Income Protection Insurance Canada

Welcome to your income protection insurance Canada guide. This page will give you a good understanding of income protection insurance (also called Disability Insurance), will inform you of savings opportunities, and also provide a number of other useful tips based on our publications. Let’s have a look at a few important statistics:

– Roughly 13% of Canadians have a Disability

– Approx. 70% of working Canadians couldn’t make it one month without a paycheck

– Over 25% of working Canadians would not make a week without a paycheck

Income protection insurance (also called Disability Insurance) provides you with financial security by replacing a part of your income in case of a disability resulting from an illness or injury, if you are not able to work afterwards. This would allow you to continue caring for your family, address your financial obligations and focus on your speedy recovery. Income replacement insurance does not pay for the cost of your treatment, however. There is another insurance product developed for these purposes: Critical illness insurance. Though some people mix them, critical illness insurance, as opposed to Disability Insurance (Income Replacement / Protection Insurance), pays a one-time lump sum if you are diagnosed with a particular critical illness. That sum can then be spent against your treatment or anything else.

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Important considerations for income protection insurance

There are 5 key features to look for when choosing income protection insurance. Many of these features are only available to a select number of occupations, i.e. professionals such as lawyers, doctors, engineers or company executives.

1. Non-cancelable coverage. This means the insurance company cannot cancel your coverage or adjust your premiums on a class-wide basis. This ensures that the coverage will remain in effect until the insured turns 65. The premiums are guaranteed to never increase.

2. ‘Own occupation’ definition. This allows a professional that has a significant investment in their occupation, including years of training and acquired experience, to work in another occupation while they are totally disabled and still receive their disability benefits. The ‘own occupation’ rider modifies the definition of total disability under a basic plan, so you’ll be considered totally disabled even if the insured is engaged in another gainful occupation.

3. Residual disability benefit. This benefit allows those who are not totally disabled to receive a residual disability payment. The insured can choose between receiving a partial disability payment for loss of time or duties, or the residual disability benefit – if they suffer a loss of income. The insured can choose the greater of the two.

4. Cost of living benefit. This is usually a rider that can be added to most disability policies, which makes sure the monthly benefit stays in line with inflation.

5. A future income option. This allows the insured to increase his or her coverage at different points in the future without evidence of insurability, however, it does require that the insured provide income evidence to justify the increase.

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Saving on Income Protection Insurance in Canada

  • Being young is beneficial: If you are young when you are apply for a Income Protection Insurance policy, you benefit from lower premiums.
  • Be healthy, save on insurance: If you are in a good health and have a good build when you apply for an insurance policy, insurers will reward that with lower premiums. Insurance companies use a so called BMI index (body-mass index, a ratio of your height and weight)  to determine your premiums.
  • Rounding mathematics matters: If you decide to buy an insurance policy, make sure that your age rounds down and not up, i.e. if you are going to be 30 years old on December 31, buy the policy in the first 6 months of the year where your age is still rounded down to 29 and not 30.
  • Got a solid group policy from your employer? Bingo! Group Life and Disability Insurance can be an alternative to your Personal Life insurance if your employer offers sufficient coverage – at least you are protected as long as you work for the company. On the downside the coverage ends when you leave your company. You might want to check what are the top benefits offered by your Group Policy
  • Avoid insurance agents: Insurance agent is not equal to insurance broker. Agents typically work for one company only and can offer only products of this company. That does not leave too many options.
  • Member of something? Some insurers reward it: Are you a member of a professional organization (e.g. Certified Management Accountants of Canada or The Air Canada Pilots Association)? Then some insurance companies will offer you a discount
  • Other tips: Contacting an experienced, licensed broker (see a button below) will help you to find other ways to reduce insurance premiums of your income protection insurance in Canada. Discussion with broker is entirely free and there is absolutely no obligations to buy.

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