We turn our attention to disability insurance after our series featuring critical illness insurance. A disability can be a traumatic event that robs you of your ability to earn a living. Disability insurance protects against this by paying a periodic benefit whenever you are unable to do your job. Although you may purchase your own individual disability insurance policy, most Canadians are provided coverage by either their employer or government programs. Here is an overview of the different types of government disability insurance programs.
Employment Insurance (EI)
Most Canadians are familiar with the financial assistance provided by EI for a temporary loss of occupation. But are you aware that EI also pays out a benefit for short term injuries or sickness? With the sickness benefit, there is a waiting period of 2 weeks before payments start, and the weekly benefit is paid for a maximum of 15 weeks. This usually coincides with the beginning of the employer’s group long-term disability payments.
The benefit is taxable and is capped at 55% of the employee’s insurable earnings, which as of January 1, 2015, is $49,500. This means that if the employee’s earnings is at least $49,500, he/she will be paid a weekly benefit of $524 ($49,500/52*55%).
EI is administered by the federal government and is funded by both the employee and employer. The premium is automatically deducted from the worker’s paycheck. Since self-employed individuals are not automatically enrolled in the EI program, they are not eligible for the EI financial assistance unless they register with the Canada Employment Insurance Commission for access to the program.
Canada Pension Plan (CPP)
As with EI, the CPP is mainly regarded for benefits other than disability. But unlike EI, qualifying for disability benefits under CPP is much more difficult. Only disabilities that are considered ‘severe and prolonged’ will qualify for benefit payments. A monthly benefit will be paid after 3 months of disability until age 65, at which point the retirement benefit kicks in and replaces the disability benefit.
Monthly taxable benefits are capped at a maximum of $1,264.59 in 2015, which is comprised of a fixed amount plus a variable amount based on how much the worker contributed to the CPP during his/her entire working career. Children of disabled individuals under the age of 21 also receive a smaller monthly benefit until they reach age 25.
Like EI, premium for CPP is automatically deducted from the worker’s paycheck. It takes awhile for the CPP disability benefit application to be assessed, so it’s a good idea to apply as soon as possible to avoid delays in payments.
Workers’ Compensation Board (WCB)
With legislation created by the provincial government and administered by the WCB, workers’ compensation programs protect employees from the financial hardships associated with work-related injuries and occupational diseases. WCB benefits is funded entirely by employer contributions. Unlike for EI and CPP, the inability to work must be caused by a work-related accident or illness.
Each province/territory compensates the employee a certain percentage of his/her income up to a maximum amount. For example in BC in 2014, the injured worker will be reimbursed 90% of his/her net income up to a maximum earnings of $75,700. The periodic benefit paid by WCB is non-taxable. Workers found to have a permanent disability will also be eligible for a lump sum payment in some provinces and territories. There is also a benefit for survivors of deceased workers who dies due to work-related accidents or illnesses.
In some provinces and territories, WCB benefits are offset if the worker is also receiving CPP disability benefits. Not all employers pay for WCB. Some jurisdictions do not provide coverage for industries and occupations such as athletes, farmers and fishermen.
Here is a table summarizing the benefits and provisions of the three government disability insurance programs:
|Maximum benefit||$524 weekly||$1,264.59 monthly||75-90% of net income up to a maximum amount, varies by province|
|Waiting period before benefits begin||14 days||4 months||0 days|
|Length of benefit period||15 weeks||Until age 65 or until disability ends||Until age 65 or until disability ends|
|How to qualify?||Accumulated at least 600 hours of employment in last 52 weeks||Contribute to CPP in 4 of last 6 years, under age 65, and meet definition of severe and prolonged disability||Injured on the job|
|Other benefits||Enhanced benefit for low income families||-Benefits available for children of disabled individual|
-Vocational rehabilitation program
|-Lump sum benefit available for permanently disabled workers
-Death benefit if death due to workplace accident
The above is simply an introduction to the benefits provided by the government in the event of a disability. In the upcoming posts, we will delve into the details of each program.
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