On average, 1 in 3 Canadians will become disabled for more than 3 consecutive months before retirement. For those who experience disability, the average time to recover from it is almost 3 years! Some would say that their greatest asset is their ability to earn an income, but with average terms of disability lasting over 3 years, imagine what kind of impact injury or an illness could have on your family and your future plans.
If you are injured on the job, you may already have coverage through the Worker's Compensation Board via your employer. However, compensation for injury through Worker's Comp. is a very difficult thing to obtain. Only about 8% of disability claims made to the Worker's Compensation Board are actually approved and paid. In other words, 92% of those filing for disability through Worker's Comp. are turned down and left to find other means to support themselves. This stresses the importance of having an independent disability insurance program to supplement your Worker's Comp. coverage.Contact us to learn more or get an insurance quote!
Disability Insurance Features and Costs
There are many types of disability insurance plans available in Canada, and with so many policies and options to choose from, it may become difficult to differentiate between policies. The following is a breakdown of some of the most common features found in disability insurance policies and how they work.
- How the benefit is paid: Depending on how the policy is laid out, you may be paid a benefit on a monthly or weekly basis. Most policies pay up to a maximum of 2/3 of your previous income.
- Partial disability and splitting the difference: Most policies differentiate between being able to work in your occupation and being able to work at all. Policies that look at changes in occupation will help you split the difference in wages between a new occupation and your previous one. Similarly, companies that consider partial disability will often look at the disability in terms of "What percentage of your ability to work is lost?" and will adjust the payout appropriately.
Example: You were a truck driver making $100,000 per year, were injured and were unable to continue in that line of work. But you are still able to work as an office clerk for $45,000 per year. Some policies would split the difference (up to 2/3 of your previous income) and give you about $21,500 per year.
- Length of elimination period: For most policies, there is a period of time that you must be considered disabled before the commencement of the disability pay. This is called the waiting period or elimination period. This period can be between 30 and 120 days, and the length of the period has an effect on the cost of the premiums. Longer elimination periods generally yield less expensive premiums.
- Danger of occupation: Higher risk occupations are harder to get coverage for. For people working in fishing, lumber, aviation, sanitation and other higher risk occupations, independent disability insurance coverage can be fairly difficult to obtain. But although many of the risk assessment practices are becoming standardized across the industry, there's no reason to give up if you're having trouble getting coverage from disability insurance companies.
- Exclusions for pre-existing conditions: Many policies put in effect exclusions for pre-existing medical conditions. What this means is that if a person has a history of a medical condition and this condition leads to them becoming disabled, in some cases they won't be eligible for a disability payout. This isn't as scary as it sounds though, as many insurers will only have a pre-existing clause in force for 2 years. After which, regardless of the disability type you may be eligible for a payout.
The Canada Pension Plan Disability Benefit
If you've made contributions to the Canada Pension Plan, you may be eligible for a government disability payout from CPP Disability. The CPP disability benefit is a taxable monthly payment made available to anyone who has contributed a certain amount to the pension plan. The benefit is only available to people under the age of 65 with a severe, prolonged disability that prevents them from working at any job.
Upon becoming disabled, to receive the benefit you must apply for CPP Disability with Service Canada. The application process can take about 4 months, after which HRDC's medical adjudicators will make a decision about whether you qualify for the CPP Disability benefit. In 2008, the average monthly benefit for those receiving the CPP Disability benefit was about $800. Every year this amount is increased to offset any increases in the cost of living.
Disability Insurance as you Approach Retirement
As you approach the age of retirement, many disability insurance companies will allow you to convert your policy to a long term care insurance policy. Long term care insurance is a valuable type of insurance that allows you to get assistance with day to day living activities. Nearly 50% of all Canadians aged 65 or older require this type of assistance, so having a long term care insurance policy in place is pivotal in ensuring that any day to day assistance you require doesn't eat away at your estate.
Getting a Quote on Disability Insurance
Because of the nature of disability insurance, getting a quote and proceeding through underwriting is a fairly involved process. Both financial and medical documentation are often required by the broker and underwriter to determine risk factors and potential losses in income due to disability. For the initial quotation, not a lot of information is required. If you decide to buy a policy, the underwriting process will require a little more information from you.
For financial information, 2 years of history are usually required. Your T4 forms or any NOA's dating back two years will generally suffice. Disability insurance companies also need to know what type of job you do to determine how dangerous and physical it is. Past claims experience is also a consideration.
As a part of getting a medical picture of you, insurance companies will also need some medical information. Common things asked for are your age, past health issues, mental status and family history of illness.
Between Worker's Comp. claims and qualifying for the CPP Disability benefit there are a lot of variables at play when it comes to your income. You're gambling by depending on these two sources of disability income. With disability insurance there's a definite peace of mind in knowing you have income protection no matter what life throws at you.
CanEquity's insurance professionals will help you through the process of finding suitable insurance. Our representatives will give you valuable insight into the workings of all the best disability insurance products, helping you make the best choice for your coverage.Contact us to learn more or get an insurance quote!