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What is Disability Insurance?

Updated: Mar 19, 2019



What is Disability Insurance?


Personally owned disability insurance pays a portion of your income as a tax-free benefit in the event that you are unable to work due to accident or illness. Disability policies can provide an income stream for set periods of time such as 2 years, 5 years, or until age 65. Insurance companies define disability under the own occupation, regular occupation, and any occupation definition. Generally, your occupation type determines the definition of your insurability. If you would like more information about these definitions of insurability, please let us know.


Why Have Disability Insurance?

If you are unable to work, how will your income be replaced? Can you afford to retire today, never work again, and still maintain the same lifestyle? The risk of becoming disabled is high. Today, a 20-year-old has a one in four chance of becoming disabled before retirement.[i] 48% of mortgage foreclosures are due to a disability of the family’s primary income earner. When we compare this to the need of life insurance, only 3% of foreclosures are due to the death of the income earner.[ii] Because of this high risk, the need for disability insurance is essential.


It is important to be aware that some programs, like Workers Compensation Board of Alberta (WCB), only cover on-the-job injuries and do not cover sicknesses or injuries outside of the workplace. Further, many group benefit plans may only cover a certain percentage of your earnings and not the full amount. In other words, your group disability benefit may provide significantly less income than your current salary. Not all group plans function this way, so it is important to seek the help of an advisor to ensure that your coverage is sufficient. At Camaco, we work with our clients to ensure that they have the proper amount of disability coverage for their specific situation.


[i] https://www.ssa.gov/disabilityfacts/facts.html

[ii] Christopher T. Robertson, Richard Egelhof, and Michael Hoke, "Get Sick, Get out: The Medical Causes of Home Foreclosures." Health Matrix 18 (2008)

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