In our series on insurance, we’ve discussed the different types – from Term Insurance to Permanent Insurance – and life insurance and estate planning. In this week’s article, we’re going to cover an often overlooked type of insurance: Disability.
What is Disability Insurance?
While most people wouldn’t hesitate to buy home or auto insurance, what about your most valuable asset: your ability to earn a paycheque? Home and auto insurance protects your properties against unfavorable circumstances and life insurance protects your family financially if you pass away. What role does disability insurance play? It protects YOU financially if you become very sick, hurt or even disabled and are unable to work. It provides a percentage of your monthly income which allows you to meet your monthly obligations while you recuperate. It’s an often overlooked type of insurance because most people either don’t imagine themselves ever being unable to work or don’t see the importance of something they may “never use”. But guess what? Life happens! You may be covered under your employer’s group disability coverage, but it may not be sufficient when you need it. Are you still not convinced disability insurance is important? Here’s a fact that may change your mind: one in three individuals will be disabled for 90 days or longer at least once before age 65. Now if that is not staggering to you, consider this, recent stats also indicate that 47% of people still live paycheque to paycheque and would be in dire financial straits if their pay was delayed for more than a week. This should make disability insurance an even more crucial part of your financial plan.
Group Disability Insurance
Similar to life insurance, disability insurance comes in two varieties: individual and group. If you’re a full-time salaried employee, you most likely have group disability insurance. While group disability insurance offers some protection, it is often a percentage of your income and can leave you needing more. The majority of group disability insurance policies only protect 60 percent of your paycheque.
That’s not the only area where group disability insurance comes up short – the benefits may only last for two years. That’s fine if you’re able to work after two years, but what if you aren’t? You’re going to have to find other means to support your family financially. You also might not even be covered for short-term disability at work. That means you’ll have to wait at least six months for your long-term disability benefits to kick in. Even if you’re covered by group disability insurance, you may not know what your coverage is. It’s important to take the time to review your group disability insurance policy and find out if your coverage is enough.
Individual Disability Insurance
Once you’ve reviewed your group disability insurance policy and you realize it’s not enough, you should consider buying individual disability insurance. Unlike group disability insurance, the majority of individual disability insurance policies offer protection for “partial disabilities” up to 65 years old. Why are partial disabilities important? Unless you’re fully disabled, you’ll more than likely not be able to collect benefits under a group policy. Another advantage that individual policies have over group policies is that they’re portable, which means it’s yours and stays yours until whenever you need it. With a group policy, if you leave your job, you won’t have any coverage until you find a new job. This leaves you vulnerable if you become disabled during this time. One other short fall of a group disability coverage is that you may only be covered if your illness or injury is work-related or happens on the job.
For an unbiased review of your current group disability coverage, contact our office to speak with one of our advisors. You can request the policy details from your company HR. Similar to the other types of insurance, disability insurance coverage is an ongoing process that needs to be constantly reviewed. If you have any questions about this article or disability insurance, feel free to contact our office and let us help you to fully weigh your options.