How Disability Insurance Works in Canada


You never know when an unexpected event can happen. If you ever find yourself suffering from an illness or injury, you’ll be glad you decided to purchase disability insurance.

While you may have heard of auto insurance or home insurance, disability insurance works similarly in protecting your family’s financial interests.

In case of an injury, disability insurance helps replace some of the income lost from your inability to work.

It also covers certain severe illnesses that may sideline you from your duties and hinder your ability to earn a living.

What is Disability Insurance?

Most insurance policies are designed to protect certain things. Disability insurance ensures that you are protected in case of lost income due to disability.

It is usually offered through your employer group benefits plan, especially if your line of work carries a risk of harm or exposure to disease.

It is also usually available from the government in the form of social security or similar programs. it can also be subscribed independently through an insurance company.

Policies like disability insurance have become crucial over time. This is because they provide comprehensive coverage of a person’s financial needs in times of tragedy.

Since most people live paycheck to paycheck, having disability insurance can put food on the table. It can also help pay for medical expenses if you have no savings and can’t earn a living.

How Does Disability Insurance Work?

Like any insurance policy, disability insurance is an agreement between you and your insurance broker. You will pay a monthly premium fee to subscribe to the contract. In return, the insurance company will pay you a monthly allowance in case of your inability to earn.

Your monthly allowance is usually determined by statistical analysis. It takes into account the amount of income you are losing due to a disability.

This money can then be used to provide for you and your family and take care of any debt obligations or medical expenses you may have.

There are certain criteria that are examined when first drafting the policy. These include:

  • The amount of money you will need to pay in monthly payments to stay subscribed to the policy. This works like any other insurance policy.
  • What the policy considers as a disability worth the payment of monthly benefits. Some policies will replace any lost income. Others will be hesitant in the case you are eligible for alternate employment.
  • The amount of money you will receive in monthly benefits. an aforementioned analysis of your income is done to determine this. it usually comes out to around 60-80 percent of your lost income.
  • The length of time the policy will provide benefits. This can be set up to a certain age or time like months or years.

The Disability Insurance Underwriting Process

In addition to the details and benefits of the policy, some other factors are also considered when assessing your risk of disability. These include:

  • Age

Naturally, the older you are, the more prone your body is to breaking down from illness or injury. This may increase the cost of your insurance policy substantially.

  • Gender

Even when buying the same policy, women can expect to pay up to 40 times more than men. This is because historically women file heftier and lengthier claims than most men.

  • Health History

It only makes sense that how you take care of your body and your risk of illness will be a factor in your risk of disability in the future. Chronic diseases and results of recent bloodwork are all taken into account.

  • Job Occupation

If you have a risky job like being a firefighter, it will make your risk of injury or disability higher. this may increase your premiums.

  • Annual Income

As mentioned, your income will play a part in the number of benefits you receive monthly. This means that the higher your paycheck, the more the insurance company will need to pay you back in case of disability.

  • Location

Your area of residence will be assessed for the cost of living and risk of injury or illness before a decision is made.

Real-World Example of Disability Insurance

Disability insurance is varied in its definition and flexibility depending on the person it is for and how expensive it is.

A person who specializes in a lucrative field may purchase an expensive policy that is lenient with what qualifies as a disability.

While someone earning a minimum wage may opt for something more strict but cheaper to get coverage.

Is Disability Insurance Worth It?

This comes down to individuality and what a person’s specific needs are. If you have a family history of chronic disease or have a dangerous line of work it may be wise to get insured.

If you are someone who has sufficient savings and doesn’t expect to be at financial risk, you may be fine without it.

All considered disability insurance is a good option for low-income families. It can provide for the family when the main breadwinner is unable to.

These policies are flexible and come at various price points. They accommodate people of all backgrounds.

Online services like Dundas Life can help answer any questions you may still have.