You might say your home, or your car is your most valuable asset. But, have you considered that it’s your ability to earn a living? Over your lifetime, that’s worth far more than your home or car.
Disability insurance works when you can’t. If an illness or injury keeps you from working, disability insurance can give you a tax-free monthly benefit to help you pay your expenses by replacing some of your earnings.
You can customize disability insurance coverage with additional benefits at an extra cost. An example is a return-of-premium rider. With this feature, you may get back up to 50% of yearly premiums you’ve paid if you cancel your policy or don’t use the policy within the term length you selected. A cost of living benefit helps reduce the impact of inflation by providing yearly adjustments to the monthly disability benefit during disability. Other additional benefits are available. An advisor can help you select what works best for you.
Note: The Canada Revenue Agency (CRA) and Revenu Québec have not provided a formal ruling regarding the tax treatment of return-of-premium benefits that are included in a disability policy. The tax treatment of an optional return-of-premium benefit is, therefore, subject to interpretation.
Disability insurance may cover you if an illness or injury keeps you from working.
While a disability can often be visible to the naked eye, not all disabilities are so easily recognized. Chronic pain or a mental health issue can also qualify as a disability.
Some examples include :
If you become disabled, you file a claim. After your claim is approved, there is a waiting period. The waiting period is the number of days from the date you’re disabled until the benefit start date. This waiting period, chosen at the time you apply, can be anywhere from 30 days to a year. After this period is fulfilled, your monthly benefit would begin.
The monthly benefit replaces a percentage of your paycheque when an illness or accident stops you from working. Your payments stop when your benefit period ends, or you return to work. Your payments depend on how much coverage you choose to purchase and is approved by us at the time you apply. You will work closely with your advisor to help determine this amount.
There are two types – short-term and long-term disability insurance. They work best together because there’s often a waiting period before your benefits start being paid.
Short-term disability insurance (STD) is usually accessed through a plan provided by your employer.
It often provides coverage for up to 6 months if you have an illness or are injured. The waiting period for short term disability is typically shorter than long-term disability.
While long-term disability insurance (LTD) can be offered by an employer, the coverage may not be enough. It’s important to review that coverage closely with your employer’s HR representative to ensure you have enough. Individual disability insurance ensures you’re fully covered if you become disabled for a longer period of time.
Long-term disability policies also have a typical benefit period. Canada Life offers 24, 60, and 120 months and to age 65.
Some individuals think they don’t need individual disability insurance coverage because they’re protected by government disability programs like Canada/Quebec Pension Plan (CPP/QPP) Opens a new website in a new window , Workers’ Compensation and employment insurance. Coverage provided by these programs may not be comprehensive enough for your needs.
Why is disability insurance important?
Premiums often range from 1 to 9% of your salary, but each case is different. Factors that can affect the cost include:
If you need to make a claim for disability insurance, you should do so through the insurance company that’s providing your coverage. Usually you’ll need to complete a digital form on the company’s website or phone their customer service area. In addition, you must have your doctor complete a Physician’s Statement.
Now that you understand more about disability insurance and how it works, why not meet with an advisor, or if your workplace benefits are with Canada Life, contact a health and wealth consultant to:
The information provided is general in nature, and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors.
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