*As published in the Winter 2013 issue of FinanceWorks.ca

Does your group benefits plan include disability insurance? If so, how well do you know your coverage? It could contain gaps that leave you under-protected in case of a claim, putting your lifestyle in jeopardy. 

1 in 3 people will be unable to work due to an accident or sickness during their working years for at least 3 months. The average time off work is 2 years

Here are some things to consider when looking at your group disability insurance plan:

1.    How much coverage does it provide?  

  • Group plans typically provide up to 66.6% of your salary as a monthly benefit if you are disabled and unable to work, but often have a maximum coverage. For example, two-thirds of your $60,000 salary is $40,000 but if there is a $2,500 monthly benefit cap, then the maximum coverage is actually only $30,000, or half of your annual salary. Can you live on half your salary?

2.    When do the benefits kick in?

  •  Most group disability plans kick in after you’ve been disabled for 90 to 120 days. Going without a paycheque for three months could result in bankruptcy, the loss of a home or the sell-off of other assets. There’s a reason why most advisors recommend a 3 to 6-month contingency fund.

3.    How long is the coverage in place for?

  • A policy that pays for five years may not provide sufficiently if your disability is long-term. You may have to change your life completely in five years time to be able to live on CPP benefits, if you qualify for them. The ideal plan provides coverage until the age of 65.

4.    Are you covered if your disability prevents you from doing your “own” or “any” occupation?

  • Coverage for “own” occupation will protect you if your disability prevents you from doing your specific job even if you are capable to doing another job. If you are covered for “any” occupation, your claim could be denied even though you cannot do your regular job. Furthermore, some policies may change occupation definitions after a couple of years of receiving benefits, potentially ending your protection.

5.    How disabled do you have to be?

  • Some group plans may require you to be unable to complete 80 - 100% of your actual job.

6.    Who pays for the premiums?

  • If your employer pays the premiums, then any benefits you receive are taxable.

Any disability insurance is better than none, but not all policies are made equal. It is a wise idea to make sure you are well protected before you actually need that protection.