Disability Insurance is to cover the portion of your earned income that would be lost due to an injury or illness. There are two types of disability policies: Short-Term Disability (STD) and Long-Term Disability (LTD).
Short Term Disability Plans are designed to replace a percentage of pre-disability employment earnings for periods of less than one year. The plans are coordinated with sick leave benefits, employee benefits and Employment Insurance. Short-Term Disability policies (STD) have a waiting period of 0 to 14 days with a maximum benefit period of no longer than two years. They are also usually harmonized with Long Term Disability plans, so there is no interruption in benefits, should the disability extend beyond the term.
Long Term Disability plans focus on longer periods of disability. It will replace a percentage of the beneficiary’s pre-disability income amount and the benefit period can last up to age 65. Long-Term Disability policies (LTD) have a waiting period of several weeks to several months with a maximum benefit period ranging from a few years to the rest of your life.
Some employers offer disability insurance through their Group Plan Benefits. It is important to check if you have a group disability coverage and if you have one, how much and how long is your coverage.
Who Needs Disability Income Insurance?
If you already have enough money to live on for the rest of your life, you probably don’t need disability insurance.
If you still have a need for income, then you have a need for disability insurance
Working individual earning an income should have disability insurance. Self-employed people, and employees not covered by group benefits, should have disability coverage. If you have coverage through your employer, it is important to know the details of the plan.
A disability due to an injury or illness can happen to anyone at any given moment and can change your life forever.
What are the types of disability insurance?
Disability policies have two different protection features that are important to understand.
- Non-cancelable
Non-cancellable means the insurance company except for non-payment of premium cannot cancel the policy. This gives you the right to renew the policy every year without an increase in the premium or a reduction in benefits.
- Guaranteed renewable
Guaranteed renewable feature gives you the right to renew the policy with the same benefits and not have the policy canceled by the company. However, your insurer has the right to increase your premiums as long as it does so for all other policyholders in the same rating class as you.
In addition to the traditional disability policies, there are several options you should consider when purchasing a policy:
- Additional purchase options:
Your insurance company gives you the right to buy additional insurance at a later time for an additional cost.
- Coordination of benefits:
The amount of benefits you receive from your insurance company is dependent on other benefits you receive because of your disability. Your policy specifies a target amount you will receive from all the policies combined, so this policy will make up the difference not paid by other policies.
- Cost of living adjustment (COLA):
The COLA increases your disability benefits over time based on the increased cost of living measured by the Consumer Price Index. You will pay a higher premium if you select the COLA.
- Residual or partial disability rider:
This provision allows you to return to work part-time, collect part of your salary and receive a partial disability payment if you are still partially disabled.
- Return of premium:
This provision requires the insurance company to refund part of your premium if no claims are made for a specific period of time declared in the policy.
- Waiver of premium
This clause means that you do not have to pay premiums on the policy after you’re disabled for 90 days.
Critical illness insurance should be looked at as an investment. Many people are of the belief that illnesses only happen to others. Yet, most people today know of someone who has been diagnosed with Cancer or had a Stroke or Heart attack.
As a healthy individual, it is difficult to envision how a critical illness will impact your life and the lives of your loved ones. The reality is you have a better chance of surviving a critical illness, than you do of dying from it. The question is, “will you be able to survive financially?”
Critical Illness Insurance was designed to help people financially, when they became seriously or critically ill. Upon diagnosis a lump sum benefit is paid to the policy owner.
With options such as return of premiums, second event riders & family counselling, Critical Illness insurance should be included in every person’s financial plan.
Critical Illness is designed to provide financial stability if you are diagnosed with a covered life-altering illness. If you are diagnosed with a covered illness, you will receive a full tax-free lump sum payment. It is financial cushion that will be there for you when you most need it.
Most Insurance companies provide critical illness coverage further with our Early Assist benefit and the Best Doctors program.
What is 'long-term care'?
Because of old age, mental or physical illness, or injury, some people find themselves in need of help with eating, bathing, dressing, toileting or continence, and/or transferring (e.g., getting out of a chair or out of bed). These six actions are called Activities of Daily Living–sometimes referred to as ADLs. In general, if you can’t do two or more of these activities, or if you have a cognitive impairment, you are said to need “long-term care.”
Long-term care isn’t a very helpful name for this type of situation because, for one thing, it might not last for a long time. Some people who need ADL services might need them only for a few months or less.
Many people think that long-term care is provided exclusively in a nursing home. It can be, but it can also be provided in an adult day care center, an assisted living facility, or at home.
Assistance with ADLs, called “custodial care,” may be provided in the same place as (and therefore is sometimes confused with) “skilled care.” Skilled care means medical, nursing, or rehabilitative services, including help taking medicine, undergoing testing (e.g. blood pressure), or other similar services. This distinction is important because generally Medicare and most private health insurance pays only for skilled care–not custodial care.