Disability Insurance (DI) is an income replacement for when you are unable to work due to illness or injury. It transfers the financial risk from you to the insurance company so that you may maintain your lifestyle while disabled.
Being disabled can be a disastor for most people:
Your current and future income ceases
Your expenses continue
Benefit amounts are directly related to income and capped at an All Source Maximum. (How much income can you prove)
In order to purchase DI insurance, you must already have or be in the process of applying for Life Insurance.
The owner of the policy does not need to be the insured. One example of this would be a corporation owning a policy for their employees.
DI insurance is a partner to Critical Illness Insurance, not a replacement.
Causes and Average Duration of disability
Canada Life reports that if you have a disability that lasts 90 days, the average disability claim lasts over 3 years.
Manulife reports the following causes:
Musculoskelatal (26%)
Mental Disorders (19%) (includes major depression, bi-polar)
Accidents (17%)
Nervous System (11%) (includes MS, Alzheimers, Parkinson’s)
STD is only available as part of a group plan. They generally provide benefits for up to 120 days where EI is not available.
Long Term Disability
These plans are available to Individuals as well as group plans.
LTD Variables
Elimination period – which is the number of days before the disability benefit will start to be paid for.
30, 60, 90, 180 or 730 days, with the highest cost for the shortest elimination period, e.g. 30 days.
Benefit period – this is the duration they will pay a claim once the claim has been approved.
Options are 2, 3, 5, 10 or to age 65, with to age 65 the most popular.
Injury only, or injury and sickness – the best plans will pay a benefit whether you are disabled from an injury, or a sickness, e.g. heart attack, however some people may not qualify for sickness due to a preexisting condition.
Off the job vs. 24 hour – some plans allow you to save money by choosing to only protect your being injured while not at work, the rationale being while on the job, you would be covered by Workers Compensation (WCB). The problem with this is WCB is notorious for either delaying payment, or just not paying at all, so a 24 hour plan is worth considering.
Regular Occupation or Any Occupation or Own Occupation.
Unable to perform substantially the duties of their occupation (Regular)
Unable to perform any line of work (Any)
Unable to perform the particular duties of their own occupation (e.g. Surgeon, Lawyer, certain Engineers) (Own)
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