Disability - Know Your Risk

In this post we review why adequate disability insurance is important and common questions about other coverage and how disability insurance works.

Did you know that over 6.2 million Canadians have a disability that limits their daily activities? It’s important to consider what you would do in the event of an accident or illness that could limit or impede your ability to earn an income.


Who is disability insurance for?

For most of us, our ability to earn an income is our most valuable asset during our working years. Anyone who wants to protect their income or continue to pay bills and expenses should consider this type of insurance.


Business owners who want to protect their business and continue operating their business – either as part of a business succession plan at retirement or to continue generating an income through business activity should also ensure that their current policies are adequate.


What If I Have Group Benefits Coverage?

Even if you have group benefits coverage, at times the monthly income replacement is inadequate. For example, many group insurance contracts include a “non-evidence maximum.” This is the amount of coverage you would be able to get without answering health questions. If you don’t answer health questions, you could be held at this non-evidence maximum limit – even if the group contract states that it covers 67% of your pre-tax income.


If you are a business owner, adequate coverage in the event of a disability is critical to be able to keep employees working and the business operating, or to cover expenses such as rent, salaries, benefits, etc.


Ensure that you understand how your group coverage would work if you were unable to do your job. Many contracts stipulate that you must be totally disabled (unable to work at all), and would only pay for benefits for two years before looking at what other jobs you could do based on your education, training, and experience.


How Does Disability Insurance Coverage Work?

You apply for disability with your health and history of earnings. There are various contract types to consider as well as bells and whistles you can include. But the basic premise is that after a waiting period, the policy would provide monthly income replacement while you are unable to work some or all of the time.


Optional riders vary by insurance company, but some of the popular add-ons include:

  • Get 50% of your premiums back every 5 – 7 years

  • Increase the benefit amount automatically or based on your earnings in the future without the need to answer health questions

  • Cost of Living adjustments

Life can change in an instant, but with adequate coverage, your lifestyle or business can endure an unexpected event.