Decide If You Need Long Term Disability Insurance

FAQs for Long-Term Disability Insurance

How much does long-term disability pay Canada?

Typically, long-term disability insurance benefits aim to replace a percentage of your pre-disability income. Insurance policies often provide benefits that range from 60% to 70% of your pre-disability earnings, although some policies may offer higher or lower percentages. However, the amount of long-term disability insurance benefits you can receive in Canada varies depending on several factors, including the terms of your insurance policy, your pre-disability earnings, and the definition of disability outlined in your policy. 

In some cases, disability insurance benefits may be provided for a maximum duration of two years if you are unable to resume your previous job due to disability. However, after the initial two-year period, continued benefits may be contingent upon your inability to work in any occupation. 

It is important to review the specific details of your disability plan to understand the duration and conditions for receiving benefits. To determine the exact amount of long-term disability benefits you would receive in Canada, it is best to consult your insurance policy or reach out to your insurance provider for specific details regarding your coverage.

How much does disability insurance cost in Canada?

Generally, long-term disability insurance rates are calculated as a percentage of the insured person’s income or a fixed amount based on their occupation. The premium rate typically ranges from 1% to 3% of the individual’s annual income. 

The cost of long-term disability insurance in Canada can vary depending on several factors. These factors include the insurance provider, the specific policy chosen, the coverage amount, the waiting period (also known as the elimination period), the benefit period, the occupation, and the individual’s health and age.

To get an accurate cost estimate for long-term disability insurance, contact Insurance Hero today to discuss your specific needs and circumstances. We’ll help you understand your options and provide personalized quotes based on your specific requirements.

What is a long-term disability?

Long-term disability refers to a physical or mental condition that impairs an individual’s ability to work or perform substantial tasks for an extended period of time. It is a disabling condition that typically lasts for a prolonged duration, often beyond a few months or even years.

A long-term disability can result from various causes, including accidents, illnesses, injuries, chronic health conditions, or mental health disorders. The impact of a long-term disability can vary, ranging from partial limitations on work capabilities to complete inability to perform any occupation.

Long-term disability can have significant financial implications as it may lead to a loss of income and increased medical expenses. This is why individuals often seek long-term disability insurance coverage to provide financial protection and income replacement in the event of a long-term disability.

What is not covered by long-term disability insurance?

Long-term disability insurance in Canada typically provides coverage for disabilities that prevent an individual from performing substantial tasks or work. However, certain limitations and exclusions may apply, which can vary depending on the specific insurance policy. Here are some common long-term disability insurance exclusions that may not be covered:

Pre-Existing Conditions

Some policies may exclude coverage for disabilities resulting from pre-existing medical conditions that existed prior to the effective date of the policy or during a specified waiting period.

Self-Inflicted Injuries

Disabilities resulting from self-inflicted injuries, including suicide attempts, are often excluded from coverage for a specified period of time.

War or Criminal Activities

Disabilities arising from war, acts of terrorism, criminal activities, or engaging in illegal activities are typically excluded from coverage.

Substance Abuse or Addiction

Disabilities caused by substance abuse, including drug or alcohol addiction, may be excluded from coverage or have limitations on benefits.

Non-Medical Conditions

Certain non-medical conditions such as pregnancy, cosmetic surgery, elective procedures, or fertility treatments may not be covered.

It’s important to carefully review the terms and conditions of your specific long-term disability insurance policy to understand the exclusions, limitations, waiting periods, and definitions of disability that apply to your coverage.

Are long-term disability benefits taxable?

In most cases, if you personally cover the full cost of your disability premium, the benefits you receive during a disability will be exempt from taxes. This can help ensure that your income while on disability remains closer to your regular take-home pay.

However, if your employer contributes towards the disability premium or covers it entirely, the benefits you receive in the event of a long-term disability will be subject to income taxes. In such cases, the taxable portion of the benefits may impact the overall amount of income you receive during your disability period.

What are the types of disability insurance?

Regular or own occupation

The term “regular or own occupation” in a disability plan refers to the condition where you receive benefits if you are unable to perform the primary duties of the job you held when your disability initially occurred.

Under this definition, you will continue to receive benefits even if you can work in a different job than the one you had before your disability. The determination is typically based on your training, experience, and education. However, it’s important to note that certain policies may restrict or reduce your benefits if you start working in a different job.

Any occupation

Under an “any occupation” plan, the definition entails receiving disability benefits only if you are completely unable to work. In other words, your illness or injury must hinder you from performing the duties of any job for which you are reasonably qualified.

In this type of plan, you will not be eligible for benefits if you are able to work in a different job compared to the one you had prior to your disability, taking into account your training, experience, and education.

The definition of disability can differ among insurance companies and even vary across different insurance plans offered by the same company. It’s important to note that some disability plans may include a requirement for participation in a rehabilitation program if it is deemed beneficial for your return to work.

To understand the specific definition of disability outlined in your insurance plan, reach out to your insurance broker or advisor. They will be able to provide you with precise details regarding the definition of disability within your plan.

How does private Canadian disability insurance work?

Private Canadian disability insurance acts as a financial safety net, replacing a portion of the individual’s income when they are unable to work due to a disability. Policies can be purchased directly from insurance companies or through licensed brokers or agents, with regular premium payments to maintain coverage.

Policy terms include a waiting period, typically the initial period after the disability occurs, during which no benefits are paid. Once the waiting period is over, regular monthly benefits are provided until either the disability ends or the policy’s maximum benefit period is reached.

The benefit amount is predetermined as a percentage of the insured person’s pre-disability income. The policy’s definition of disability specifies the criteria for qualifying as “disabled,” whether it’s the inability to perform one’s own occupation or any suitable occupation.

When considering private disability insurance, it is vital to carefully review policy details such as waiting periods, benefit periods, and the definition of disability to ensure it aligns with your specific needs. 

How long can you collect long-term disability insurance?

Disability plans and their terms can differ from one plan to another. In some cases, disability benefits may be available for a maximum of two years or five years if you cannot resume the job you held prior. 

With a “regular or own occupation” plan, after the designated two- or five-year time period, the disability policy often transitions to the “any occupation” definition if you are unable to work any type of job.

Long-term disability benefits for an “any occupation” plan will persist as long as you meet the definition of disability outlined in your policy or until the specified coverage period concludes, typically at age 65. However, the duration of coverage can differ among policies, so it’s important to review your specific plan to determine the length of time benefits will last according to its terms.