How does disability insurance work in Canada?
Disability insurance offers coverage for a portion of your income if you become incapable of working due to an injury or illness. In other words, the insurance company will pay you a certain percentage of your monthly wages, which helps you cover your expenses and as well as prepare for the unexpected and protect yourself and your family. Some companies pay if your injury lasts for a long time, while others will offer coverage only for a short term, i.e., right after an incident. If you are thinking about applying for disability insurance, you have found yourself in the right place. In this blog, we discuss the nitty-gritty of disability insurance, how many types are there and what are its benefits. Read on!
Varieties: How many types of disability insurance are there?
There are several types of disability insurance available in the market and the factory that categorizes them is the duration of the policy. In the following section, we summarise different categories of disability insurance policies available in Canada. Have a look
- Long-term disability insurance: Long-term disability insurance, or LTD, replaces a percentage of your lost earnings over an extended period. The policy benefit period may continue anywhere from a year until you reach the age of retirement and the monthly payment can equal up to 70% of your total monthly earnings. There are two types of LTD policies:
- Own-occupation disability insurance: Identifies a disability as a lack of ability to perform your usual job. This policy pays benefits even if you can perform a different job.
- Any-occupation disability insurance: This only pays benefits if an illness or injury stops you from providing value in any occupation for which you are reasonably suited. You should know that this type is tougher to qualify for and is hard to prove. However, it costs less than its counterpart.
- Mortgage disability insurance: If you cannot work due to injury or illness, LTD insurance may provide coverage for your mortgage payments. This type of insurance is specific to mortgages and can be purchased to protect you from a prolonged absence.
- Supplemental disability insurance: This type of insurance will help bridge the financial gap between benefits provided by an employer-sponsored disability insurance policy and the overall cost of living while disabled. In other words, it will come in to cover your extra expenses (things that are not covered by your current employee disability policy). A disability insurance broker would suggest this type of policy when you know you’ll be facing a lot of costs and have a good feeling that your employer’s disability check won’t be enough to cover them all.
Benefits of disability insurance
There are several advantages to having disability insurance:
- Financial security: Disability insurance provides financial support to individuals who are unable to work due to a disability. This can help to cover basic living expenses, such as rent or mortgage payments, groceries, and other bills.
- Peace of mind: Having disability insurance can provide peace of mind knowing that you have a safety net in place in the event that you become unable to work due to a disability.
- Protects against lost income: Disability insurance can help to replace lost income if you are unable to work due to a disability. This can be especially important for individuals who rely on their income to support themselves and their families.
- Offers flexibility: Disability insurance policies often allow policyholders to choose the level of coverage they need, as well as the length of time they want the policy to be in effect. This allows policyholders to tailor their coverage to meet their specific needs.
- Government programs: In Canada, disability insurance is also available through government programs such as the CPP and QPP. These programs provide financial support to individuals who are unable to work due to a disability and have contributed to the plan through their employment.
If you have made it till here, we hope that this blog has been useful and you now have a better understanding of disability insurance. For more topics like this, contact and follow us.
