Disability Insurance Policies

Understanding Disability Insurance

Disability insurance is structured to provide financial compensation in the event that an individual is disabled or injured and unable to work. This insurance can be offered under your employer as a workplace benefit. The employer may choose to collect contributions to offset the payouts.

Who Is It Designed For?

This type of insurance is tailored both for groups and individuals. Policy holders can choose between short term and long term policies. Short term policies generally have a maximum benefit period of not more than two years, and a waiting period of up to 14 days. The maximum benefit period of long term policies may range from several years to a lifetime. The waiting period is normally a few weeks to several months.

How Does It Work?

Most insurance companies will not offer a 100 percent replacement of your earnings. Most policies will provide a payout of up to 70 percent to cover you for the period you will not be in a position to work. If your employer’s plan does not provide a cover of up to 70 percent, then it is wise to obtain a supplemental coverage through an individual policy. The advantage of an individual policy is that the benefits received will be tax-free, while the benefits received from an employer are tax deductible. It is important to note that individual plans are more expensive when compared to group plans.

TYPES OF COVERAGE:

- Group Short Term Disability

Short term disability programs offer partial income for disabilities that are non-work related. In most cases, these plans only cover certain employees. The employer may state that the benefits will only be paid to workers to work at least 30 hours every week for a particular period of time.

- Group Long Term Disability

Long term policies provide income protection to cover physical illness, pregnancy, injuries or mental disorders. The insurer may offer a payout of up to 70 percent of one’s income. The waiting period may range from 4 weeks to two years.

Benefits of Disability Insurance

• Income protection of up to 70 percent
• Policies are tailor made to suit individual needs
• Added features may include: assisted living benefit, child care benefit and employee assistance program.


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