Understanding Long-term Disability Insurance

Posted on July 2, 2010 and updated March 19, 2019 in Disability Insurance, Insurance Types, Life Insurance Canada News 3 min read
disability insurance

Disability insurance replaces an insured person’s income in the event that he or she becomes disabled due to injury or illness.

Most group policies break down disability insurance into short-term and long-term disability coverage. Short-term plans generally cover the insured from the first day of disability up to the 120th day. Whereas, most long-term group disability policies can cover the insured from 120th day up to age 65.

Both short-term and long-term disability plans can work in tandem on an individual policy, so once short-term expires, long-term kicks in. You also may be eligible for government benefit programs, such as Workers Compensation or Employment Insurance.

Individual disability policies do not break down short-term and long-term disability coverage. Individual disability policies allow the insured to choose an elimination period, generally anywhere from 30 days to 180 days. The elimination period is the period of time the insured must wait before collecting his or her disability benefit. The benefit period on an individual policy determines how long the insured will receive his/her disability insurance for. It can be two years, five years, or until age 65.

It’s important to consider that long-term disability claims are going to be the ones that have the greatest impact on the insured’s financial situation. If the insured is off work for 30 or 60 days, odds are he or she will be able to cope financially. However, If insured is off work due to an injury or illness for an extended period of time the financial impact can be devastating.

Disability Insurance should not be confused with Critical Illness Insurance which pays out a lump sum if the insured is diagnosed with a serious illness as listed in the policy.  A Critical Illness policy is used to cover the out of pocket expenses associated with a Critical Illness.  An example someone who develops MS may need to make renovations to their home.  

Some carriers offer Disability Insurance with a Return of Premium benefit.  This pays back a percentage of the insured’s premium if he/she does not make a claim or is not on claim for a period of time. There is a cost associated with adding this rider.  But many applicants like the idea psychologically of a bonus so to speak for staying healthy.

For more details on Long-term Disability Insurance, please contact us at 1-866-899-4849 or visit our Disability Insurance Quotes Page.

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