Disability Insurance-Frequently Asked Questions

• If I purchased a disability insurance policy on a approximation of earnings will it pay?
• What if I approximated my earnings and indeed I do not have a net taxable even close to what I reported?
• What if I do not have a net taxable, reported a loss and had a net taxable in the previous year?
• Will I have a higher benefit (replacement income) amount if I purchase a plan based on my gross earnings?

• I purchased an INJURY only policy, are most claims INJURY within my occupation illness or injury related?

• What if I sustained an injury previously and I did not report it on my contract for disability insurance, will the claim be paid?
• What if I disclosed this pre-existing condition and they have excluded the pre-existing condition, will I be covered inspite of this injury?

• I have a sprain and strain limitation within my contract which I am not satisfied with are there contracts offering no limitations?
• Is partial disability limited within most contracts?
• My contract offers a limited amount of rehabilitation is this an important aspect of my policy?

• I have a contract with return of premiums in the event I never have a claim, do you think this is a good option?

• Do I really need Accidental Death & Dismemberment coverage?
• Should I buy Critical Illness coverage as a rider forming part of my disability insurance policy or as a separate policy?
• Can I buy protection to protect my investments in the event of a disability?
• Should I purchase Waiver of Premium in the event I become disabled so I do not have to pay any future premiums?
• Should I purchase Future Earnings Protection within my Disability Insurance policy?
• Should I protect my Own Occupation until age 65 (Regular Occupation Period Extension)?
• Do you think I should protect myself from the Cost of Living?

If I purchased a disability insurance policy on a approximation of earnings will it pay?
Yes. However, this approximation should be close to your net taxable earnings reported to Revenue Canada

What if I approximated my earnings and indeed I do not have a net taxable even close to what I reported?
Unfortunately, if you have a net taxable lower than $12,000 the insurer to reserve the right to NULL and VOID your contract for insurance or pay you a benefit based on the income reported.

What if I do not have a net taxable, reported a loss and had a net taxable in the previous year?
This depends upon the contract sold and the insurer, some contracts lock in your qualifying benefit based on the earnings supplied on financials and tax returns, other contracts do not. Policies that require verification at time of application will pay the claim. Others require earnings to be verified at time of claim.

If the contract is based only the last 12 months, benefit will NOT be paid. This is important aspect of purchasing a contract for disability income. We insist on a 24 month assessment period for all our clients.

Will I have a higher benefit (replacement income) amount if I purchase a plan based on my gross earnings?
Not necessarily. Accountants utilize many different methods to reduce your net taxable reported to Revenue Canada. Some of these methods that can be brought back into your income by an Insurer include an Income Split between you and your spouse, if she is provided an income and not part of your business, above average depreciation in any one year due to acquistion of equipment, other income illustrated on financials etc. These are all utilized to increase your net taxable internally from an Insurers stand point.

What if I sustained an injury previously and I did not report it on my contract for disability insurance, will the claim be paid?
Individual contracts most times will not pay this claim. If not disclosed this contract may be NULL and VOID by the insurer or just refuse to pay the claim.

This all depends on the type of contact sold to you at the time. There are 3 types of contracts and 4 types of definitions of disability. Group insurance will cover this most times. Some group plans have a 24 month pre-existing clause that does not provide coverage until the waiting period of 24 months is satisfied, others would be automatically covered.

Depending on the type of injury it may or may not be payable. For example a strain or sprain not included in that area may now be covered since it is only covered for 15 days on one type of contract. Discretion is upon the Insurer. This is why choosing a good insurer is so important and not following price.

What if I disclosed this pre-existing condition and they have excluded the pre-existing condition, will I be covered inspite of this injury?
Exclusions are generally excluding a condition or injury that was sustained previously to you being insured and that the no one will accept this responsibility.

For example: You had knee surgery and the knee has plastic parts. This knee which ever right or left would be excluded.

However, if you broke your leg, your broken leg would be covered; if you purchased a non-cancellable contract; excluding you right or left knee but providing coverage for your right or left leg.

*We encourage you to contact your living specialist who sold you the contract or contact or office.

