Disability Insurance (also known as a DI policy) is one of the lesser known insurance types. Many Canadians are knowledgeable about life insurance, but, in most cases, it is disability insurance that is more likely to be used. DI can be costly, so we collected all the known ways to save on disability insurance; our objectives are to help you get a cheap disability insurance quote, to make sure that your disability insurance rates are low, and to make sure that your coverage is high enough to substitute a part of your income. So, let’s get started.
Disability Insurance Policy
- Take a good look at your riders. These increase your premium. If you can drop additional features, such as the cost of living benefit or the return of premium rider, you will save money.
- Pay attention to the DI coverage limits and number of policies. Remember that, even if you have several disability insurance policies, there is a maximum coverage that you cannot exceed. In other words, you can combine disability insurance coverage as long as it does not exceed this maximum. As you go up in income, the maximum benefit is a smaller percentage of your income. For example, someone earning $5,000 a month can get $3,000 max benefit (60%). Someone earning $30,000 a month may have a maximum benefit of $12,000 a month (40%).
- Choose your term wisely. The longer the term, the more expensive the policy (in most cases).
- Keep an eye on the insurance type. There are guaranteed policies where premiums don’t increase and other plans where DI rates can increase. The former (called non-cancellable) is more expensive since you are paying for guarantees. If you are getting a disability insurance quote, try to obtain a policy that is both non-cancellable and guaranteed renewable. Non-cancellable insurance means that an insurer cannot cancel the policy, hike up insurance rates, or decrease benefits as long as the premiums are being paid.
- Combine your life insurance with a disability advance payment. Such a combination can cost you less because the carrier saves on administration costs. Compare quotes on both policies separately to see how much you can save. This combo is less common than life Insurance combined with critical Illness insurance, but with some searching, it can be found.
- Return of Premiums Endorsement for Disability Insurance: If you get a return of premium rider on your disability insurance, you get all (or some, depending on the policy) of the money back if you don’t use up the coverage during a set period of time. You pay more in the short term, but save more in the long run. Normally, not all the premiums are returned. Expect a pre-determined percentage.
- The amount of coverage matters. Make sure you are not paying for more coverage than you really need. The fact is, even if you decided to go for more than your income by misrepresenting your income, an insurer will only pay you a pre-determined amount of coverage. Remember, you can only be covered for a certain percentage of your income since the benefit is tax free.
- Dealing with pre-conditions: Speak with a broker about having certain health conditions excluded from your policy if you feel that the condition will not lead to a claim. Be careful with this tip, though, and remember that each company’s underwriting protocol is different.
- Did you know about the family or multi-spouse discount? If two spouses apply together, you can get a discount, but it will be marginal.
- Start of benefits: Some policies will allow you to choose the start of the monthly benefits (after 60 days or after 90 days, for example). Choosing a later start to the benefits will lower the disability insurance premiums. You need to weigh the risks, though. Do you have enough savings to keep the household going for 90 days?
- How is your family’s medical history? If you have one or more persons in your immediate family who has a health condition like cancer or diabetes, this may increase your premiums.
- Smoking and Disability insurance: Here’s a fast way to pay top rates: be a smoker! Smokers always pay much higher rates than non-smokers for disability insurance. The increase will be not as aggressive as in the case of critical illness insurance, though, which is around 30 per cent more.
- Are you healthy? Do you eat kale and go to the gym? Those in great health get the best insurance premiums. Your hard work can be rewarded!
- Your age also helps determine your premium. Typically, the younger you are, the better your rate.
- Rounding up your age. Carriers round your age up or down, depending on where your birthday falls on the calendar year. If your birthday is close to the end of the year, buy your policy in the first six month of the year to take advantage of age rounding.
- BMI (Body Mass Index) and Disability insurance: Know that the BMI chart will come into play. Insurers use this index as a measure of health. It is important to note that disability insurance index tables are more stringent than life insurance policy tables.
- A good driving record will help you get standard disability insurance rates (disability Insurance does not have preferred rates like life insurance). If your record is poor, you can get rated, meaning that your entire disability insurance policy will be significantly more expensive. In the worst case, you might have exclusions added to your policy.
- Some professional associations and alumni groups offer discounts on insurance. Check with yours to see if you can benefit from this.
- If you drink heavily, you may get a higher rate. An intensive drinker is somebody who drinks 15-20 beers a week.
- Stopping drinking: If you had a previous rating for heavy drinking, it can be removed if you can demonstrate better, more moderate drinking habits that you have kept up for at least one year.
