What is Disability Insurance | Everything you Need to Know about Protecting your Income
Don’t despair, disability insurance doesn’t seem so scary or complicated. Although some of the issues related to disability insurance in Canada may seem complicated, it is very straight-forward in its core. Explain to us.
In short, disability insurance
If you earn one and can't afford to live without it, you want disability insurance. Originally it was designed to replace the damage you may have caused by a long-term or short-term illness or injury that prevents you from returning to work right now. However, you cannot replace 100% of your lost wages. It may seem silly, after all, if you are willing to pay a premium to insure 100% of your income, why wouldn't you be allowed to? The fact of the matter is that it creates a very tempting fraud situation. The risk of people insuring their income and then falsely claiming disability is also very high for insurers, so they cap 85% of your coverage limit.
Individual Disability Insurance vs. Group Benefit
Group benefits are insurance coverage provided by your employer. Your group policy may include medical benefits such as dental or optometry coverage, as well as disability insurance. Premiums for these policies are deducted from your regular salary so you don't have to worry about paying yourself.
Individual disability insurance is insurance that you purchase on your own contract through a supplier, usually medium to large sized insurance companies. As well as getting quotes through insurance brokers, separate coverage can also be purchased by comparing rates. Brokers can review and compare all policies from multiple providers that meet your needs and help you decide the best one. The best part is that brokers do this for free because they end up selling their products to any supplier and they receive their commissions, so they don't have to pressure you and have no fixed interest from any particular insurance provider.
Remember, you can get group benefits, or individual disability insurance, or a combination of both if that's not enough, but these may not fully exceed 85% of your total income before you become disabled.
In fact, 85% is in your best interest.
Maximizing your disability insurance coverage in Canada is best for you If you want to know, review the example below.
Say you make 4,000 a month and your group benefits pay only 50% disability benefits, which means your disability lasts longer but you can only end up with an income of 2,000 2,000 per month. It can be months or years. However, if you get an extra 35% coverage from a private insurance provider for the benefit of your group, you are getting 3, 4,400 per month, and so you will lose normally $600 a month on your normal salary.
Familiarize yourself with fine print
Sometimes disability insurance policies have limitations such as the duration of your policy. Your policy under your Group Benefit may only cover you up to two years for injury or illness or it may cover you up to a certain age. It is important that you know the limitations of your policies and what they are. The same is true for individual disability insurance, with the exception of choosing your own policy. Even after providing the kind of protection you want, make sure you choose a good policy that suits your budget.
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