According to a recent survey by RBC Insurance, Canadian workers are underestimating the importance of disability insurance. Out of 1,000 employed Canadians polled, 45% believe disabilities occur infrequently. However, current statistics indicate that 1 in 7 adults are currently disabled, and 1 out of 3 adults will become disabled for longer than 90 days before the age of 65 (1).
Moreover, Canadian workers are unsure as to what constitutes a disability. It shouldn’t be surprising that the majority consider physical accidents (72%) and workplace-related accidents (64%) to be causes of disabilities. But depression, anxiety and diabetes can definitely cause disability, and only 45%, 30% and 21% of Canadians surveyed respectively consider these illnesses to be causes of disability. A common misconception that has perpetuated for many years is that disabilities are caused by one-time traumatic incidents, when in fact accidents make up less than 10% of disabilities. Chronic illnesses are much more common causes of disabilities. As a matter of fact, mental illness, cancer, cardiovascular and musculoskeletal disease are six times more likely to be the cause of disability than accidents.
When asked why workers don’t purchase individual disability insurance to protect their ability to earn, the top reason given was that they believed they had enough coverage through their group benefits plan at work. While this may be true for some people, there are often limitations to group disability coverage, used by the employer to lower the overall cost of the plan.
For instance, most group policies use a regular occupation definition for only the first two years of a disability, after which it will switch to an any occupation definition. With the any occupation definition, benefits cease if you are able to work in another capacity in which you are trained, even if you are incapable of performing the duties of your previous job. By having the employee return to work, the insurance company is no longer required to pay the disability benefit, thus lowering the cost for both them and your employer. There are many other nuances of group disability insurance that you should be aware of, which will be covered in a future post.
The benefit of owning an individual policy is that you can choose features that are important to you. An individual policy is also portable, so even if you were to change occupation, your policy will remain with you. You can even use individual disability insurance to complement your existing group coverage, such as extending the regular occupation definition or topping off the benefit amount.
Although disability insurance often takes as backseat to life insurance, it should not be overlooked. Your ability to earn an income is your greatest asset, so make sure it is properly ensured. With insurance companies lowering rates on their disability products, there has never been a better time to obtain your own disability insurance policy.
1. Disability probability based on the 1985 Commissioner’s Individual Disability Table A gender distinct incidence tables for Occupation class 2A, 90 day waiting period.