Self-employed and confused about disability insurance? Do I need it?
Dear Cheryl&Mack,
I’m self-employed, and I’ve been told I need disability insurance.
I have a few rental properties, so if I stop working and my tenants move out for some reason, I might be SOL (shit outta luck).
Total transparency - I’m confused.
How does disability insurance work, and why is it such a hot topic with self-employed individuals like myself?
I’d like to know:
What are the covered conditions?
What is an elimination period?
How long will I receive payments?
Is every policy different? How do I choose?
I’m located in Ontario, Canada, for more context!
Thanks!
Signed,
WhatIf?
Dear WhatIf?
Navigating disability insurance is crucial yet very overwhelming, and I appreciate your inquiries.
Let's simplify it…
Disability insurance protects you and your family in the event of an unexpected illness or injury that leaves you incapable of working and earning an income.
Typically, disability insurance replaces a significant portion of your regular income, ranging from 60% to 85%, up to a specified maximum, for a defined period under two circumstances:
1. Temporary inability to work.
2. Permanent disability resulting from an injury or illness. It's important to clarify that "permanent" refers to the nature of the disability, not lifelong benefits.
There are two primary categories of disability insurance:
1. Short-term disability insurance, which provides benefits for up to six months during sickness or injury.
2. Long-term disability insurance, which commences when short-term or other benefits end, usually covers 60% to 70% of your expected income.
You can define disability in two ways: "Any Occupation" (complete inability to work) or "Regular/Own Occupation" (inability to perform your job's primary duties).
When considering your questions:
1. Covered conditions vary by policy.
2. The elimination period, is the time you must wait before the claim is paid out. This is usually between 30 to 90 days.
3. Payment duration can differ from policy to policy, sometimes covering a specific term or until a certain age.
I trust this information is beneficial. Please don't hesitate to seek further clarity or pose additional questions since individual policies vary to suit unique situations.