Health Insurance

Disability insurance

Your ability to earn is almost certainly your largest financial asset, and it is the one most people never insure. An accident or illness that stops you working cuts the income and usually raises the costs at the same time. Disability cover replaces part of the pay cheque while you cannot work.

How It Works

What the policy actually does

Disability insurance — sometimes sold as lifestyle protection or income protection — pays a monthly benefit while you are unable to work because of illness or injury. The benefit is set as a percentage of your pre-disability income, not the whole of it, which is deliberate: insurers keep a gap so that returning to work is always worth more than staying off.

The waiting period

Benefits start after an elimination period you choose — commonly thirty, sixty or ninety days. A longer wait lowers the premium substantially, and is affordable if you have savings or short-term workplace cover to bridge the gap. Match the two rather than choosing the wait at random.

The benefit period

How long payments continue: two years, five years, or to age sixty-five. Short benefit periods are much cheaper and cover the common case, but the whole point of this insurance is the uncommon one — a disability that never resolves. If the budget allows only one upgrade, extend the benefit period before shortening the wait.

The definition of disability

This is the clause that decides claims. “Own occupation” pays if you cannot do your own job. “Any occupation” pays only if you cannot do any job you are reasonably suited to — a far harder test. Many policies use own occupation for the first two years and any occupation after. Know which you are buying.

Workplace Cover

Do you already have enough?

Check the benefits booklet before buying anything. Group disability cover is common, and it is also commonly misunderstood.

It usually ends with the job

Workplace cover typically applies only while you remain employed. If the disability follows redundancy, or you change employer, the protection may not travel with you — and the moment you most need it can be the moment it stops.

It may be capped, and it may be taxable

Group plans often cap the monthly benefit at a level that suits an average salary rather than yours. And where the employer pays the premium, the benefit is generally taxable in your hands — so a stated seventy percent of income can be considerably less in practice.

Short-term and long-term are different things

Many plans have both, with different waiting periods, different definitions and different durations. Some have only one. Read which you have rather than assuming you have the pair.

Self-employed people have none of this

No employer plan, no sick pay, and often no cushion beyond the business itself. For anyone self-employed this is usually the first insurance to arrange, ahead of life cover, because the probability of a long absence through illness is higher than the probability of dying during working years.

Who pays the premium changes what you receive. If you pay for disability cover from after-tax income, the benefit is generally received tax-free. If your employer pays, it is generally taxable. Two policies with identical headline percentages can therefore leave you with very different amounts in hand — worth checking before deciding you are adequately covered at work.

No obligation

Bring the benefits booklet.

Most conversations about disability cover start with what you already have and end quite quickly. Tell an advisor what the workplace plan says and what you earn, and you will get a clear view of the gap — including when there is not one.

Talk to an advisor

Disability insurance questions

Typically somewhere around sixty to seventy percent. Insurers deliberately leave a gap so there is always a financial reason to return to work, and they take existing group cover into account when setting the maximum.

Usually yes, though some policies limit the benefit period for mental health and substance-related claims to two years where a physical disability would be covered longer. It is a specific clause worth reading, because these are among the most common claims.

Most policies include partial or residual benefits that pay a proportion where you can work but at reduced capacity or income. Without that feature a policy can be all-or-nothing, which fits few real recoveries.

Yes, though insurers will want evidence of income — typically tax returns over two or three years. Newer businesses can be harder to insure at a meaningful level, which is an argument for arranging it sooner rather than once the accounts look impressive.

CPP disability requires a severe and prolonged disability that prevents any substantially gainful work, and the monthly amount is modest. It is a floor, not a replacement for an income.

Is your income actually covered?

Call 437-428-2828 and talk it through with a licensed advisor. Mon–Sat, 9am–8pm ET. No obligation, and nobody will push you to buy on the call.

Call 437-428-2828