plan limits and add other benefits to personalize your coverage.
Pay your premiums: Pay monthly or annually.
File a claim: Open a disability claim if you get injured or become ill.
Approval: Your insurer reviews your claim and approves disability benefits.
Payments: You will start receiving payments after the waiting period ends. Payments will stop when you return to your job, or your benefit period expires.

Should I get disability insurance or critical illness coverage?

There can be some confusion about whether you need disability or critical illness insurance. It often comes down to the details of your specific situation. There are instances when you may need both. They can operate together to lessen the impact of your injury or illness.

Here is an outline of the main differences between the two types:

Qualifications: You receive disability if you cannot work because of injury or illness. You receive critical illness if you are diagnosed with a condition covered in your policy.
Purpose: Disability helps cover monthly expenses whereas critical illness can help pay off medical expenses, your mortgage, and other debts.
Payment: Disability provides monthly income replacement. Critical illness is a one-time payout.
Duration: Disability ends at 65 and critical illness coverage is applicable for as long as you are alive.

What does disability insurance cover?

two deaf and mute hearing impaired people communicating

It covers you for many types of injuries, disorders, and health conditions. They include:

Loss of sight in both eyes
Loss of hearing in both ears
Loss of speech
Loss of use of hands or feet
Mental health
Chronic pain
Neck and back injuries
Muscle and joint disorders
Cancer
Cardiovascular disease
Other accidents and injuries

Speak with your insurance advisor for a complete list of the types of ailments that qualify. What is covered can vary by insurer and policy type.

Do you need disability insurance? is it worth getting?

A sudden loss of income because of a disability can significantly change your financial situation if you do not have coverage. Here are some situations where you should seriously consider taking out a disability policy:

You do not have it through your employer
You have others who depend on you
You have debt
You are in a higher risk job
You want peace of mind

How much does disability insurance cost?

Premiums are based on your annual salary. They are typically 1% to 9% of your salary. Other factors are also considered, such as your age, health, job type, coverage amount, and the duration of payments, should you file a claim. You can reduce your costs by extending the waiting period before your benefits begin.

Compare insurance quotes to assess your options and choose a plan that best meets your standard of living.

How much disability insurance should I have?

a physiotherapy worker with senior client

Determining how much you require is important. It will be different for every individual.

What is your current after-tax income?
How much are your living expenses?
How many people depend on you financially for support?
If disabled, would you be able to take on a lesser-paying position?
Do you have the financial means to continue to pay your mortgage and bills if your income stops coming in?
Do you have savings and investments you can use?

Consider how much you make monthly, your monthly expenses, and how much financial support you would require short-term and long-term. Speak with an advisor to review your options.

How to get disability insurance in Canada

There are four main ways for Canadians to get this insurance:

Government

You will receive basic coverage through certain government programs such as the Canada Pension Plan (CPP), Employment Insurance (EI), or WSIB.

Group plans

You have coverage through your employer or union. The issue with these options is you have little flexibility, it is basic, and you only have it if you are employed with the company.

As part of other insurance

You may be able to add some disability coverage as part of your car insurance, travel insurance, or life insurance plans. These plans have some protection, but it is limited.

Individual plans

These provide you with the most options and flexibility. You can choose limits, exclusions and if you want a non-cancellable guaranteed renewable or guaranteed renewable plan.

Disability insurance FAQs

Should you get disability insurance if you have it through Work?

While coverage through your group insurance plan provides you with some basic protection, it is often not enough. Adding individual protection will boost your protection and both plans can operate for you in unison.

Can you get life and disability insurance together?

Life insurance does not provide coverage for disabilities. They are meant to pay out benefits if you pass away. Disability insurance helps you if you become disabled and cannot earn a living. So yes, you can get these policies together.

Are disability insurance premiums tax deductible in Canada?

No. Premiums are not tax-deductible for individuals or businesses in Canada.

Do I need supplemental disability insurance?

Even if you have some disability coverage through an employer or other source, it is still a good idea to add supplemental insurance. This will increase your level of financial protection and give you peace of mind in knowing you have protection if you are unable to earn a living.

How long does disability insurance last?

It depends on the type of policy and your insurer. Short-term disability lasts from 6 to 12 months. Long-term lasts from 2 to 5 years.

Where can you get disability insurance?

Right here with ThinkInsure. Many of our insurance partners such as Manulife, RBC Insurance, Sun Life Insurance, Canada Life, and BMO Insurance offer disability insurance. Speak with our advisors today to compare your options.

Compare disability insurance quotes

Getting injured or ill resulting in disability can be sudden and unexpected. Disability insurance can ensure you are financially protected if this happens to you. Contact our advisors today to compare quotes.

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