Disability Insurance Options

If you have the option of group or personal disability coverage here are some points to consider which outline the differences between group & individual policies.

Group Insurance through an Employer or Association 

  • may have Short Term Disability also known as Weekly Indemnity (W.I.), which would have a 1st-day injury and a 7-day sickness waiting period
  • the benefit period usually runs to a maximum of 120 days and in some cases 365 days if no Long Term Disability (LTD) option exists
  • Long Term Disability (LTD) usually starts when W.I. ends and can run for 5 years, 10 years, or to age 65 depending on the plan
  • costs are based on the average age of the group and usually increase slightly per year
  • usually pays out up to a maximum of 67% of salary up to a fixed maximum
  • benefits are paid monthly after the waiting period is met
  • covers for sickness, injury, or a debilitating mental health condition
  • definitions and benefits can be amended or canceled by the Insurer with notice
  • typically has the least attractive definition of disability of all the plans to keep costs down
  • rarely has other options like Lifetime Benefit, Cost of Living, or Return of Premium
  • for larger groups with more than 10 people, eligibility is not based on a health declaration, thus can be advantageous for those with health issues
  • good only for the time you are with that specific employer; it is not a portable product
  • there are some exclusions such as war, military service, and self-inflicted wounds
  • typically the least expensive option, however, the rates tend to increase annually.

 Personal Disability Policy (Limited Coverage) 

  • rates can be changed for an entire class, but they can not single you out individually for a rate increase
  • can be issued strictly for an accident with sickness as a Rider
  • limited benefit periods for certain soft tissue injuries, like backs
  • less favourable definition of disability more in line with group insurance
  • does not feature Return of Premium, but has limited other options such as Cost of Living
  • underwriting is less stringent as the Insurer is not as financially committed as they are to the more comprehensive package
  • greater number of exclusions including drug & alcohol abuse, Fibromyalgia, and mental health disorders such as depression or anxiety
  • premium is typically lower than a Comprehensive policy but slightly higher than a group plan

Personal Disability Policy (Comprehensive Coverage) 

  • rates are locked in for life at your present age
  • typically has a waiting period from 30 days to 1 year, and benefits are paid monthly after the waiting period is met
  • the benefit period can be from 1 year to age 65
  • covers all causes of disability
  • offers a full range of options including Lifetime Injury, Cost of Living, and Return of Premium
  • has the most favourable definition of disability
  • once issued it can be continued regardless of your future health or occupation
  • underwriting is very stringent and much more difficult to get compared to life insurance, because of the guarantees
  • typically it is the most expensive of the various options because you are paying for the guarantees and favourable definitions
  • some exclusions typically for war, participating in a riot, or crime

 Critical Illness Policy

  • relatively new “cousin” to the disability family of products and has been in Canada for the last 25 years
  • rather than pay out monthly, it pays out a tax-free lump sum upon diagnosis of any of 24 different medical conditions – cancer, heart disease, MS, Parkinson’s, loss of limbs, Alzheimer’s, blindness, etc.
  • premiums can be fixed in 10 or 20-year increments. They can also be locked into age 75 or even age 100
  • various options including Return of Premium, and 2nd Event Payout
  • very stringent disability underwriting as your personal health history along with your immediate family’s history is evaluated
  • priced similarly to a personal disability policy but based on a premium term such as 10 Year Renewable or Level to age 75 (or 100)