Disability Insurance – Protecting your greatest asset

Why disability insurance?

We get this question often.  The truth is that disability insurance is one of the most important types of insurance available.  After all, it protects your greatest asset; your ability to earn an income.  

Unfortunately, government sponsored programs such as CPP and EI just don’t provide the level of disability coverage that most of us would need in order to maintain our current standard of living in the event of a disability, especially if you’re self-employed.  

Who needs disability insurance?

  • A graphic designer who is battling depression
  • A mechanic who needs weeks to recover from a car accident
  • A professional sales person whose strength and energy is depleted by chemotherapy
  • The owner of a software company who needs time away from the office to recover from a heart attack
  • An electrician who breaks his arm while skiing and can’t work for eight weeks

Nobody wants to consider the possibility of being disabled for any length of time. But these things happen. Disability insurance can provide income replacement benefits to business owners and employees alike, at a time when they need it most.  Regardless of the cause, injury or illness, if you are unable to work, benefits are payable based on the specifics set out in your contract.  

5 Key Elements of a Disability Insurance policy

Every disability insurance policy is different. The coverage that’s right for you may depend on your occupation, your income, your health and your budget. 

Consider these 5 Key Elements of a Disability Insurance policy when evaluating your options:

  1. Monthly Benefit Amount – disability benefits are typically paid out monthly in the event of a claim. The amount of coverage available under most policies will depend on your employment income. For example, Long Term Disability (LTD) coverage from your employee benefits plan typically replaces about 2/3, or 67%, of your earned income. Beware of coverage maximums, especially if you’re a high income earner. If your coverage is capped at a certain limit, you could be left underinsured. In this situation you may wish to consider an individual disability insurance plan which tends to provide more customization. 
  2. Waiting Period – the waiting period (aka elimination period) within a disability insurance policy is the length of time that the policyholder must be disabled before benefits become payable. Generally speaking, the shorter the waiting period, the more expensive the coverage. Considering that Employment Insurance benefits provide coverage for the first 4 months of a disability, many choose a 4 month waiting period for their group or individual disability insurance plan. 
  3. Benefit Period – the length of time for which monthly benefits are payable in the event of a claim. Commonly selected benefit periods include 2 years, 5 years and “to age 65”. When choosing a benefit period, consider the fact that the average length of a disability claim in Canada is 2.9 years. 
  4. Definition of Total Disability – meeting the definition of disability is the only way to have a claim approved and receive payments under a disability insurance policy. As a result, the strength of the definition of disability arguably dictates the value of that policy. Here’s a quick explanation of the 2 most common definitions of disability:
    • a. Regular Occupation (referred to as Own Occupation under an employee benefits plan)– 
    • b. Any Occupation – the weakest definition of total disability, Any Occupation states that you are entitled to benefits if you are unable to do your job, and you are unable to do any job for which you are reasonably suited. 
  5. Future Cost – we’ve all been there before. You buy something today under the impression that you’ve landed a good deal. Next thing you know, that purchase turns out to be costly to maintain or increases in cost over time. The same is true for disability insurance. As a rule of thumb, Cancelable or Renewable disability insurance contracts are subject to changes in price based on your age, occupation etc. If you’re looking for a plan that offers a fixed cost, then an individual Non-cancelable disability policy is the one for you. Non-cancelable policies can be more expensive up front, but are typically worth it in the long run. Plus, they often offer superior coverage. 

The fact is that we insure a lot of things that are arguably less valuable than our ability to earn an income. Contact us today to learn more about your options for corporate or personal disability insurance protection.  


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