What Is Disability Insurance, and Do You Need It?

Disability insurance replaces lost income when the wage earner of a family can’t earn income because they can’t work.  There are two types of disability insurance: short-term and long-term. If you’re wondering what disability insurance is and if you need it, you’ve come to the right place.

In this post we’re going to take a deeper look into why you would need disability insurance and the potential consequences of going without it.

What Is Disability Insurance?

As we mentioned above, this type of insurance protects lost income. To help explain, we can compare it to life insurance. Life insurance replaces lost income via a death benefit to a beneficiary when an income earner passes away. Disability insurance does the same thing, but it isn’t paid out in a lump sum and it’s paid to the disabled person.

Disability insurance pays a percentage of your income on a bi-weekly basis. So, when you can’t work you still receive an income. This kind of insurance doesn’t only apply to physical inability to work due to an accident or illness, it includes other reasons such as mental illness.

More than likely your situation is: if you don’t work, you don’t get paid. Thus, if you don’t have disability insurance you will not have any income. If you support yourself you might have to give up your home, lower your standard of living, and make lifestyle changes.

If you share the household income responsibilities with another, your loss of income will put a financial strain on the home – and your relationship.

Now you might be thinking that you’re young, careful, healthy, and mentally stable so you don’t have to worry about insurance. This is called the “It Won’t Happen to Me” – optimism bias. You don’t want to be fooled with this type of thinking.

Did you know that the chances of becoming disabled are significantly higher than your chances of getting into a motor vehicle accident or your house burning down? In Canada, there’s a 25 per cent chance that a 20-year-old person will be disabled during his or her career. If Canadians are at risk of a disability by this young age, consider how the possibility rises as we age.

Now let’s compare short-term and long-term disability insurance.


Short-Term vs Long Term Disability Insurance

Short-term disability insurance benefits are available shortly after you become disabled – from a few weeks to a few months. You receive your disability payments regularly like a pay cheque thereafter for a set time, which is generally three to six months, depending on your policy.

Long-term disability kicks in after you’ve exhausted your other short-term disability benefits. This type of insurance provides protection for serious health issues and conditions. Thus, you receive your long-term disability pay for longer.

We hope our article answered your questions about what disability insurance is, if you need it, and the difference between short-term and long-term disability. At Sadler insurance we work with several insurance companies to get you the best rate.

If you want to know more about disability insurance or to speak with a broker, please visit our website.