Many individuals wonder if they really need individual disability insurance, and it is only in the event of a claim when clients realize that existing coverage does not provide adequate benefits to maintain their standard of living.
The following summary provides a brief description of the various disability insurance programs in the marketplace and some considerations when examining these programs.
Canada Pension Plan (CPP)
Waiting period: 4-6 months
Coverage & Benefits: Payable to age 65. Maximum benefit amount is $1264 per month (for 2015) but dependent on individual’s CPP contributions. Benefits are taxable
Considerations: Definition of disability must be both severe and prolonged and must prevent insured from being able to work at any job on a regular basis.
Contributions: Contributions to CPP must have been made for 4 or the last 6 years or 3 of the last six years (if contributed for at least 25 years).
Employment Insurance Sickness Benefits (EI)
Waiting period: 14-day waiting period
Coverage & Benefits: Maximum coverage period is 15 weeks. Maximum benefit is generally restricted to 55% of average insured earnings to a maximum). Maximum benefit amount is $524 (for 2015). Benefits are taxable.
Considerations: Not available to self-employed individual unless they have entered into a special agreement with Canadian Employment Commission. Other income is deducted from EI benefits.
Contributions: Employees and self-employed persons must have contributed and worked 600 hours in the qualifying period. For self-employed individuals, there is a 12 month wait from the date of entering into the agreement.
Waiting period: No waiting period in Alberta.
Coverage & Benefits: Payable until age 65 or later and in Alberta covers 90% of net income up to a maximum of $95,300.
Considerations: Only covers illnesses/injury as a result of or arising at work.
Group Long-term Disability
Waiting period: Generally 4-6 months
Coverage & Benefits: Generally payable to 65 but may be a lower amount. Benefits may or may not be taxable and usually covers a percentage of regular earnings up to a maximum earned income amount.
Considerations: High-income earnings may be underinsured due to pan maximums. Coverage is generally not portable. Medical evidence may or may not be required.
Contributions: May be employee or employer paid.
Individual Non-Cancellable Long-term Disability
Waiting period: Choice of waiting periods
Coverage & Benefits: Generally not taxable and generally payable until age 65. Covers a percentage of earned income at time of application.
Considerations: Premiums, rates are contract is guaranteed. Coverage is portable. Medical evidence is required.
This post originally appeared on the Vital Partners Inc. website.