Your Source For


Disability Insurance

The chance of becoming disabled for 90 days or longer, at least once before age 65, is approximately 1 in 3. Most people cannot afford to do without their income, particularly for an extended period of time. Disability insurance policies provide a monthly income to the insured during a period of disability.

The main features of a disability policy are described below. Some of the benefits described are not available in certain policies.

Definition of Disability

This is the most important feature of the policy as it is the basis for determining when the insured is eligible to make a claim. There are three common definitions in use:

  1. Any Occupation: unable to perform the essential duties of any occupation for which one is reasonably fitted by education, training or experience
  2. Regular Occupation: unable to perform the important duties of one's regular occupation and not gainfully employed in another occupation
  3. Own Occupation: unable to perform the important duties of one's regular occupation (even if working at another occupation)

Two of the definitions are sometimes combined into one contract. For example, the own "occupation definition" could apply for the first two years of disability with the "any occupation" definition applying thereafter.

Residual Disability Benefit

A sickness or injury may not be severe enough to keep the insured totally disabled, but may nevertheless result in a loss of earnings. This benefit pays a proportionate benefit if the loss of earnings resulting from a disability are within a specific range, typically between 20% and 80%.

Partial Disability Benefit

If the insured is considered partially disabled, in other words, is unable to perform one or more of the important duties of his or her occupation or, can perform all the important duties, but not on a full-time basis, a percentage of the maximum benefit is payable.

Elimination Period

This is the period from the onset of disability and the commencement of disability benefit payments. The elimination period can range from 30 days to 2 years. A shorter elimination period results in a higher premium.

Benefit Period

This is the maximum amount of time that disability benefits are payable when the insured becomes disabled. The benefit period can range from one year to age 65. The longer the benefit period, the higher the premium.

Cost of Living Adjustment (COLA)

To reduce the impact of inflation, the disability benefit is increased (annually or semi-annually) by a fixed percentage or by the Consumer Price Index.

Future Insurability Option (FIO)

This benefit allows the person insured to purchase additional coverage at stated times in the future, without providing evidence of insurability. However, future purchases are generally subject to financial underwriting and maximum issue and participation limits.

First Day Hospital Coverage

Provides for payment of the total disability benefit from the first day of hospitalization as long as the insured satisfies the definition of total disability and has been hospitalized for a specified period of time.

Accidental Death and Dismemberment

This option provides a lump sum benefit for death and benefits for specific losses due to accidental bodily injuries sustained by the insured and resulting in a continuous total disability.

Retirement Protector

In the event that retirement contributions are interrupted by a period of total disability, this option is designed to help maintain retirement savings.