Becoming disabled and not able to work is not as uncommon as one might think. It’s almost a daily segment on the news reporting pedestrian, biking and car accidents. What about a sudden illness or a chronic condition that escalates, or more and more common- a psychological event. A person can spend months or even years recuperating and be unable to work. The Canadian Life and Insurance Association states in their guide to disability insurance that one in three people over the course of their life will experience a disability that will last for 90 days or more.
Most people understand the concept of life insurance but are unaware that disability insurance is just as important. Disability insurance is designed to replace lost income and some of the more common coverage types are individual plans and group plans through an employer, union or association. The premium or cost of the plan is dependent upon the following options:
1. Income replacement is typically 60-75% of gross income. However most plans have a ceiling on income replacement so the percentage could be lower. In addition, depending how the plan is set up will determine whether or not the benefit is taxable.
2. The waiting or elimination period. This is the period from the date the disability occurs to the first payment from the plan. The longer the waiting period the lower the premium. A common waiting period in a group plan is 119 days. Be prepared to weather this period with alternate income sources like an income replacement plan (sick time benefits) through your employer, a short-term disability plan or employment insurance disability benefits.
3. The length of coverage. This is usually two to five years or can go as long as the disability remains up to 65 years old.
4. Are you insurable? Pre-existing injuries or disabilities could be excluded from the policy or the premium increased offset the insurer’s risk.
-Navigating through the recovery process and return to work can be extremely stressful without knowing what is expected of you and what resources are available. Michelle Paterson BA RRP, Work Health Consultant / Vocational Rehabilitation Specialist has the following tips for a smooth transition back to work:
-Keep in contact with your employer and get clarification such as: how long will your position be available for you to return to? Will this absence affect your pension and retirement date? Are your employee benefits premiums being paid so you can see the dentist, physiotherapist, Employee Assistance Program (EAP)?
-Be regularly engaged in your recovery and rehabilitation in order for disability payments not to be disrupted or halted and prepare your health care provider to submit progress updates in a timely manner when your insurer requests an update.
-If you expect you may be left with a permanent disability, will you be able to return to your own job or will your employer consider accommodating you in an alternate job? Ask how that process would unfold. If you might be able to return to your own job with permanent restrictions, talk to your health care team and employer about how that would be assessed. Most often an Occupational Therapist would do an assessment of you in your job to make recommendations or it might be as simple as a brain storming session with you and the employer representative.
-If you expect you may have to return to an alternate job with another employer (or want to), you should begin that process as early as you feel able, since most LTD coverage will move you in that direction at 2 years after you take leave from your job. Look at assistance for tuition from community sources if you feel you may need to go back to school to upgrade your skills and take advantage of any schooling opportunity as soon as you feel able. For example, if you worked in a labour position and now require a less physical job, chances are you’ll need computer skills. If they’re weak, get some upgrading. No charge public sector employment services can help you explore suitable job alternatives, assist with resume preparation and help your regain your confidence to re-enter the job market.
-Lastly but most important, be your own best advocate or have a friend or family member assist you. Your disability coverage is a wage replacement service for illness. The package is only as good as what was purchased and due to cost it won’t be total wage replacement so be prepared to live on less.
-Be sure to check if you have disability coverage from other sources to pay your mortgage, loan and credit card payments. Recovering from a disability is stressful on its own without an added burden of lapsed payments.
-In Michelle’s experience the majority of LTD claims are depression or anxiety related. She advises to be proactive and talk to your health care or Employee Assistance provider about services to help guide you back to wellness before you head down the path of LTD.
Janice Desautels has been working with families and individuals for the last seven years helping educate in the field of financial literacy. She is a Certified Financial Educator with over 15 years’ experience in teaching and training adults. For questions or advice, please contact jdesautels11lmlc@ wfgmail.ca.