Disability Insurance 101

This insurance product is designed to replace anywhere from 45 to 60 per cent of your gross income, tax-free. Every disability insurance policy is different depending on the insurance agency. While it's always prudent to shop around for the most competitive rate, experts warn against automatically going with the cheapest policy. Read the fine print about when you'll receive your benefits (monthly or otherwise) or if you'll receive benefits if you cannot perform the duties of your own occupation, a job in your particular field, or any job at all.

How does it work?
Disability insurance is usually paid on a monthly basis as the disability continues. Should you recover from your disability, the policy will continue.

Group disability policy – This is the most common type of disability insurance. With this type of policy, the insurance agency will look at the size of the entire group that is being 'underwritten'. There are no added features to this type of policy and there is also no individual assessment. The insurer will determine the premium rates by taking a look at the type of work that the group does that will be applying for coverage. This will be based on the risks associated with the job and, or industry. The exact type of coverage will be negotiated between employer and insurance provider. Depending on the particular employer, some will provide short and long term insurance, while most usually just provide long term disability insurance. Group rates are usually negotiated annually and they may increase if there have been a large number of claims during the previous year.

With group disability policies, there is usually a clause that will cover you for the first two years, should you be unable to work in your 'occupation classification.' This is called 'own' occupation. However, after the first two years, the definition of disability changes to mean that you cannot work in 'any' occupation. In order to continue receiving your benefits, a number of factors must be considered, one of which being whether or not you remain disabled according to the definition of the insurance provider. This will be determined by medical factors