Disability Insurance

Disability insurance provides a stream of monthly income when you are not able to work due to accident or sickness. Monthly income received by you is based on your Gross or Net Income. Few insurers calculate loss of income benefit based on gross income while most insurance companies calculate the amount of benefit you will receive while you are disabled based on your net income.

Do I Need Disability Insurance?

Did you know that the chances of a person becoming disabled for 90 days are lot higher than dying?

Consider! If you don’t go to work tomorrow due to disability, where will the income come from to make  mortgage payment, car loans and credit card payments, food, kids clothing, school supplies, utilities, phone bills, etc.

Disability insurance will provide you monthly income to meet your expenses and you will have better chance of faster recovery because you will have less to worry about.

What Should I look for when buying Disability Insurance?

Disability insurance is complicated because of different definitions of disability. Exclusions, occupational classifications, and options vary between insurance companies.

There are three main definitions of disabilities.

  1. Own Occupation

Own Occupation disability is defined as not being able to perform usual duties of a professional occupation even if you are still able to work in other areas of your expertise or jobs.

For example, a surgeon cannot perform an operation because of developing arthritis in his hand. He is able to do everything in his daily life but his income earning is jeopardized because he is not being able to perform surgery. He may be considered disabled even if he is able to work as consultant and make an income from his new job.

His insurance policy will pay part of his lost income due to the sickness or injury.

A computer programmer due to high work pressure may develop deprssion and is unable to concentrate on the job. He is not able to do his job because of mental nervousness. He will get paid from his disability policy if his policy has “own occupation” disability clause.

  1. Regular Occupation 

Regular Occupation disability is defined if you are not able to perform your essential duties and you are not able to work in other reasonable occupations based on your skills and education. You are under medical care of a qualified physician.

  1. Any Occupation

Any Occupation disability is defined by a stringent definition where there is a “total disability. You cannot perform the regular duties of your job and you are not able to work in any other occupation. This type of policy usually has 2 years of Own Occupation coverage thereafter any occupation.

Most group insurance policies have two years own occupation only.

Any occupation disability definition will apply after two years benefit is over.

For example, a disabled roofer will get paid for the first two years for not working in his regular occupation, but then thereafter has to find another job because his policy has an Any Occupation clause.

Whether claim is going to be paid out or not will depend on the disability definition in the policy. You certainly must take a very close look in the words used for defining disability while looking for disability insurance contract.

How long does disability benefits pay out? 

Like term life Insurance policies, disability policies are also available for different lengths of time. There are options to buy loss of income benefits for two, five, and ten years, and also an option for a policy to cover to age 65.

For example, you become disabled because of injury or sickness and you have two years income benefit. The insurer will pay monthly income for two years only for any one disability and income benefits will stop after two years.

Most disability policies have waiting period of at least 30 days. Income benefit will start after satisfying the waiting period of 30 days. You can lower your premium by choosing a longer waiting period of 60, 90 days or longer.

Some insurance companies have better plans for blue-collar workers with benefits starting from day one while other insurance companies offer a good insurance contract for professionals and other white-collar workers.

Industrial Alliance, RBC Edge programs offer good plans for blue-collar workers. RBC, Manulife, Canada life, and Desjardin Insurance offer excellent disability policies with Own Occupation definition for professionals and white-collar workers.

Here is another example. You are owner/operator truck drive and become injured due to an accident or while working on your truck and have a $2000/month income benefit in your policy. The total disability benefit has a “Regular Occupation” clause.

Your insurer will pay you for the first two years if you are not able to drive because of the injury. After first two years, your insurer will pay if you are not able to work in any other occupation and you are under the care of a qualified doctor.

When you are buying an accident policy beware of restrictions and exclusions in the policy. Most soft tissue injuries are covered for only a very short period of time and disability insurance for blue-collar occupations has some common exclusions.

If you are an employee in the armed forces or a pilot, becoming injured while driving a vehicle under influence of alcohol or drugs is excluded from coverage. Self-inflicted injuries are common exclusions in disability insurance contract.

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Call  (905) 568-1676 or email at inder_madan@sympatico.ca to inquire about  disability  Insurances