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What is Disability Insurance?
Disability Insurance (DI) is designed to replace your monthly income should you become injured or sick and cannot work.
Benefits will start either 30, 60, 90 (or longer) days after you become injured or sick. The earlier the benefit starts, the higher the premium. Benefit terms can last 2, 5 ,10 years, or until age 65, depending on your job class. The longer the benefit period, the higher the premiums.
While some medium to large sized companies often carry disability insurance as part of their employee benefits plan, many do not. Should you become injured and cannot work, a disability insurance policy can ensure monthly cash flow until you are able to work again, or up to age 65.
Example:
A Canadian employee makes $50,000 per year. Over a 40 year working life, that amounts to $2 million in wages (not counting inflation and raises)! A disability mid-way through her career could mean a loss of $1million or more in wages. A disability insurance policy can replace most of that income up until age 65.
A good quality DI policy can offer you the option to return up to 70% of your premiums, at the policy expiry date or every 10th anniversay, if you have made a minimum amount of claims.
If you are a self-employed professional or you run your own business you are an especially good candidate for disability insurance because your income is directly related to your activity! How will you business operate if you are disabled for 1 year? How about 5 years? Indefinitely?
Some DI plans will cover your business overhead expenses, such as rent, salary, and utilities, for up to 2 years, if you should become disabled. This allows you time to heal and get back to work, or to keep your business running in good condition, until you can sell it.
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