A disability illness insurance policy pays a monthly, tax-free, cash benefit should an injury or illness prevent you from working and is designed to replace a portion of your lost income. You can choose to spend this money however you wish.
There is a tendency to think of disabilities as those that manifest physically and are visible to the naked eye, however it's important to note that not all disabilities are so easily recognized. A disability can result from a number of causes, including a serious illness or a mental health issue, as well as physical injuries.
Disabilities vary in duration - some being short, and others long-term.
Without an income, your ability to meet your financial obligations and provide for your family may be at risk. Furthermore, your retirement savings could be impacted if you're forced to consume those funds to support yourself. Disability insurance is intended to help replace your lost income so that you can continue to meet your obligations and keep your financial plans on track.
A regular monthly cash benefit payment that you can use for whatever you need.
Canada Pension Plan (CPP) disability benefits are limited and may be more restrictive.
Most employer plans end if you leave your job. Individual disability plans can go with you throughout your career(s).
Disability coverage can be customized based on your unique personal needs.
If you are in your working years, disability insurance should be a foundational component of your insurance planning and risk management strategy. Your ability to earn an income is your most important asset - because without income it's usually impossible to pay for all the other important things in life.
On average, 1 in 3 Canadians become disabled for 90 days or longer before age 65.
You receive a substantial portion of your pre-disability income so you can stay on track financially.
Your retirement savings are earmarked for retirement, not medical bills.
Recover easier knowing you're financially secure and have cash to pay for your regular expenses.
There is a tendency to think of our home, or car, or investment portfolio as the most valuable things that we own. However, our philosophy is that your ability to earn an income is actually your most valuable asset.
The following table offers a sense of your potential career earnings to age 65, based on your current annual income, assuming a 2.5% increase (i.e. raise) each year.
Here are some examples of factors that can affect cost:
Insurance costs generally increase with age.
Insurance costs are affected by the relative risk associated with your profession.
Naturally, larger coverage amounts cost more than lower coverage amounts.
This is how long your policy will pay a benefit for. The longer the duration, the higher the cost.
This is how long you must wait before your policy will begin to pay a benefit. Shorter the duration, the higher the cost.
Insurance cost can be affected by health history. Cost will be lower when there is little history.
Your income will dictate how much coverage you are eligible for. Each insurance company will have it's own guidelines as to what percentage of your income they will insure.
The following table is intended to offer a sense of the maximum amount you could potentially receive tax-free each month in the event of a disability claim. These are just approximate figures – your actual maximum benefit amount will depend on factors such as insurance company, as well as age and occupation. Your insurance advisor can assist you in calculating what benefit amounts you may be eligible for.
In the event you become disabled you may be eligible for Canada Pension Plan (CPP), and Quebec Pension Plan (QPP), however it is important to understand they offer limited benefits and may be difficult to qualify for due to the definitions of disability those programs use.
In order to qualify for disability benefits under CPP/QPP, one must “have a severe and prolonged mental or physical disability”. You may be able to get your own individual disability policy with a more relaxed definition.
Under CPP disability the maximum disability benefit is $1,464.83 per month as of 2022. The average disability benefit paid out as of October 2021 was $1,050.29 per month. These amounts are taxable, and are therefore included in your taxable income.
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