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Best Life Insurance for People With Disabilities: Our Top Picks

Have you considered what might happen to your earnings if you couldn’t work due to an injury or illness? In such a scenario, you might incur extra expenses due to treatment costs in addition to your standard recurring monthly expenditure. The financial burden could become debilitating very quickly.

Disability insurance provides a level of protection for such unexpected situations. In this blog post, you’ll learn more about life insurance for people with disabilities in Canada and why you need it.

What Is Disability Insurance?

Disability insurance is a policy that provides you with partial income when you get too sick or injured to work. Most people think of disabilities as ailments that lead to loss of limbs or mobility. However, conditions like arthritis and heart problems can affect your income-earning potential—and WSIB doesn’t cover most of them.

Insurers define disability in different ways, but there are two main distinctions.

“Any occupation” disability insurance pays out disability benefits if you can’t work in any capacity after sickness or an accident. Thus, you wouldn’t qualify for benefits if you can undergo training to take up a different job in line with your experience, training, or education. 

For instance, if you have a heart condition that makes climbing a flight of stairs a few times a day dangerous, moving to a role that puts you behind a desk is a practical option. Thus, the insurance provider wouldn’t pay out disability benefits. 

“Own occupation” disability insurance pays out disability benefits if you cannot return to the job you previously held following illness or injury. These insurance plans are sold individually and often have higher premiums.  

These policies are best if you work in a specialized field and moving to another occupation would require you to take a significant pay cut.

Should You Buy Life Insurance for People With Disabilities?

According to the Canadian Life & Health Insurance Association, around 33% of Canadians (one in three) will be disabled for 90 days or more before age 65. Considering the statistics, buying disability insurance is a sound financial decision.

Disability can last years or months. Therefore, disability insurance can provide a financial buffer when you can’t earn income to take care of your mortgage and other recurring bills. 

Disability insurance is not only for people working in construction. A network engineer who suffered a stroke can forget how to set up or implement network configurations. Depression can occur after a traumatic event, making it hard for a desk worker to function daily. In fact, according to this publication by Groupenroll.ca, workplace stress in general can contribute to the onset of mental illness.

Therefore, you should buy life insurance for people with disabilities if you rely on your work income to take care of your expenses. It’s the best way to ensure that you continue receiving partial income if you end up too sick or injured to work.

The Types of Life Insurance for People With Disabilities

The Canadian market offers two main types of disability insurance:

Short-Term Disability Insurance

Short-term disability insurance typically runs for six months. Some employers provide the policy to workers. In this case, you would have to use up the sick or vacation time first before your short-term disability would start to count. Most short-term disability insurance policies pay out 70% of your income.

You can purchase yours independently if your employer doesn’t provide the policy. Workers without short-term disability insurance might qualify for the Canadian Employment Insurance (EI) sickness benefits. 

Long-Term Disability Insurance

Long-term disability insurance policies kick in after you have taken advantage of EI, short-term disability, and sick leave benefits. Most of these policies last up to two years. They replace 40-70% of your income, with maximums set at $5,000 per month.

Some policies may continue to pay out after two years if you can’t work in any occupation.

Types of Disabilities That Will Qualify You for Disability Insurance

When discussing disability insurance, most people believe it’s only applicable to catastrophic conditions like a debilitating stroke or paralysis from a car accident. However, most claimants of disability insurance benefits have minor injuries that resolve in a few weeks. Others have more common conditions like:

  • Digestive disorders
  • Pregnancy
  • Depression
  • Back pain

Individuals with clinically diagnosed depression may also claim disability insurance benefits. However, the surest way to know what conditions qualify you for disability insurance is to check the policy’s fine print.

How Much Disability Insurance Do You Need?

The best way to know how much disability insurance you need is to calculate how much disposable income you need (after tax) to comfortably take care of your monthly expenditure and recurring bills. 

However, as stated earlier, you’ll only get around 70% of your income. Compare both numbers to figure out how much disability insurance you need. You also need to estimate the number of months you’ll need coverage—which may not always be easy to quantify. 

