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Disability Insurance 101

What conditions qualify for disability insurance?

Normally, a disability benefit is paid out when you are unable to do one or more of the important duties of your job due to an injury or illness. In addition, you must be disabled for a period, referred to as your elimination period (also known as a waiting period), and be under the regular care of a physician before you qualify for benefits.

What are the different types of disability insurance?

There are three main types of disability insurance: income replacement insurance, business overhead expense insurance, and disability buy sell insurance.

Income replacement insurance is what is termed as an “indemnity” type of insurance that pays you a set monthly income for up to age 65 if you are disabled.

Business overhead expense insurance is a “reimbursement” type of insurance that pays a monthly benefit to reimburse you for business expenses that you incurred during a month where you are disabled.

Disability buy sell insurance is an “indemnity” type of insurance that pays out a set amount after the waiting period to a business or shareholder to facilitate the buyout of the disabled shareholder’s or partner’s interests in a business.

How long does disability insurance last?

Disability insurance can be purchased to provide benefits for 5 years or to age 65 if you remain disabled for the entire period.

How much does disability insurance cost per month?

The cost varies based on the age, gender, smoker status, occupation, medical history, and lifestyle of the person being insured. The amount being applied for also affects the cost – the more you purchase, the more it will cost. Prices can range from $50 per month up to hundreds per month based on the above variables.

How hard is it to get disability insurance?

Disability insurance is easy to get if you are healthy, have no adverse medical history, and don’t participate in risky activities. For individuals who have existing or past injuries, an adverse medical history, or participate in hazardous sports, it may be difficult to get disability insurance at standard rates without exclusions or at all. It is possible that a seemingly fully functioning person may not be able to get disability insurance because of their medical history, so we encourage everyone who needs or wants disability insurance to get it as soon as you can to avoid the complications of health conditions or lifestyle choices that would prevent you from getting disability insurance.

How much do you receive when you’re on disability insurance?

The amount you receive is dependent on how much you buy. You can buy any amount of coverage up to a maximum amount set by the insurance company based on your income. Insurance companies won’t insure your income on a dollar-for-dollar basis but will insure only a percentage of your income. The percentage decreases as your income goes up so you can never be “over insured”. It is best to get as much as you can because it will never be as much as your current take home pay.

If I am disabled, how long will it take to get my disability benefit money?

After your claim is approved and you have satisfied the waiting period, you will receive a cheque for your benefits after the end of each month of disability. You qualify for 1/30th of you monthly disability benefits for each day you are disabled past your waiting period. For example, if you have a 90-day waiting period, you will start to accrue benefits for each day that you are disabled after 90 days. At the end of the month, you will submit your claim form for that month to the insurance company and they will send you a cheque for benefits accrued during that calendar month and for each month that follows, as long as you are disabled.

If I don’t get disabled, can I get some money back?

Yes, you can. If you add the Premium Refund Rider to your policy, you can be legible for a refund of up to 50% of your premiums paid if you don’t make a claim. The claim-free period is 8 years, so the refund can come back to you multiple times over your working career, which significantly reduces the cost of your coverage of that period. If you make a claim, you lose your refund, and start your 8-year period again once you are no longer on claim. You don’t have to cancel the policy to get the refund and can continue the policy for the next 8 years on the same basis.

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