Disability Insurance, often called DI, insures your earned income against the risk that a disability will prevent you from being able to perform the core functions of your work.
Examples include a psychological disorder, injury, illness or condition that causes physical impairment or incapacity that affects your work. DI encompasses paid sick leave, short-term disability benefits (STD), and long-term disability benefits (LTD).
Having a source to replace your earned income in the event of an illness or accident is vital considering that on average, 1 in 3 Canadians will become disabled for a period of more than 90 days at least once before the age of 65. For those that are disabled for more than 90 days the average length of that disability is 2.9 years.
Types of Disability Insurance Individual
If your employer does not provide benefits, or if you are self-employed, you may want to purchase Individual Disability Insurance. Available benefits and premiums for individual coverage vary considerably between occupations and geographic region.
In general, premiums are higher for policies that provide more monthly benefits, offer benefits for longer periods, and start payments of benefits more quickly following a disability claim.
Premiums also tend to be higher for policies that define disability in broader terms, meaning the policy would pay benefits in a wider variety of circumstances.
High-limit Disability Insurance
- High-limit Disability Insurance is designed to keep individual disability benefits at 65% of income, regardless of income level. Coverage is typically issued supplemental to standard DI coverage. With high-limit disability insurance, benefits can be anywhere from an additional $2,000 to $100,000 per month. If you are a high earner, this type of DI insurance would be a smart option for you.
Key Person Disability Insurance
- Key Person Disability Insurance provides benefits to protect a company from financial hardship that may result from the loss of a key employee due to disability. The company can use the benefits to hire a temporary employee should the disabled employee’s disability appear to be short-term. In the case of permanent disability, benefits are used to help defray costs related to hiring a replacement, including recruitment, training, startup, loss of revenue and unfunded salary continuation costs.
Business Overhead Expense (BOE)
- coverage reimburses a business for overhead expenses should the owner experience a disability. Eligible benefits include: rent or mortgage payments, utilities, leasing costs, laundry/maintenance, accounting/billing and collection service fees, business insurance premiums, employee salaries, employee benefits, property tax, and other regular monthly expenses.