November 27, 2019

Are you financially protected if you get sick or injured?

By Sheryl Smolkin

What happens if you get injured or sick and can’t work? Here’s how long-term disability (LTD) insurance can help.

Have you ever had an injury or illness affect your ability to work? 

According to our 2019 Barometer report, one in five working Canadians have recently experienced a serious accident or health event. (The Sun Life Barometer surveys Canadian’s attitudes towards their health and finances.)

The survey also found that among working Canadians: 

  • 25% experienced financial hardships due to an accident or health event and
  • 23% used up or reduced their savings to cover the cost of getting sick or injured. 

That’s why having adequate long-term disability insurance (LTD) during your working years is as important as insuring your life or your home. You may be fit and healthy right now, but the future is uncertain. With enough disability insurance, you could be adequately covered if you become sick or hurt and can't earn a living.
To start, you may want to look into what your employer has to offer when it comes to long-term disability insurance. Here are some frequently asked questions to consider first:

  1. Does your employer offer group long-term disability as part of their employee benefits package? Many employers do. Associations or industry groups may also offer group coverage to members. If you pay the full premiums for your group long-term disability coverage, your benefit payments would be tax-free.  
  2. How much could a group long-term disability plan cost you? Buying long-term disability insurance through a group plan at work is generally a lot cheaper than buying individual coverage. It usually covers a fixed percentage of your pre-tax earnings up to a maximum. For example, it could provide two-thirds of your salary up to $5,000 per month. There also may be a graded schedule of benefits, such as:
    • 67% of the first $2,500 of monthly pre-disability earnings;
    • 50% of the next $2,500; and
    • 40% of monthly earnings beyond that.

Any other benefits collected from sources listed in the policy (such as Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) disability benefits, workers’ compensation and automobile insurance) will be deducted from group long-term disability benefits.

  1. What’s the payment period for group long-term disability benefits? It’s typically two years if you can’t work at your own occupation. After two years, if you can’t work at any occupation, your benefits may continue for several more years or even up to age 65 if you have a permanent disability.
  2. Do you need a medical examination to qualify for the basic group long-term disability benefit? It’s not required. But some workplace policies allow employees to buy additional coverage. These policies may want you to take a medical exam or ask for extra information regarding to your health.
  3. Do group long-term disability premiums (monthly or annual fees) ever change? They can change annually when the employer’s policy renews. This depends on the group’s demographics and claims experience as well as disability trends in the market. Coverage ends if an employee leaves the company, retires or reaches age 65. Coverage may also end if the employer decides to discontinue its employee benefit plan.

Remember, disability insurance is designed to replace a portion of your income if you become disabled and can’t work. A disability can happen for a number of reasons, including an injury, a serious illness or a mental health issue.  And the duration of a disability can be either short- or long-term.

It’s also important to note that there are different kinds of disability insurance coverage. This can include group insurance plans from your employer, individual insurance plans and government plans such as workers’ compensation and pensions.

Want to know how much disability insurance is right for you? An advisor can help you select the coverage you need as part of your overall financial plan.

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