- Risky job? Higher premium! Members of a bomb squad, police gang unit, and even professional tightrope walkers pay higher premiums…for obvious reasons!
- Unlike with life insurance, men actually get lower rates than women for disability insurance. Women live longer, but are also more active, so their likelihood of suffering from a disability is greater.
- Travelling to dangerous destinations: Check the Government of Canada’s website for advisories before you travel, and avoid places that are not recommended due to dangerous geographical, climate, or political situations. Travel to these areas could result in a denied claim.
- Insurance carriers are not fond of extreme sport enthusiasts. Expect higher ratings, or even a denial of insurance, if you trade your basketball in for a wing suit.
- A previously rated policy can be reviewed if your condition improves. Let’s say you have been rated initially for disability insurance (you paid higher disability insurance premiums than somebody in better shape/condition/health) but things have improved. Your rates could improve as well.
Pre-existing Conditions and Disability Insurance
- Disability insurance and cancer: Those with recently resolved or existing cancer cases have difficulty getting disability insurance. If the cancer was in remission five years ago, a disability insurance policy might be available for you, but you are likely to see an exclusion for this illness.
- Disability insurance and diabetes: Choose a broker to find you a disability insurance policy if you have diabetes. Brokers have access to all the products on the market and know which carriers are best for your needs. It’s not easy to find, but disability insurance for diabetics does exist.
- Disability insurance and high pressure: Technically speaking, blood pressure exceeding 140/90 can trigger higher premiums, but rates will vary among carriers. Again, a broker is your best bet for finding a rate that will work for you if you have high blood pressure.
- Disability insurance and mental health: Mental health issues represent one of the most frequent disability causes today. It is a serious health condition. Those with mental health conditions can receive ratings, exclusions, or denials on their applications.
Insurance Purchase Habits
- Agents are not brokers. Agents work for one carrier and can only offer you their products. Brokers are independent and can offer you the products of any carrier in Canada. With a broker, you have more options.
- Always compare quotes, or have a broker compare them for you. The premiums for similar products vary widely in the market.
- Disability insurance is not as straightforward as auto insurance. There are many questions that need to be asked, and many aspects of your life that need to be considered. A broker helps you through this process and can likely get a better rate than you could on your own.
- Your life changes, and so should your coverage. Buying, or paying off, a home, for example, will change your risk factors and your premiums. Conduct an annual review of your insurance with a broker.
- Paying your premiums annually saves your carrier administrative costs, and they often pass those savings on to you.
- Mortgage insurance from a bank can overlap with life, disability, and critical illness insurance. If you have enough coverage with your other insurance policies, consider dropping bank-provided mortgage insurance. Speak with a broker first, though, as you do not want to cancel a policy unless you have coverage elsewhere.
- Insurance reviews for Disability Insurance: Knowledge is power, and with the select independent review sites out there, you can quickly and easily learn if a carrier has negative reviews or has unjustly denied a claim.
- Bundle? Bundle! Don’t underestimate how much you can save by bundling insurance products (disability, critical illness, life, etc.). Bundling means lower premiums.
- Disability Insurance and banks. There are several different places to get insurance, including your bank. A broker can give you the most options and can compare policies across numerous carriers. Weigh your options of using a bank, an agent, or a broker carefully before deciding with whom to speak for your insurance needs.
- Backdating your policy: You can actually have your policy backdated to take advantage of locking into a lower age and, therefore, a lower rate bracket. This will cost you a bit extra in premiums, but it can save you money in the long run. Speak with a broker to find out which carriers allows this.
Disability Insurance Claims
- Note the deadline required to file a claim. If you wait too long and miss the deadline, your claim may be refused and you will not be paid.
- Multiple claims: If your claim history shows that you filed a lot of disability insurance claims in the past, your carrier may consider you to be a higher risk. This will impact your premiums, or it could result in a rating or even an unsuccessful application.
- Return-to-work bonus: Some insurers may pay a lump-sum bonus once you return to work to “motivate” you to get back to your occupation and stop receiving disability payments.
Other ideas to reduce your Disability Insurance Rates
- Do you have benefits through work? Does your work policy have good disability coverage? That’s great! This can be an alternative to an individual policy, but remember to check on the protocols to transfer the policy to an individual one if your employment at the company ends.
- Compare your rates with others: consider asking what other people, similar to you, pay for their coverage and use this info when getting the next disability insurance quote