Essentials of disability insurance coverage

Protecting your income through injury or illness

Most people never doubt the importance of life insurance. Yet many overlook disability coverage. Disability insurance protects your income if an illness or injury prevents you from working. Full or partial recovery from an injury is common. But without adequate insurance, even those temporarily disabled can exhaust their savings.

Whether you're insured on your own or through a benefits plan, here are a few essential things to know about your coverage.

On-the-job protection

Fortunately, most people who work are covered by their employer's group disability insurance. If this is the case for you, take the time to find out exactly what medical conditions your plan does and doesn't cover as well as any potential limitations to coverage.

Things to consider when looking at your disability insurance plan:

1. Waiting period

Some plans start paying out within 30 days following an injury or illness, while others have a waiting period of six months. If you were to develop a chronic condition with flare-ups, find out if the waiting period would apply each time.

2. Amount of benefit

Disability policies pay either a set amount or a percentage of your income, often ranging between 40% and 80%. Some plans pay out more initially, and then reduce the amount. Others are indexed to inflation.

3. Tax status

If you pay your own premiums in a workplace-sponsored insurance plan, benefits are not taxable. If your employer pays the premiums, however, any income would be taxed.

4. Definition of disability

The most comprehensive plans cover you if you can no longer work in your chosen occupation. Other plans cover you only if you can no longer work in any occupation.

5. Duration of benefit

Options generally range from two years to age 65, or retirement. Professional advice can guide you through the fundamentals of disability coverage or highlight how a plan can be tailored to your needs.

6. Uncommon coverage

Are you covered for illnesses affecting your mental health? According to Health Canada, one in five Canadians will experience a mental illness during his or her lifetime. What if you develop chronic pain? It is important to know whether you are covered for back pain, or other incapacitating illnesses that are difficult to diagnose, such as fibromyalgia or chronic fatigue syndrome.

On your own

If you're self-employed, disability insurance is even more critical because you have no employee benefits to fall back on. As more insurers recognize the growing trend towards self-employment, new types of disability plans are helping to meet the special needs of home-based and part-time workers and business owners.

A plan that works for you

Even if you are covered by a group plan at work, you can't assume it's adequate to meet your needs. Benefits might run for just two years and be capped well below your income level. And coverage usually ends if you leave your job.

For complete protection, you may want to get a bare bones individual policy now that will let you boost coverage if you need it in the future, without a new medical screening.

A top-quality individual disability insurance plan can be used on its own, or in combination with a group plan, to provide secure, lasting protection in the event of a wide range of physical and mental conditions.

Professional advice can help make you aware of the strengths and limitations of your coverage, and fill any gaps. Talk to a BlueShore insurance advisor about disability insurance that meets your needs.