Do I need disability insurance (Supplemental insurance)

My next door neighbor had a good paying career with a family owned company, wife and three kids , a cottage in the country side, and greta vacations in Europe each year.

One Sunday morning, just before the Easter holidays, while jogging in the parc, he felt extreme pain in his upper chest. Realizing he must be having a heart attack, he asked his body to  drive him to the emrgency room.

He had to undergo urgently a heart surgery. His operation was successful however he had to stop working for 5 months and then he was only able to get back to work a few hours per day. His income was halved and the family had to sell some of their retirement savings in order to pay their growing debts. His wife had to go back to work and her mother moved in with them to help out.

This type of situation can happen to any time, illness or accident can have huge impact your life.

Hoe can disability insurance help?

Disability insurance or as sometimes referred to salary or supplementary insurance is a great solution to protect one’s income from unpredicted life changing events. However it is important to understand the conditions and limitations in these types of contacts in order to validate protection is adequate.

At first, the insured person’s profession will determine eligibility and consequently cost of premiums. For example an electrician because of intense physical work faces more risk of disability than an accountant. The insured person’s gross income has to be calculated. It is recommended to insure from 60% to 65% percent of gross income as insurance benefits are tax free in Canada.

The insured can choose a proposed amount or reduce it to his convenience and proceed to the next step that is to choose the waiting period and the length of benefits period.  The waiting period can vary from 14, 30, 60, and 120 days and is the period during which no benefits are paid following a disability.

The benefits period can be selected from 2 or 5 years or to the age of 65 and can be extended in some cases.   Logically the longer the waiting period is, the lower the cost of insurance premium and vice-versa the longer the benefits period is the insurance cost is higher. There are many other options to choose from depending on the product selected and the service provider. Such options are residual or partial disability (more on this in future articles), future insurability protection, cost of living adjustment, and more.

Disability insurance is complex and requires a deep analysis for every client.

People have to become aware that some disability insurance cover in case of accident only and has many conditions in both the waiting and benefits periods.