One in three working Canadians will experience a period of disability lasting longer than 90 days during their working lives (RBC Insurance, 2015).
There are many kinds of disability insurance. It is important to know their strengths and weaknesses:
- Coverage under a group benefits plan provided for by an employer or an association. This is low-cost coverage, but the definition of disability is usually narrower than with an individual plan. In addition, it is non-contractual, and can therefore be terminated at any time, and if you leave your job, some plans can be converted to individual plans, but at very high premiums.
- Coverage under a government plan. The coverage is even narrower here. For example, there is disability coverage under the Canada Pension Plan, but only if the disability is “severe and prolonged”, thus excluding serious but temporary disabilities. If your employer is covered by Workers Compensation, then you will be covered for a work-related injury or illness, but not any other injury or illness, which is far more likely to occur. Finally, Employment Insurance may cover you, but only for a short time.
- Coverage under your auto policy. Covers car accidents only, and has further limitations.
- Coverage under an individually-owned disability insurance policy. You can avoid all the above weaknesses, and others.
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