Myths and facts about disability insurance

You must be surprised to know that illnesses, not accidents, cause most disabilities in Canada and the prevalence of disabilities in Canada may be more common than one may think.

• In 2017, 6.2 million (22%) Canadians aged 15 and older had one or more disabilities.
• The prevalence of disability increased with age, from 13% for those aged 15 to 24 years to 47% for those aged 75 years and over.
• Women (24%) were more likely to have a disability than men (20%).
• Disabilities related to pain, flexibility, mobility, and mental health were the most common disability types.
• Among youth (aged 15 to 24 years), mental health-related disabilities were the most prevalent type of disability (8%).
• Among those aged 25 to 64 years, persons with disabilities were less likely to be employed (59%) than those without disabilities (80%).

Types of Disabilities

• Disabilities related to pain (15%), flexibility (10%), mobility (10%) and mental health (7%) were the most common among Canadians aged 15 years and over.
• This was followed by seeing (5%), hearing (5%), dexterity (5%), learning (4%), and memory (4%).
• Developmental disabilities were the least prevalent type representing approximately 1% of those aged 15 years and over.

What is disability insurance?

Disability insurance offers you protection against a loss of income should you become disabled. It can replace a substantial portion of your paycheque (typically 60-85%) whether the loss of your earning ability was due to a sudden accident or a degenerative illness. This payment is made to you until you resume working or until the end of a pre-determined disability coverage period – whichever of the two comes first.

Types of disability insurance

Disability insurance comes in 2 major forms:

1. Short term disability insurance

• Limited time coverage, usually for 6 to 26 weeks
• Usually offered through employers
• Provides weekly income replacement
• Benefits can begin 1-14 days after disability
• Typically claimed for temporary health issues such as sports injuries, back problems, infections, etc.

2. Long term disability insurance

• Common coverage terms are 2 years, 5 years, or up to age 65
• Generally purchased individually, to supplement employer coverage
• Provides monthly income replacement
• Benefits begin after short-term disability period is over
• Typically claimed for mental health issues, muscoskeletal issues, accident etc.

 Disability insurance myths

1

Myth: It won’t happen to me.

Fact: 1 in 7 Canadians have a disability. 33% of workers between ages 30-64 will experience a disability greater than 90 days.

2

Myth: It is expensive.

Fact: It’s more affordable than you may think. Coverage can be obtained for 1-3% of annual income.

3

Myth: Most disabilities are caused by accidents.

Fact: Mental illness is the #1 cause for disability claims. Most disabilities are due to illnesses; less than 10% due to accidents

4

Myth: OHIP will cover me.

Fact: OHIP does not cover partial or temporary disability.

5

Myth: I have group insurance.

Fact: Group insurance coverage ends or becomes expensive on leaving a job.

6

Myth: I have my savings.

Fact: An average 30-year old Canadian has more than $3 million at risk due to disability. Average length of disability over 90 days is 35 months.

What to ask when buying disability insurance

When buying disability insurance, make sure you understand the following. Ask your benefits administrator or insurance agent about anything you don’t understand.

General terms and conditions

• How the plan defines disability
• Are there any exclusions
• Are there any pre-existing condition clauses in the plan that you should be aware of

Premiums

• How much the policy will cost
• Do you still need to make premium payments while living with a disability

Benefits

• The amount of money you’ll get each month
• Are the benefits taxable
• Will benefits be adjusted for inflation
• How long you need to wait before starting to receive benefits
• Does the plan include partial disability benefits
• Can you increase your coverage without a medical exam

Main reasons why you should consider personal disability insurance

The main reasons why you should consider a personal disability insurance plan are:

• Worker’s Compensation only covers work related accidents.
• Even if you already have some disability insurance through your employer, it may not be adequate.
• If you ever change jobs, your employer-sponsored disability insurance will most likely end with your employment.
• Your other health insurance can help with the medical bills. But to replace lost income, you need disability income protection insurance.
• Unemployment insurance only covers 15 weeks.
• Disability benefits under the Canada Pension Plan (CPP) limit the benefits you can receive. Also consider the probability of incurring a 90-day or longer total disability prior to age 65.
• Group and association coverage can fill a valuable role in long-term disability protection. However, the benefit may be limited by the definition of disability and coverage amount.
• The benefit received in case of claim is not taxable.
• For self-employed people or for those who is working by a contract, there is no protection at all.

When you imagine life without your income and the odds of becoming disabled at some point in life – disability income protection insurance makes sense. If you get disabled during your peak earning years, your family may lose the financial protection you intended to create for them. Disability insurance helps you continue to build a safety net for your loved ones.