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How many of us know about the basics of life insurance? If anyone approached you, would you be able to explain how life insurance works, or the cost of life insurance in detail? Would you be able to explain the procedure you can use when picking the best life insurance policy in Canada?
Life insurance may be one of the most important purchases you make. It is basically the pinnacle of the whole adulting thing. If you think a policy is too expensive, or your employer-offered insurance is enough, think again, analyze and research. The bottom line is, you need enough life insurance
Although it is not a mandatory requirement in Canada like car insurance, you and your loved ones will in one way or another need life insurance when you least expect it. This is especially important if you have dependents who will be largely affected financially should you as the sole provider die. It can be used to pay off debts like mortgages of a home that is to be inherited.
Below is an analysis of everything that entails life insurance policies including their different types, their cost, and who should be investing in them:
critical illness insurance

What is disability insurance?

According to the social security administration, at least a quarter of the 20-year-olds will become disabled and unable to engage in their regular work before hitting 67 years. The problem is, very few people are aware of the disability insurance services in Canada. This is a type of insurance that is designed to replace a portion of your regular income should you become unable to work. 

Disability insurance acts as an income replacement paid every month to the insured as they recover from an illness or injury. It replaces not the entire income but approximately between 60-80% of the salary. This makes the insured person able to manage their lifestyle standard without falling into financial crisis and instability. 

If the accident occurs outside the place of work, health insurance or Medicare might cover the bills. However, health insurance doesn’t guarantee coverage of lost wages for the time that you will not be able to go to work. It only focuses on your medical bills.

Long-Term vs. Short-Term disability insurance 

The type of disability insurance in Canada will depend on the period of the coverage. When it comes to short-term disability insurance, the policy a portion of your regular income for a few weeks, immediately after the elimination period. The benefits of short-term disability insurance vary depending on the plan, company, employees’ position/income, and how long they have worked.  It is mostly offered by employers and companies. 

According to statistics, of all the employees with short-term disability insurance, 85% are responsible for their full amount of the premiums while 15% require contribution the contribution of the employee

For example, some policies may require a minimum period of employment, full-time work, or consecutive working period. On the other hand, some employers demand the employees use all their sick days before they can qualify for the coverage.  

Long-term disability insurance provides coverage to the insured by ensuring they receive a percentage of their regular income for a longer period as compared to the short-term disability insurance plans. It is mostly acquired as an individual by employees. This prevents the insured and their dependents from the prolonged financial crisis if they are not able to get back to work or never at all. The injury or illness has to have occurred outside the work environment and it should not have been covered by worker’s compensation insurance. 

Where the short-term disability plan stops, the long-term picks up and goes until the plan is exhausted. Some long-term disability plans provide coverage until the insured is 65+ years old depending on the company. While some companies offer both short-term and long-term, most companies allow their customers to customize their plans according to their needs, dependents, and financial position and liabilities. 

What is the difference between short term disability insurance and Long term disability insurance

The difference between the two types of insurance policies will depend on how severe the injury/illness is and how long they will take to recover. Short-term can provide weekly payouts to support you during the recovery process while long-term disability insurance acts as an income replacement for a certain period. 

Short Term Disability Insurance Long Term Disability Insurance
  • Limited time coverage
  • Common coverage terms are 2 years, 5 years, or up to age 65
  • Usually offered through employers
  • Generally purchased individually, to supplement employer coverage
  • Provides weekly income replacement
  • Provides monthly income replacement
  • Benefits can begin 1-14 days after disability
  • Benefits begin after the short-term disability period is over
  • Typically claimed for temporary health issues such as sports injuries, back problems, infections, etc
  • Typically claimed for serious illnesses and accidents like mental health issues, musculoskeletal issues, accidents, etc.


Which do I need: need short-term disability insurance or long-term disability insurance?

While considering buying a long-term disability insurance plan, ask yourself if you have an emergency savings fund. And, is the fund able to provide sufficient coverage in the event you are unable to work to maintain lifestyle standards? 

If your answer is no, then you need long-term disability insurance. You should also understand that short-term disability insurance provides essential financial coverage for a limited time. Therefore, a long-term plan will ensure that your financial well-being is not influenced and can provide coverage until you are retired. 


Should Employers Offer Disability Insurance in Canada?

Disability insurance is a benefit for employees & employers. Disability insurance is one way to ensure that workers can access replacement wages if they become sick or injured and cannot work.


