A third of all people now aged 35 will be unable to work for at least six months before reaching age 65.
Having adequate disability insurance is crucial. It can mean the difference between low-income future employment, and having the funds needed to prepare for a new career. Your family can be financially ruined, or financially secure.
Close to eight million Canadians have disability insurance coverage through group plans. However, many people are not covered adequately and some are not covered at all. There are various limits in group policies. The plan may pay only a percentage of your gross salary, or it may have a maximum payout that doesn't meet your needs. It may only cover your inability to perform "any" work, rather than your "own occupation," or have a restrictive definition for partial disability.
Group plans also generally terminate when you leave an employer for any reason. This can be a major cause of concern for many Canadians. Even if you start a new job right away, you may have to wait several months to join your new employer's plan (assuming there is one).
Nearly 2.3 million Canadians, or almost 17 per cent of the total workforce, are now self-employed. Workers' compensation programs or employment insurance program provide basic disability coverage. However, these plans provide limited coverage, with relatively low benefits.
Most self-employed people need additional income protection insurance. Older self-employed persons may find it difficult and expensive to obtain individual disability insurance. It's obviously better to buy such a policy when you are younger.
What is a disability?
Look carefully at how your policy defines a "disability." The best policies, and the more expensive ones, offer "own occupation" or "regular occupation" coverage. In these policies, disability is defined as being unable to perform the duties of your usual job. People in professions demanding special education or experience should look for this type of policy.
Under some policies, you are disabled only if you are unable to work at any job for which you are qualified by education, training, or experience. This is an "any occupation" definition. The least comprehensive policies cover only "total disability," or the inability to work at any job at all.