Disability Insurance

What is Disability insurance?

Disability insurance offers income protection to individuals who become disabled for a long period of time, and as a result can no longer work during that time period. A disability – whether it’s sudden or because of a degenerative condition can rob you of your ability to earn a living. Disability insurance is a type of coverage that gives you protection against the chance of losing income if you become disabled and you are not able to pay your expenses. There are two types of disability provided once you are disabled. Short term disability(STD) and Long term disability (LTD). Most people recognize the need for life insurance, but many do not understand the need for disability insurance. The fact is, when you are disabled because of an illness or injury, your income stops – but your bills don’t. Disability benefits typically replace up to 60 to 85 per cent of your regular income. Some plans pay tax-free benefits while others are taxable. You can receive disability benefits from more than one source, but these plans are usually coordinated to make sure that all the benefits you receive are not greater than your normal income.

Short Term Disability :

This coverage begins when your sick leave runs out. Most short term disability plans pay a percentage of normal earnings – for example, 70 per cent – up to a certain length of time. Typically, this can be up to 15, 26 or 52 weeks. Some employers, however, choose not to provide short term disability benefits, relying instead on Employment Insurance (EI) disabilitybenefit but EI benefits does not pay you for longer time and it is depending on the situation.

Long Term Disability (LTD) :

Long term Disability plan will start when your short term disability (or EI) benefits run out. Typically, the goal is to replace 60 to 70 per cent of your normal income, but there is always a maximum dollar amount (e.g., $5000 per month). LTD benefits are usually paid for up to two years if you are unable to perform your regular occupation. After that period of time, you may have to be disabled from performing any occupation for the benefits to continue.
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