What is Disability Insurance?

Disability insurance is a protection plan to replace an individual’s income when they are injured or sick and are unable to work. For example: If someone goes skiing and they break their leg, they will be defined as disabled. Unless they have disability insurance coverage they will lose their ability to generate income. How will they:

  • Pay their mortgage?
  • Make loan and debt payments?
  • Buy groceries and support their family?

If they had disability insurance, it would kick in and start to pay a benefit that would replace their income till they are able to go back to work.

What type of disability coverage is available in the market?

Not all types of disability insurance plans provide the same benefits. In fact most of our clients get us to tailor the plan to meet their specific needs and budget. Here is a general overview of the types of plans available in the market:

  1. Accident Only: This is a policy that will only pay a benefit if the disability is the result of an accident.
  2. Accident and Sickness: This policy will pay a benefit if the disability is caused by an accident or sickness.
  3. Non-guaranteed: A non-guaranteed policy is one where you may need to show evidence of insurability to renew the policy.
  4. Guaranteed: A guaranteed policy does not need any evidence of insurability to renew.
  5. Group or Association plans: These are benefits that are part of an employee or association program.  This is the most common type of disability coverage out there as it may be provided by an employer, but often is inadequate because they have maximums that do not fully replace your income.
  6. Individual Plan:  This is a tailored plan that an individual applies for and can be customized to meet one’s unique situation.

Some people believe that Workers Compensation Board (WCB) is an adequate disability insurance plan that will provide sufficient security to them when needed, but they are often surprised to find that only in fact only 6{a03822e28c5c906589e58caafc71b922ff7b2692d58bfeefe8f12d55f85871c7} of accidents would result in a WCB claim being paid.

Why do you need disability insurance?

According to a study done by the CIDA, the chances that a 30 year old person in Canada would have a disability lasting more than 90 days before the age of 65 can be as high as 65{a03822e28c5c906589e58caafc71b922ff7b2692d58bfeefe8f12d55f85871c7} depending on occupation and gender. 

Combine this with the fact that the average disability in Canada that is over 90 days actually lasts for between 1.5 to 3 years, and it is a recipe for financial disaster if a plan is not in place.  This is where disability insurance comes into play as it is the most affordable way to make sure that when life throws you a curve ball you don’t strike out.

What is more important: your property? your vehicle? or your ability to earn money by being at work?  The table below shows what the stream of income, that is your ability to earn money, is worth to you:

Annual IncomeAge 25Age 35Age 45

As you can see, your most valuable asset is you, so the question is how much do you invest to protect that asset?

Ask yourself this: What will happen if you were unable to work for a period of time? Would you be able to pay your mortgage or rent, buy food, make car payments, make loan payments, pay utilities? The truth is that meaningful financial security comes when you know that even if you are sick or hurt and cannot go to work, you and your family will be taken care of financially.

How can we do this? Take a small percentage of our income and put it toward a financial security plan that includes disability insurance.

Which type of job would you rather have?

If I was given those two options, I know which job I would choose; the one that will make sure that my family and I are safe and secure.  You can make that choice too, click here to start a discussion a licensed insurance advisor.