*If the average claim is 6 weeks buying either contract offers only 2 weeks of coverage

These same contracts offer only illness short term as well but a 1st day Injury benefit. Ask your Living Benefits Specialist for a plan that will offer you no limitations as well as illness to age 65.

They also may have exclusions not commonly found with a higher end product (non-cancellable contracts). Ask your Living Benefit Specialist for a comparison between both contracts. Definitions are the key to Loss of Income Plans (disability insurance contracts).

Is partial disability limited within most contracts?
Yes. Cancelable contracts (1st day injury policies) generally offer 3 months of partial disability coverage with no option to purchase extra coverage. Non-Cancellable (30 or 31 day Injury plus Illness policies) contract generally do not provide Partial Disability Coverage but provide a rider that can be purchased for extended periods such as 6 months, 12 month, 24 months.

Partial Disability may be an important benefit to your occupation and not yet to others. Depending on what you do for a living, partial may be an asset to you. Ask your living benefit specialist for further information.

My contract offers a limited amount of rehabilitation is this an important aspect of my policy?
Absolutely. Rehabilitation will provide you with the means to not only become a part of society once again but also provide you with the benefits needed for retraining, necessary equipment which would come out of your pocket if limited within your contract.

These limitations are commonly found in cancelable programs (1st day Injury policies), all competiting in the same market such as the truckers market. We caution you and recommend you contact your advisor or living benefit specialist to purchase a plan offering unlimited rehabilitation.

The return of premium is a % of what was paid i.e. 25, 30 or 40% of premium paid. This is excellent within the white collar markets and many times purchased within the blue collar markets. Consider the following:

• The average premium payable or built in to a contract offering return of premium is $50.00 monthly, $600 annually and $12,000 investment providing no liquidity and tied up for 20 years. With only the probability of maintaining the contract for this period.
• Surrendering this contract after 10 years means $6,000 in lost revenue with no return on investment or claim.
• The rate of return maintaining liquidity of $50 per month on $50.00 monthly based on the following interest rates provides.

*Please note a 3% charge has not been illustrated for monthly premium withdrawl for this illustration that is charged for monthly withdrawls.

Should I buy Critical Illness coverage as a rider forming part of my disability insurance policy or as a separate policy?
Critical Illness coverage is highly competitive coverage. It too is based on definitions. We have found that buying a separate policy is in the best interest of our clients since most clients want to have the option of a payout on initial diagnosis “Early Intervention Benefit” and payment for diagnosis of Diabetes, Prostate and Breast Cancer. Definitions are the key to this contracts as well as length that the coverage will be offered. Consult your Living Benefit Specialist.

Can I buy protection to protect my investments in the event of a disability?
Absolutely, so carriers offer protect to cover your monthly deposits into your RRSP or Non-Registered Investment. If you are doing business with the same insurer for your disability benefit as well as investing this is an ideal rider and very cost effective.
Consult your Living Benefit Specialist for more information.

Should I purchase Waiver of Premium in the event I become disabled so I do not have to pay any future premiums?
Most contracts offer this coverage for free payable after 30 days. Most carriers do not offer this as a rider but very few do. Consult with your Living Benefit Specialist to see if this benefit is within your contract.

*A word of Caution some association offer this coverage only after 6 months which may be a financial burden to you, consult your advisor for the waiting period on this option.

Should I purchase Future Earnings Protection within my Disability Insurance policy?
Absolutely, especially if you want to protect your insurability as well as a company that is progressing financially. Future Earnings Protection option allows you to buy more coverage without evidence of insurability and allows your benefit to increase.

Should I protect my Own Occupation until age 65 (Regular Occupation Period Extension)?
Many professionals purchase this benefit and protect their skill or professional expertise. This rider allows the professional to receive a benefit to age 65 and the ability to be able to consider another occupation and receive this permanent benefit.

This benefit is ideal for a professional or skilled worker, athelete whereby their ability to work and earn a living is dependent on their professional capability or skill. The cost is minimal in comparison to the long term advantages. Would you like the ability to still work and collect a benefit cheque from your Insurer?

Do you think I should protect myself from the Cost of Living?
Absolutely, the cost of living adjustor is an ideal benefit considering either the rate of inflation or the increasing in the consumer price index? The cost is minimal in consideration to its long term benefit. You protect yourself from the increased cost of living.