Disability insurance is a tool to replace your income if you are unable to work after becoming disabled. Disabilities can be either physical impairments or mental health illnesses. Canadian Mental Health Associations states that 1 in 5 Canadians suffer from mental health illnesses. In other words, a large portion of our Canadian population is currently experiencing mental health issues without sufficient financial support. For these reasons, purchasing disability insurance will become one of the most responsible thing you can do as an adult.
Disability Insurance is a little pricier out of all the insurance plans. Both your premiums and coverage are paid until your 65th birthday (or when your policy expires). The monthly payouts are pre-determined during your application process and this amount cannot be more than your current income. When you’re reviewing the disability insurance policy, make sure the policy includes the condition “unable to perform your occupation.” This condition will enable you to make a claim when the injury/illness prevents you from performing your current job. Many policies do not include this statement leaving the injured person with no support.
For example, if a nurse has a broken leg from a slip and fall incident, the insurance company will not pay out the disability claim if the policy does not include the statement “unable to perform your occupation.” The reason is even though the nurse cannot perform their duties, it doesn’t mean they are totally disabled. The person is technically able work in another occupation where frequent walking is not required. Keep in mind, insurance companies do not account for whether or not you can obtain a new job. So please make sure you review your policies carefully with your insurance provider.
Update: Some disability insurance now covers those who become critically ill from the COVID-19 virus and unable to work due to complications of the disease. Check with your provider to see if you are covered.
Tip: Some insurance companies have the option to add a rider to your disability plan. If your current/future spouse or children is diagnosed with a terminal illness, you can claim the disability insurance right away to spend more time with your family. See example from RBC bank’s Family Compassionate Care Rider for more details.
To learn more about other insurance policies click here.
Disclaimer: I am not an insurance advisor. This article was written based on personal experience and opinions. Please seek an insurance advisor for advice tailored to your needs.
– The Wealthy Sheep
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