Disability Insurance Explained

Disability Insurance helps protect your paycheque!

Disability insurance works when you can’t. It can give you tax-free monthly income to help pay expenses if an illness or accident stops you from working.

Monthly income – Payments replace part of your paycheque each month.

 

Guaranteed – Guaranteed rates for your coverage until age 65.

 

Personalized – Customize your plan to suit your personal needs.

 

What is disability insurance?

It can give you a tax-free monthly payment to help replace your income and cover your expenses if an illness or injury keeps you from working. While a disability can often be visible to the naked eye, not all disabilities are so easily recognized. Chronic pain or a mental health issue can also qualify as a disability. 

How does it work?

  • Choose the amount you want and add optional benefits to customize your coverage.
  • Pay your monthly premium.
  • File a claim if you become disabled.
  • Receive your monthly payments when the waiting period ends. The waiting period is the number of days from the date you’re disabled until the benefit start date.
  • Your payments stop when your benefit period ends or you return to work.

Why do you need Disability Insurance?

It’s more common than you think – with up to 40% of Canadians becoming disabled for 90 days or longer before the age of 65.

Replaces most of your paycheque – Potentially receiving up to 80-90% of your take-home pay.

Protect your retirement savings – Disability Insurance can help you meet your financial obligations so you may be able to avoid dipping into your retirement savings.

Protect your most valuable asset

Your ability to earn an income over a 30 or 40-year career, is your most valuable asset. Here’s an idea of what you could earn over the rest of your working life based on your age and current salary. This chart assumes a 2.5% raise every year and that you’re working to age 65.

Age 30
Age 40
Age 50
$70,000
$3,844,975
$2,391,043
$1,255,235
$90,000
$4,943,539
$3,074,199
$1,613,873
$120,000
$6,591,385
$4,098,932
$2,151,831
$150,000
$8,239,231
$5,123,665
$2,689,789
$200,000
$10,985,641
$6,831,553
$3,586,385
$250,000
$13,732,051
$8,539,441
$4,482,981

How much does it cost?

Premiums often range from 1-9% of your salary, but each case is different. Here are some factors that can affect cost:

Coverage amount The more you’d like to receive, the more it will cost.

 

Benefit period It’ll cost more the longer you want to receive payments.

 

Waiting period Your premiums will be less expensive if you’re willing to wait longer to receive payments.

 

Age Disability insurance may be less expensive when you’re young.

 

Health Your costs will be lower the healthier you are.

 

Occupation If you have a dangerous job, your premiums can be higher.

 

How much income can you get?

The following chart shows the maximum amount you could receive tax-free each month if you faced a disability. These are just estimates – the amount you’d actually receive depends on specific circumstances, like your age and occupation.

Annual income
Maximum monthly benefit
$35,000
$2,200
$50,000
$2,975
$100,000
$5,200
$120,000
$5,925
$140,000
$6,625
$200,000
$8,550
$300,000
$11,350
$500,000
$16,050
$1,000,000
$25,000

What does the government give you?

You can get disability coverage through the Canada Pension Plan (CPP) and Quebec Pension Plan (QPP) but they provide limited benefits.  

Strict definition You must “have a severe and prolonged mental or physical disability” to qualify for CPP disability benefits. You may be able to get disability coverage through Canada Life under a more relaxed definition.

Lower monthly benefit The CPP’s average monthly benefit is $966.43 and the maximum in 2019 is $1,362.30.

Do you need disability insurance if you have it through your employer?

Group insurance is a great start, but it usually only provides basic coverage.  A personal disability policy complements group insurance – together, they can help protect you, your family and your lifestyle should the worst happen.

 

Group coverage
Individual coverage
How much coverage do I get?
Coverage amounts are often limited
You choose your coverage amount
How flexible is it?
Your employer often picks the coverage options
You choose the coverage amount and how long you need it
Can I change my coverage?
Typically, you can make changes once a year or if there’s a life-changing event
Yes, you can adjust coverage
What happens if I leave my employer?
Your coverage ends unless there’s an option to convert to individual coverage
Your coverage stays the same because it’s not tied to a job or membership
How much does it cost?
Typically, it’s low cost
Typically, it’s a higher cost than group coverage 
Will the cost ever change?
Costs can change every year
Costs stay the same for the duration of your policy

 

Contact us today, Bowie Can Help. 

 

Info sourced from Canada Life.