When you think about your most valuable asset, you might immediately think of your home or car. However, have you considered that your ability to earn an income is actually your greatest asset? Your earning potential supports your lifestyle, savings, and future aspirations. That’s why disability insurance serves as a crucial safety net; it ensures that if an illness or injury prevents you from working, your financial stability remains intact.
Understanding Disability Insurance
Disability insurance is designed to protect your income if you are unable to work due to illness or injury. It provides a tax-free monthly benefit that helps replace a portion of your earnings, allowing you to manage expenses without depleting your savings or retirement funds.
There are two main types of disability insurance:
- Short-term Disability (STD) – Typically offered through employer plans, this coverage begins shortly after an illness or injury and can last for up to six months.
- Long-term Disability (LTD) – This provides extended coverage and may kick in after short-term benefits are exhausted. Depending on your policy, it can cover you for 24 months, 60 months, or even until age 65.
How Does Long-term Disability Insurance Work?
If you become disabled, you start by submitting a claim to your provider. After your claim is approved and a waiting period—ranging from 30 days to a year—has passed, your benefits will begin. The monthly payment you receive is a percentage of your salary, determined by the level of coverage you have chosen.
These payments continue until you recover, return to work, or reach the end of the benefit period, whichever comes first. Long-term disability insurance provides critical income protection that can help you navigate an extended period of recovery.
What Qualifies as a Disability?
Disabilities can be visible, like a physical injury, or invisible, such as chronic pain or mental health issues. Examples of conditions that could qualify include:
- Recovery from a car accident
- A broken limb that prevents a carpenter from working
- A heart attack that sidelines an overworked physician
- Chemotherapy treatment that drains energy
- Cognitive impairment following a stroke
- Major depressive disorder after a traumatic event
Why You Need Disability Insurance
Many people underestimate the likelihood of becoming disabled. In reality, up to 40% of Canadians may experience a disability lasting 90 days or longer before turning 65. Disability insurance ensures that you can maintain your standard of living, even when you cannot work. Here’s why having this coverage is essential:
- Replaces Most of Your Income: Depending on your policy, you could receive up to 80-90% of your take-home pay.
- Helps Meet Financial Obligations: Disability insurance allows you to cover expenses without relying on your savings or retirement funds.
- Customizable Coverage: You can choose additional features, such as a cost-of-living benefit that adjusts for inflation or a return-of-premium rider.
Considerations for Choosing a Plan
The cost of disability insurance varies based on several factors:
- Coverage amount: Higher coverage means higher premiums.
- Benefit period: Longer periods increase costs.
- Waiting period: Opting for a longer waiting period can reduce costs.
- Age, health, and occupation: Younger, healthier individuals and those in less risky jobs generally pay lower premiums.
Government Programs vs. Individual Coverage
While government programs like the Canada Pension Plan (CPP) and Workers’ Compensation offer some assistance, they often fall short of covering all expenses. Individual disability insurance fills this gap, providing more comprehensive coverage tailored to your needs.
Protect Your Income and Your Future
Your ability to earn an income is your most valuable asset. Without a steady income, managing daily expenses and long-term financial goals becomes challenging. Disability insurance offers peace of mind, allowing you to focus on recovery without the added stress of financial strain. At BCCA Employee Benefit Trust, we understand the importance of comprehensive support. Our core benefits, including long-term disability insurance, are part of our holistic plans designed to support you and your employees. To learn more and find the best plan for your company, contact us at 604.683.7353 or email info@bccabenefits.ca.
