What is Disability Insurance?

Disability insurance can help protect you and your family from an unexpected illness or accident that leaves you unable to work and earn an income.

Generally, disability insurance replaces between 60% and 85% of your regular income, up to a maximum amount, for a specified time if you:

- temporarily can't work
- are permanently disabled due to an injury or illness

Permanent refers to the nature of the disability. It does not mean that you'll get benefits for the rest of your life.

Many employers offer disability insurance. However, you can get your own disability insurance plan through a life and health insurance agent.

If you're self-employed, you can also get disability insurance that will cover many of your business expenses if you're unable to work.

what to consider when buying disability insurance

If you're considering disability insurance, make sure you:

- check with your employer to see if you already have group disability coverage with your employer's plan
- shop around, especially if you're considering private disability insurance

Consider group insurance offered through a union, guild, or professional or alumni association. Premiums for this type of coverage usually increase as you get older. You'll need to renew your insurance every few years.

Definition of disability

The definition of a disability can vary between insurance companies. The definition can even vary between different insurance plans from the same company.

Some disability plans may also require you to take part in a rehabilitation program if they can help you get back to work.

Check with your insurance plan administrator or insurance agent to learn your plan’s definition of disability.

Any occupation

The definition of “any occupation” plan means you'll receive disability benefits only if you're unable to work at all. This means your illness or injury prevents you from performing the duties of any job for which you're reasonably suited.

You don't qualify for benefits if you can work in a different job from the one you had before your disability, based on your training, experience, and education.

Regular or own occupation

The definition of "regular or own occupation" plan means you'll receive benefits if you're unable to perform the main duties of the job you had at the time the disability started.

You'll still receive benefits even if you can work in a different job from the one you had before your disability, based on your training, experience, and education. Some policies don't allow you to get benefits, or may reduce your benefits if you begin working in a different job.

In group policies, it's common that policies have regular or own occupation plans for a specified period. At the end of the specified period, usually after the first 2 or 5 years, the disability policy will often change to any occupation definition.

Own occupation plans that never change in the definition are often purchased individually and usually cost more than any occupation plans.

You may want to consider your own occupation plan if you have a specialized occupation that would require you to take a significant pay cut in order to work in another field.

Disability insurance benefits and taxes

Generally, if you pay the entire amount of the disability premium yourself, your disability benefits will be tax-free. This may bring your income while on disability closer to your current take-home pay.