What is disability insurance?

Disability insurance

Disability insurance is designed to replace a portion of your monthly income if you become unable to work due to injury or illness. As with any insurance, there are a variety of choices. This infographic breaks down your coverage options so that you can create the policy that is right for you.

What is disability insurance?

Disability insurance provides you with a monthly tax-free benefit in the event you are unable to work or perform the duties of your regular occupation due to an injury or illness. The maximum amount of coverage available is approximately 66.7% of your income.

Breaking down the coverage options

Choose your elimination period

The amount of time (anywhere from 30 – 365 days) you must be disabled before benefits are claimed. The shorter the elimination period, the more expensive the cost of the coverage.

Choose your benefit period

The amount of time you receive benefits for is typically 2 years, 5 years or until the age of 65. The shorter the benefit period, the less expensive the cost of the coverage. A benefit period to age 65 is commonly recommended to obtain coverage for as long as possible.

Choose your optional riders

Future insurance option (FIO)

  • Provides guaranteed insurability up to age 55.
  • Every year you will be able to purchase additional coverage without a medical exam, even if your health has changed.
  • It is often recommended that policies include this.

Cost of living adjustment (COLA)

  • Increases your total benefits to compensate for inflation.
  • The increase is based on the actual change in the Consumer Price Index (compounded) up to a maximum of 10%.

Own occupation

  • Allows you to work in another occupation while you are totally disabled in your regular occupation and continue to receive disability benefits.
  • Modifies the definition of total disability so you will be considered totally disabled even if you engage in any other gainful occupation.

Premium refund rider

  • Provides a refund every 7 – 8 years of a portion of the premiums paid.
  • Can help bring down the long-term cost of insurance but can be expensive in the short term.

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