Long Term Disability Insurance – Is My Employer’s Coverage Enough?

Most people are aware of the importance of obtaining life insurance to provide for loved ones in the event of a death, but what happens if you become disabled or suffer from an unexpected illness that prevents you from earning an income?  

Long-term disability insurance is an important provision you need to make for your future. It replaces a portion of your income if you become unable to work for a prolonged period of time due to an illness or injury. It is important to consider that long term disability insurance is going to have the greatest impact on your financial situation. If you are off work for 30 or 60 days, chances are you will be able to cope financially. However, if you are unable to work for a longer period of time, the financial impact can be devastating.                      

There are two basic definitions of disability in long term disability insurance contracts: ‘own/regular occupation’ and ‘any occupation.’ The own occupation definition refers to your ability to perform those duties essential to your own/regular occupation.

Under the any occupation definition of disability, you are considered disabled if you are considered medically unable to perform the essential duties of any occupation for which you are reasonably qualified by training, education or experience. Often the ‘own/regular’ contract will cover a term of two to five years, and will convert to an ‘any occupation’ if you are determined to be disabled at the end of this period. It is important to discuss your options with your insurance broker to decide which long term disability insurance plan you feel best suits your needs.

Some employee benefit packages do contain coverage for disability, although this is often not long term disability insurance. These are typically set at a rate that provides a percentage of salary, for example 50% of your base salary until the employee turns 65. But is this enough? It may not be…

There are several benefits to obtaining additional or supplemental long-term disability insurance coverage. Depending on the policy provided by your employer, you may be covered until retirement or until you recover from your disability. However, this coverage usually does not begin from the time you are off – usually it does not start until short term disability payments, such as sick leave, stop. This means that if additional costs are incurred during this period, you are on the hook. Instead, long term disability insurance provides you with the necessary coverage to bridge the gap between the onset of your illness or disability and the beginning of your employer provided disability insurance coverage.

What if you are injured at home, or in a non-work related incident?  Worker's Compensation only covers work related accidents and unemployment insurance only covers 15 weeks. This can be detrimental if your illness or disability lasts longer than the allotted time or occurs off the job. Personal long term disability insurance takes care of these issues and provides coverage regardless of where the disability occurred, and for a much longer period of time.

With long term disability insurance, the monthly income replacement can often be the difference between being able to support and provide for those that matter to you, and not being able to. Don’t just protect your life, make sure you protect your income.

For more information on how to obtain long term disability insurance, please contact Gary Mandel at Independent Financial Concepts Group by calling 416-849-1653 or visit www.wecoveryou.ca.