Disability Insurance Vancouver, BC
More than one in three adults will suffer a serious disability before age 65. Contrary to the cliché, our single biggest asset is not usually our home but rather our ability to earn an income. Disability insurance pays a monthly benefit in the event that one is unable to work due to illness or injury. Some people may have adequate disability insurance through their employer but those who do not need to consider a private policy.
If you were unable to earn an income would you and/or your family suffer? If the answer is yes and you do not have coverage through your employer than you need long term disability insurance. Disability insurance is especially important for single people.
More than one in three adults will suffer a serious disability before age 65. Contrary to the cliché, our single biggest asset is not usually our home but rather our ability to earn an income. Disability insurance pays a monthly benefit in the event that one is unable to work due to illness or injury.
Of the 3 main types of insurance that insure the person, life, critical illness and disability insurance, disability insurance is by far the most complicated. It’s really important that you understand what you are buying and that it will pay you when you need it.
How it works
Generally long term disability policies will have a waiting period of 90 days. This means that you must be off work on a total or partial basis for at least 90 days to claim. There are short term policies that will pay immediately but they are usually only offered by large employers. Most people could last 90 days with no income, however 90+ days gets difficult.
Benefit periods are typically 2 years, 5 years or to age 65. This means that even if disability persists that benefits will be cut off once the benefit period is up. Therefore, it’s recommended to have a disability that covers you until age 65.
Injury only vs. Injury and illness policies
Some policies will only cover injury and/or accidents. These polices are really not very comprehensive. With few exceptions (maybe young men with high risk professions or lifestyles) the vast majority of claims are due to illness. For this reason a policy that will insure you against any cause of disability is advisable.
With life insurance (at least with term life) all polices are very similar. It’s really quite simple: If the insured dies the life insurer pays the death benefit. Disability insurance does not work this way. There can be complicated exclusions as to under what scenarios they will pay. For this reason it’s very important that you understand what you are buying and work with an advisor who is experienced with disability insurance.
Underwriting for disability insurance
Disability underwriting is threefold: occupational, income qualification and medical. Occupational Some professions are inherently more risky than others. For example, an electrician or construction worker is more likely to go on claim than is a doctor or software engineer. The polices are priced accordingly.
Occupation classifications for disability insurance – how much does it cost
The higher risk occupations are much more expensive to insure; some are even uninsurable. Below are examples of how much a 35 year-old male (females will pay a little more), non-smoker would pay for basic injury and illness coverage to age 65. These are just examples to use as a benchmark. Often the premium can be discounted due to experience in your field or membership in professional associations. Please ask us for an accurate quote to suit your needs. email@example.com
|Monthly premium per $2,500 of benefit
|Underwater welder or Stunt person
|Landscaper or Unskilled labourer
|Plumber or Electrician
|Registered massage therapist or Acupuncturist
|Physio or Chiro
|Doctor or Accountant or Lawyer or Software Engineer
A rule of thumb is that you cannot be insured for more than 2/3 of what you earn when you are working. This is just due to moral hazard. Many people would not go back to work making more or even the same than they were before they are working. Usually the insurer will request the last 2 years tax returns for self-employed or incorporated professionals or a letter of employment for full-time employees.
Medical underwriting for disability insurance
The underwriting for disability insurance is very thorough. Often we see exclusions that won’t be covered. Exclusions are disclosed after the underwriting process. You will be told of the exclusions and it is your choice as to whether you accept the policy.
Generally if you have a had a prior injury that could lead to a claim it will be excluded. The most common exclusion being back/neck injuries. We also see knee, shoulders etc. quite frequently.
Some high quality policies will cover conditions such as depression and anxiety. But if there is any prior history (even a few sessions of counselling) an exclusion for any mental health disorder is likely. On the high qualify policies as much as 40% of claims are now for mental health disorders.
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Who needs life insurance?
Ask yourself this question: Would anyone you care about suffer financially in the event of your premature death? If you have dependant children, the answer is yes. If you have a spouse, the answer is probably.
Who does not need life insurance?
If you are single you probably do not need life insurance. Usually the death of a single/childless person does not leave anyone worse off financially. A single person with a mortgage may still NOT need life insurance as their family would still inherit equity in their property. Single people need to prioritize critical illness and disability insurance.
How much life insurance do I need?
The primary purpose of life insurance is to pay off debts (especially a mortgage) and replace income for dependants of the deceased. We do a needs analysis to determine how much money your family would need to maintain their standard of living in the event of your premature demise. A commonly used guideline for someone in their 30s is 20 times after-tax annual earnings.