How Disability Insurance Works in Canada

Disability Insurance Works in Canada is very important, it protects you and your family if you are unable to work. This usually happens as the result of an accident or illness. When it does happen, you want to be prepared for it and know how it works. If there is something you do not follow, let us know in the comments bellow so that we can find a solution for you.

Disability Insurance is only part of full financial security

While you may be able to pay for home repairs, or replace an old car if it breaks down, what happens if your ability to pay for these things changes?

This is where disability insurance comes in. These policies are designed to provide coverage when a person’s ability to make ends meet is affected.

No one knows what type of personal accident is waiting around the corner.
Having the peace of mind that you and your children will be provided for if such a tragedy takes place is crucial to secure your financial future.

What is Disability Insurance?

Disability Insurance is a form of insurance that helps to provide income to the insured party in case they cannot work due to an injury, illness, or other circumstance. Disability insurance is the most important kind of insurance almost everyone should have. The bottom line is that if something were to happen and you became disabled, the money you’re making is going to be replaced (by your disability insurance provider).

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Disability insurance helps replace part of any lost earnings due to an injury or illness.
It is an often-overlooked component of a comprehensive life insurance strategy.
If you are wondering how to get disability insurance, often there are public programs available for people in need, as well as countless private policy options.

How Does Disability Insurance Work?

As you may be aware of insurance policies that deal with specific aspects like your health and or life, a disability insurance plan kicks in when you lose income due to a disability.

Disability insurance often comes with strict terms and conditions that need to be met for the policy to pay out.

Essentially, you as the policyholder pay a monthly premium. The policy pays a monthly benefit when a certain disability criterion is met and you are unable to earn an income for a specific amount of time.

Disability insurance is a great way to cover your income earning ability during a stressful live event.

Some factors that affect the price of disability insurance includes:

  • The amount of income you are replacing
  • The duration of time in which the benefits are paid out
  • The severity of the injury/illness and your overall medical history
  • The downtime between loss of income and the start of your benefits

The Disability Insurance Underwriting Process

If you are susceptible to the risk of disability or major illness, this will play a big part in determining your monthly premium.

You will go through an underwriting process where the insurer tries to understand your risk to the insurance company.

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There are several factors insurance companies look at when assessing your risk of disability such as:

Age: Naturally, the older you are the more likely you are to get sick, and this can increase the cost of your insurance plan.

Gender: Since women tend to file for a higher number of claims and for an increased duration compared to men, they may pay up to 40 percent more in premiums.

Medical History: Many things are taken into consideration when it comes to health, such as chronic illnesses, tobacco use, height, weight, and results from blood and urine tests.

Job Occupation: People with demanding jobs like construction workers and police officers may pay higher premiums. It all comes down to how dangerous and demanding the job is and how difficult it would be for you to return to work after illness or injury.

Annual Income: Since disability benefits are based on a percentage of your income, the more you earn the more, you will end up paying and getting in return.

Location: Your cost of living and regulations could be taken into account

What are the Different Types of Disability Insurance?

There are 2 widely available types of disability insurance that most people opt for in Canada:

Long Term Disability Insurance: This option is ideal for people who are at risk of an extended disability. Long term disabilities can last from several months to even permanent disabilities.

This insurance payout usually lasts for a maximum time period, which can be several decades or a specific age (eg. Up to age 65)

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Long-term disability coverage tends to offer much better protection, but also costs more money.

Short Term Disability Insurance: These plans are usually provided through your employer benefits plan and help cover lost income resulting from a temporary injury or illness.

They can cover up to 60 percent of your lost income and can last for up to 6 months of pay.

Is Disability Insurance Worth it?

Nobody can predict when an accident might occur. It is important to ask yourself if your family would be able to cover their financial needs if an accident or disability were to occur.

Disability Insurance is very important for anyone who makes their living with their hands. I’ve had a disability before so I know how costly it can be without having disability insurance. it’s always in the back of my mind to get Disability Insurance just in case I ever need it. Having a short term disability insurance is always important when you have a family that relies on you financially.

These are questions that everyone must ask themselves as the answer depends from person to person.

You can speak with a qualified life insurance broker to help determine your disability insurance needs. It is better to be prepared for the worst and hope for the best.