As an employer, you should know that some states offer state-mandated disability insurance. For some states that don’t have this as a law, providing disability insurance depends on the employer being able to afford the costs. The benefits, like pregnancy and maternity leave for women’s pay, are a motivator to attracting and retaining a skilled and talented workforce. 


If the employer can’t afford the costs that come with the provision of disability insurance in Canada, they may consider offering short-term or long-term policies as a voluntary benefit. This means you’ll facilitate the purchase of the insurance, but the employees are responsible for paying the entire premium. This small amount of money will be pulled out of the employee’s paycheck to cover the cost of the insurance premium.


What can Disability Insurance be claimed for?

The main function of Disability insurance is to act as a replacement for the monthly income. This provides financial security for you and your loved ones for all the periods that you are not able to make an income. The benefits from the insurance coverage can be used to cater to basic needs, cover medical bills and pay for any further medical-related expense. 

  • Serious illness 
  • Mental illness 
  • Serious injury 
  • Hospital bills 

How can I use disability insurance proceeds? 

  • Act as an income replacement
  • Doctor and medical professional consultations 
  • Cater for ongoing expenses 
  • Cater for rehabilitation services 


Why do you need a disability insurance plan? 

Disability insurance is not something most people think about. However, the longer you avoid it, the worse the risk of long-term financial risks as a result of illness and injuries that prevent regular working to earn a living. 

Accidents and sickness are some of the unavoidable things. On top of dealing with pain and possibly physical or mental limitations, a disability can also result in financial difficulties because your ability to earn an income may be impacted too.

According to stats, 1 in 7 Canadians have a disability. 33% of workers between ages 30-64 will experience a disability greater than 90 days. If you or others depend on your income, you need disability insurance. 

If you will not be working for less than a year due to an injury or sickness, social security disability benefits will not be applicable. Disability insurance should therefore be a criterion to consider to avoid financial crisis.

  • 20% of Canadians aged 15 years and over (1 out of 5 or 6.2 million) have had at least one disability in 2017.
  • At least 24% of female Canadians and 20% of male Canadians have at least one disability
  • In terms of disability type, 14% are pain-related, 7% relate to flexibility issues, 7% are mobility difficulties, and 7% are mental health-related.
  • The age dependency ratio in Canada is approximately 50.6%


Do I need supplemental disability insurance?

Supplemental disability insurance consists of extra coverage added to long-term or individual disability plans for increased protection. It is essential for those who want to protect a greater percentage of their income, bonuses, and commissions. It is also possible to get supplemental disability insurance through your employer. 

Supplemental disability insurance focuses on covering between the payouts received from the current policy and what you will need to maintain the existing lifestyle in the event you are unable to work.  Below are some of the benefits of a supplemental disability insurance policy: 

  • The policy is customized to provide a bigger safety net that includes compensation, bonuses, and other incentives. 
  • The policy is individual and will still be applicable even if you change employers or jobs.
  • It doesn’t require any medical exam.
  • The coverage costs and benefits can remain fixed 


Does term life insurance cover disability?

While both life and long-term disability insurance can provide income protection, their payouts depend on different circumstances. 

Long-term disability policy offers coverage for when you are still alive and incapable of earning a regular income to support you and your dependents due to illness or injury. Therefore, for disability insurance to be used, the policyholder must be alive. 

On the other hand, a term life insurance policy is designed to pay death benefits to your beneficiaries as a replacement for your financial support to help them maintain their lifestyle. However, when purchasing term life insurance, the insured can incorporate riders to provide coverage against medical conditions. This can be a long-term accelerated death benefit rider or waiver of the premium rider. The riders can help in the vent that you get seriously ill or injured to work. 


How do I get the quotes for disability insurance?

Our transparency and the need to help our customers on sport have made finding disability insurance policy quotes simple and instantly. Most compliant insurance service providers have made insurance quotations as easy as a click away. 

You can use our online forms or reach out to us via email, and phone number. The quotations can be adjusted as per your financial situation and insurance needs. 


Which is the best disability insurance company in Canada?

The best disability insurance companies are those that are experienced, have the knowledge and understanding of the insurance industry. Different companies offer different policies that range from the individual, group, and customized amount of benefits and premiums as per the needs. 

While Canada has several trusted insurance companies, Policyhub stands out as the best choice for most Canadians. This is because of their industrial connection with a wide range of investment and insurance companies as well as well-trained and experienced staff that will guide you throughout every step of your coverage.

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