Whether you’re an executive, a business owner, or an everyday employee, your job is probably your lifeline. If you ever lose the ability to work, you may no longer have enough income to meet your basic needs.
However, disability insurance can provide the funds you need to stay afloat after experiencing a physical disability or illness that leaves you unable to work. This insurance can help you cover bills, loan payments, and other expenses.
Read on to learn more about disability insurance, then contact our Advantage Pacific Services team to book a consultation.
What Is Disability Insurance?
Disability insurance, also known as long-term care insurance, is a type of insurance that can give you funds if you suffer an unexpected illness or accident that leads to job loss. This insurance can replace anywhere from 60% to 70% of your wages, depending on your specific plan. The benefits typically last for a predetermined time.
There are two main types of disability insurance: short-term and long-term. Short-term disability insurance provides benefits for up to six months, while long-term disability insurance can cover additional time after your short-term plan ends.
While every long-term plan is different, many provide benefits for up to two years if you cannot return to your previous job. After this time, you may continue receiving benefits if you cannot work any job due to your disability.
You will need to pay a premium each month to maintain disability insurance. This premium typically equates to about 1% to 5% of your salary.
Common Riders for Disability Insurance
Riders are optional benefits you can add to your disability insurance to expand your coverage.
Here are a few common riders you may want to add:
- Own occupation rider: Provides comprehensive disability benefits if you are unable to practice your chosen profession, even if you move to a new career
- Future increase option rider: Gives you the right to purchase additional coverage at specified dates without needing to show evidence of good health
- Healthcare professional rider: Provides special coverage for healthcare workers who come into contact with bodily fluids or perform invasive procedures
- Lifetime extension rider: Extends your benefits beyond age 65
- Cost-of-living rider: Increases your benefit amount each year to offset inflation and cost-of-living increases
Your advisor can explain these riders further and help you determine which ones you may benefit from the most. Not all riders are available at every insurer.
How Much Coverage Do You Need?
Every person has different financial needs and health risks, and every disability insurance plan looks slightly different. As you consider how much coverage to include in your disability insurance, the biggest question you should ask yourself is: how much money would I need to meet my basic needs if I lost my ability to work?
Many people significantly underestimate their living expenses when choosing disability insurance. However, for this insurance to be worthwhile, you must ensure that it provides enough coverage to sustain you. Consider how much you currently pay each month for your:
- Mortgage or rent
- Medical bills
- Personal loans
- Other insurance premiums
Your disability insurance will not provide 100% of your previous wages. However, depending on your monthly expenses, you may need to choose a plan that covers at least 67% of your paycheck.
Our experienced advisors can help you examine your unique financial situation and choose the right disability coverage for your needs.
What Is Disability Insurance Underwriting?
When you apply for disability insurance, your insurer will analyze your risk to ensure that they provide the right coverage at the right price. This process is known as insurance underwriting.
Different risk factors may make you a more expensive or affordable person to ensure. For example, your occupation, health, and lifestyle all contribute to the possibility that you will eventually require disability payments. Meanwhile, your current income determines how much your insurer will need to pay you during your disability period.
Initially, your underwriter will ensure that you meet the following general requirements for disability insurance:
- Be between ages 18 and 60
- Be a resident in Canada for at least 12 months
- Be employed at least ten months each year
- Earn at least $15,000 per year
- Work at least 30 hours per week
Your underwriter will also examine your occupation class, which signifies your risk of becoming disabled in that occupation.
Contact Advantage Pacific Services Today
If you’re considering disability insurance as an individual or group benefit, you need an expert advisor to assist you. Before you purchase disability insurance, you should ensure that you understand its terms and coverages. For example, you need to know whether it only covers jobs in your occupation or extends to any occupation.