Choosing disability insurance

There are several key policy features that you’ll need to consider when buying disability insuranceDisability insurance Insurance that gives you income in case you get sick or hurt and can’t work.+ read full definition. The definition of disability is the most important because it describes the circumstances in which you’re entitled to receive disability payments.

3 common definitions of disability

1. Any occupation coverage

You’re considered disabled if you’re unable to work at any job for which you’re qualified by reason of education, training or experience. This is the most restrictive definition of disability because you do not receive payments if you’re able to do another (potentially lesser) job that you’re qualified for, even if you can’t do your own.

2. Regular occupation coverage

You’re considered disabled if an illness or injury prevents you from performing the duties of your regular job and you are not working elsewhere. This is a less restrictive definition of disability because it links disability to your job.

3. Own occupation coverage

This coverage provides payments when you are disabled in your regular job, whether or not you are working elsewhere. This is the most favourable definition of disability to have in a policy.

Other features to consider

1. Waiting period

Your policy’s waiting period – the time before benefits start being paid – can vary from 30 days to a year or more. The longer your waiting period, the lower your premiums. If you think you can survive financially on other sources for a few months, you can save money on your premium by choosing a longer waiting period.

2. Payment period

Some policies pay benefits for 2 or 5 years; others continue to pay until age 65. Age 65 is the most common benefitBenefit Money, goods, or services that you get from your workplace or from a government program such as the Canada Pension Plan.+ read full definition period because it allows payments to be made for your entire working career. Consider shorter periods only if premium costs for longer coverage are unaffordable.

3. Option to increase coverage

Ideally, your plan will offer what’s known as a “future insurability option”. This is a valuable benefit because it allows you to increase coverage at regular intervals as your income rises – without the need for proof of good health.

Caution

How disability is defined in the policy will affect the payments you’re entitled to. For example, some policies will only make payments if you’re unable to perform all functions of your job, but not if you’re able to do another (potentially lesser) job.

Take action

Reduce the cost of disability insurance by choosing:

  • a lower coverage amount.
  • a longer waiting period.
  • a shorter benefit period.
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