Disability Insurance
What would you do if you had a major accident or illness that caused you to be disabled and unable to work? How would you pay for daily costs of living without your income? Disability insurance supports situations where the disability has caused lost wages.
Disability Insurance also known as DI provides you with financial stability when something as tragic as this occurs. It replaces a portion of your income on a month basis, while disability continues. Coverage could possibly be payable again for other disabilities or for the reoccurrence of prior disability. Disability insurance can be provided through individual or group insurance plans. Disability insurance is a common part of employee benefits as it protects the employees from a loss of income if disability occurs.
Short Term Disability (STD)
Short term disability covers an absence from work caused by an accident or sickness. STD usually continues for one to two years if the disability has not been restored. When disability is caused by an accident the benefits usually begin on the first day. If the disability is caused by sickness benefits generally begin on the eighth day. These benefits are usually a set percentage of the individual’s pre-disability salary, typically around 60%.
Long Term Disability (LTD)
When the period for short term disability ends and the individual is still unable to work then long term disability usually begins. LTD usually continues for two years, five years or till age 65 depending on the policy put into place. The benefits of LTD in a group plan are usually 60% of pre-disability income if employee has been paying the premiums and 75% if the employer has been paying the premiums.
What About Government-Provided Disability Insurance?
- Canada Pension Plan (CPP)
- Employment Insurance (EI)
To qualify you have to:
- Have contributed to the CPP for the required period of time and have met the requirements for earned income
- Meet the CPP definition of disability
- Be between the ages of 18 and 65
- Apply in writing
The definition of disability according to CPP is quite restrictive and must be both severe and prolonged. The benefits are a flat amount and are based on how much and how long contributions have been made to CPP. The benefits earned through CPP are taxable and are not received until four months after the person is found to be disabled.
EI Benefits
To be eligible for benefits, a person must show
- That regular weekly earnings have been decreased by more than 40%
- That 600 “insured hours” have accumulated since the last claim or in the last 52 weeks.
Frequently asked questions about EI and STD: Click Here for PDF
Government Benefits – Can you count on them?
CPP only pays for the most severe disabilities and, at best, only a $900 per month taxable benefit. Employment Insurance only covers employees and only pays a short-term benefit. Workers’ Compensation primarily covers work related injury. Relying on these government provided disability insurance can result in a disability benefit that will not provide the financial comfort needed at a difficult time. It is important to investigate what your options are to prepare for a situation where an unexpected disability interferes with your ability to earn income.
There are different types of disability insurance and difference definitions of disability. We, at Svab Insurance Inc., are ready to assist you and will be happy to answer any questions you may have. Contact us today to set up an appointment to find out how disability coverage can benefit your employees.