The exact amount of coverage you need will come down to several factors, including:

  • Your lifestyle. What is your average monthly expenditure? Can you survive on 70% of your income if you become disabled?
  • The number of dependents. The number of people depending on you financially can influence your decision-making regarding the disability insurance policy. If you have two or more dependents, the financial implications of disability can be more far-reaching.
  • Employment status. Are you willing to take on jobs with lower pay?
  • Debt and savings status. Do you have alternate arrangements for your car loan payments, mortgage, and other recurring bills? How long will your emergency fund last? Do you have other savings that can support you if you stay without earnings for long periods?

What Is the Cost of Life Insurance for People Living With Disabilities?

The cost of disability insurance policies will vary widely overall. The premium depends on factors such as:

  • Gender
  • Occupation
  • Smoking status
  • Age

Disability insurance will cost less for younger people. Men also tend to get lower premiums than women overall. Smokers and construction workers also have to pay a bit more than average to get disability insurance coverage.

Overall, you should budget around 1-5% of your annual income for disability insurance premiums.

Disability Insurance and Pre-Existing Medical Conditions

If you already have a medical condition, your insurance company will offer you coverage after excluding the condition. For instance, if you have existing musculoskeletal pain or complications, the insurance company will not provide coverage for any disabilities traceable to the condition.

Should You Buy Both Standard Life Insurance and Disability Life Insurance?

Conventional life insurance policies provide for your family if you pass away. 

A term life policy will pay out if you die within a stipulated time frame, while a permanent life insurance policy will remain active for as long as you live. 

Both policies can provide your loved ones with a financial buffer when you’re no longer around.

However, they won’t help if you are alive but disabled. It’s why you need disability insurance. The policy will pay out while you’re alive to replace any lost income when you can’t work or have to take a lower-paying job.  

If you have dependents, you should consider taking out both conventional life insurance and disability insurance. If you don’t have dependents, it’s best to prioritize disability coverage. More on the question of purchasing life insurance without dependents can be found here.

How to Buy the Best Life Insurance for People With Disabilities

There are three options you can explore when you’re looking to buy disability insurance:

  • Your employer
  • The insurance company
  • The insurance advisor or broker

If you buy your policy through your insurance provider, you will lose your coverage when you change jobs. 

Buying directly from the insurance company increases the risk of buying the wrong coverage at a high price. Purchasing insurance from an advisor, or broker, is the best way to find excellent coverage at an affordable price.

Here are some top tips to keep in mind when shopping for disability insurance:

  • Ask questions. You should ask for clear definitions of the policy terms and the coverage options—especially as it concerns exclusions and exemptions. If you’re unsure about any terms or definitions, you should seek clarification.
  • Pay attention to the numbers. How much will the premium cost you per month? How much coverage can you expect? Will you be expected to continue premium payments while receiving disability payments?
  • Shop around. All major insurance providers offer disability insurance. Evaluating offerings from multiple providers is the best way to find the most favorable policies. 
  • Check the fine print. What is the procedure for increasing your coverage down the line? Will you be subjected to new terms and conditions when you renew your policy? What are the terms of a group policy?

See Our Top Picks for Disability Insurance

Alliance Income Services Corp. (AIS) has a team of insurance advisors committed to helping you find the best life insurance for people with disabilities. Fill in the quotes form to see our top picks for disability insurance in Canada or compare the rates right away via our online Life Insurance Quoter and apply.

We work with the top insurance companies in Canada, including: 

  • Green Shield Canada
  • Manulife
  • Canada Protection Plan
  • Assumption Life
  • RBC Insurance
  • iA Financial Group
  • GMS

Let’s help you find the best policy for your budget today.

Conclusion

At Alliance Income, we make it easy to find and compare quotes from different providers nationwide. Our easy-to-system can match you with the best insurance products. Looking for the Best Life Insurance for People With Disabilities? Fill out our online form today to receive a quote!

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