As you get ready for your next vacation abroad or out of province — keep travel insurance in mind. It can help protect you and your family while you’re away.
February 16, 2024
How will you pay to live if you can't work? Here's how disability insurance can help
By Sun Life Staff
Most of us don’t think of our income as our single biggest asset — but it is. Disability insurance is designed to protect it.
Collette was in her early 30s when someone she knew had a terrible accident while hiking. A rock fell on his head, and he lost the ability to walk and talk. "He was in the hospital for months." He became permanently disabled and unable to work."
It made her wonder what would happen if she faced such a life-changing accident. "I began to wonder how would I survive? How would I pay my bills? With inflation, and the cost of everything on the rise, it made me even more worried.” Collette recalled that it was a wakeup call that inspired her to buy disability insurance coverage.
What is disability insurance?
Disability insurance protects your greatest asset – your earning power. It helps cover your loss of income by providing you with a monthly benefit. Your insurance will pay if you're unable to work for a certain period of time due to an accident or illness.
There are two types of disability insurance, short-term and long-term:
- Some employers offer short-term disability coverage as an employee benefit, meaning it's part of your employee benefits. Short-term disability insurance generally only covers you for the first 120 days of a disability.
- Long-term disability coverage is available both individually and through some employers' group plans. Long-term disability insurance generally covers you from the 120th day (or other specified waiting period) to traditional retirement at age 65.
Do you need disability insurance?
Disability insurance isn't just for the self-employed. You may have group disability insurance coverage at work (often called long-term disability or LTD). But you need to be aware of what your group plan offers. This means you'll have to find out:
- How your group plan defines a disability
- What conditions the plan covers and
- How much and how long you can expect to receive income
Is the amount of money you expect to get from your group long-term disability insurance enough to cover you in case you get sick or injured? If it's not enough, then you may want to consider getting your own disability insurance.
Also, Worker's Compensation only covers certain types of workers and work-related accidents. Let’s look at an example. Let's say you fall off your bike on the weekend and can't work for a long time. Since it wasn't a work-related injury, it's not covered under Worker's Compensation.
Plus, unemployment insurance sickness benefits only cover up to a maximum of 15 weeks. What happens if you can't work after it runs out? This is where disability insurance (along with other potential sources of income) can help to make ends meet if the need arises.
How does disability insurance differ from other insurance?
Disability insurance is often confused with two other types of health insurance. Here's a breakdown of what each one has to offer:
- Disability insurance helps replace part of your income if you can't work because of an illness or injury.
- Personal health insurance helps pay for health-care expenses not covered by your provincial/territorial or employer plan.
- Long-term care insurance helps cover the cost of care for you or a loved one over an extended period.
- Critical illness insurance helps cover the costs of coping with and recovering from a covered critical illness.
Which type of health insurance is right for you?
The right type of insurance for you depends on your specific needs and life stage. Perhaps your needs are simple and you only need one type of insurance. Or maybe you have a large family or multiple people who rely on you financially. In some cases, you may need more than one type of insurance to help protect yourself and your loved ones.
Collette says she felt better about riding her bike knowing she had disability insurance in place. And now that she's a mother of two, she's considering increasing her coverage.
But she also notes that she made sure to save a little extra money in an emergency fund. This can help cover expenses over the first few months before her policy kicks in.
Need help figuring out what type of insurance is right for you? You may want to talk with an advisor for help. An advisor can:
- Discuss all your insurance options
- Answer questions you have to help you understand your options and
- Help you figure out what type of coverage makes the most sense for you
An advisor can also help you build life insurance into your overall financial plan. This can be especially helpful if your financial picture is complicated. For example, maybe you own a business or you're self-employed. Or, you may have a blended family. Or, if you want to use life insurance to leave money for your children.
This article is meant to provide general information only. Sun Life Assurance Company of Canada does not provide legal, accounting, taxation, or other professional advice. Please seek advice from a qualified professional, including a thorough examination of your specific legal, accounting and tax situation.
