Disability Insurance

Enables you to protect your number one asset - your ability to earn an income.
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What is disability insurance?

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.

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Monthly income

A regular monthly cash benefit payment that you can use for whatever you need.

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Fills Coverage Gap

Canada Pension Plan (CPP) disability benefits are limited and may be more restrictive.

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Portable

Most employer plans end if you leave your job. Individual disability plans can go with you throughout your career(s).

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Personalized

Disability coverage can be customized based on your unique personal needs.

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How does it work?

  • Choose the coverage amount you want.
  • Pay your premium.
  • Claim on your insurance in the event you become disabled.
  • Receive your monthly tax-free cash benefit once your waiting period expires (also known as an 'Elimination Period'). The waiting period is the number of days from the date you’re disabled until the benefit start date.
  • Spend your benefit however you wish while working towards recovery.
  • Your payments stop when your benefit period ends or you return to work.

Why do you need disability insurance?

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.

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It's common

On average, 1 in 3 Canadians become disabled for 90 days or longer before age 65.

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Replace lost income

You receive a substantial portion of your pre-disability income so you can stay on track financially.

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Protect your savings

Your retirement savings are earmarked for retirement, not medical bills.

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Focus on recovery

Recover easier knowing you're financially secure and have cash to pay for your regular expenses.

Protect your most valuable asset

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.

Your health is your wealth

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.

Annual Income
Age 30
Age 40
Age 50
$36,000
$1,977,415
$1,229,679
$430,366
$48,000
$2,636,553
$1,639,572
$860,732
$60,000
$3,295,692
$2,049,465
$1,075,915
$72,000
$3,954,830
$2,459,359
$1,291,098
$84,000
$4,613,969
$2,869,252
$1,506,281
$96,000
$5,273,107
$3,279,145
$1,721,464
$120,000
$6,591,384
$4,098,931
$2,151,831
$180,000
$9,887,077
$6,148,397
$3,227,746
Source: RBC Insurance

How much does disability insurance cost?

Here are some examples of factors that can affect cost:

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Age

Insurance costs generally increase with age.

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Occupation

Insurance costs are affected by the relative risk associated with your profession.

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Coverage amount

Naturally, larger coverage amounts cost more than lower coverage amounts.

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Benefit period

This is how long your policy will pay a benefit for. The longer the duration, the higher the cost.

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Waiting period

This is how long you must wait before your policy will begin to pay a benefit. Shorter the duration, the higher the cost.

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Health history

Insurance cost can be affected by health history. Cost will be lower when there is little history.

How much coverage can you get?

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.

Annual Income
Maximum Monthly Benefit
$35,000
$2,200
$50,000
$3,000
$100,000
$5,200
$120,000
$5,925
$140,000
$6,625
$200,000
$8,550
$500,000
$16,050
$1,000,000
$25,000
Source: RBC Insurance
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What is included in my government disability benefits?

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.

Definition of disability

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.

Monthly benefit amount

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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