Many don’t realize that disability insurance is considered the most important insurance protection, but why would that be. Let’s face it if something were to happen to you by way of illness or injury leaving you permanently disabled, your biggest asset is your employment income. Imagine if an injury or illness was to occur, how would you support your family, pay your bills, make care lease payments. But before pursuing the disability insurance it is important to understand that if your employer currently offers you disability insurance you will want to compare and see if you can top it op with an individual policy or if you are self employed disability insurance might seem like the best option as it will cover you for a majority of your salary.

How does it Disability Insurance Work ?

Disability Insurance basically covers you for 66 per cent of your salary in the event of a total disability by way of injury or illness. It will pay you a lump sump after the elimination period (number of days until the claim is paid ) is satisfied. The disability insurance payments also have the option of covering you for 2 years, 5 years, 10 years, or to age 65. Obviously the longer the elimination period and the shorter amount of coverage years the less expensive the premiums.

Underwriting and Disability Insurance

Disability Insurance is underwritten more stringently because of the number of false claims according to Canadian Statistics. They will look at your medical history very closely and want to get as much information on doctors you have visited. Its important to note that disability insurance usually takes longer to get approved because of the in depth underwriting.

How much does disability insurance cost ?

Case Study

John Henry is 36 years old and is looking for a professional series disability insurance through RBC Insurance policy. He is self employed but makes $60,000 after expenses before taxes. As a self employed individual he will need to show proof of income for the last 2 years. John decides on a 60 day elimination period which means he will have to wait 60 days until the payout begins, and he also decides on coverage until age 65. After 3 months he is approved and accepts the policy for $3500 monthly with some additional riders like Cost of Living Adjustment, and option to purchase more disability insurance without a medical proof if his income changes. His monthly premium is $160 dollars monthly and is locked in at that rate until age 65.

 

8 months later John suffers a major car accident and is paralyzed. After 60 days, the insurance company pays out the monthly payment of $3500 per month. He is covered until age 65. He will be compensated the 60 days of premiums he had to pay and the coverage will increase alongside the cost of living adjustment.

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