Disability insurance: your questions answered

By ATB Wealth 23 April 2024 4 min read

Protecting your most valuable asset

Have you ever thought about what your most valuable asset is? Most people think of their home, family or a treasured piece of art. 

But your most valuable asset is you—your health, wellness and ability to support yourself, your family and your lifestyle.

What happens if you lose that ability?

It’s difficult to think about being injured or ill or receiving a life-changing diagnosis, but it's a good idea to consider what would happen if you could no longer work for an extended period of time.

Disabilities in Canada are more common than you may think

Many Canadians encounter a disability during their lifetime. 

In 2022, more than one in four (27%) of the Canadian population aged 15 and over (that’s about eight million individuals), had one or more disabilities. 

The prevalence of disability increased with age, from 20% for those aged 15 to 24 years, to 40% for those ages 65 years and over. Women (43%) were more likely to have a disability than men (39%). The most common disabilities were related to pain, flexibility, mobility and mental health.1

A disability may disrupt your ability to earn an income in your current job or work of any kind, and, depending on the type and severity of the disability, the disruption can be short or long-term.

What is disability insurance?

Disability insurance pays you a percentage of your established monthly income if your ability to work is removed or reduced by an injury or physical or mental illness. It allows you to maintain your lifestyle and support yourself and your family while you’re not working.


Why should I consider getting it?

Disability insurance provides you with peace of mind.

If you find yourself experiencing a disability and unable to work, disability insurance allows you to pay your monthly expenses, support yourself and your dependents. It gives you the space to focus on your recovery or manage the disability without having to worry about your finances.


What types of disability insurance are available? 

An employee benefit package often includes some level of disability coverage. Review your benefits to determine your level of employer-funded coverage and any additional coverage that could be purchased. If your employer does not provide disability coverage and you feel it is important coverage for your circumstances then an individual plan can be purchased either through a broker or other entity such as an association or union.

There are several options to choose from, including the total benefit amount and length of duration of the insurance. The insurance can be taken out for a predetermined time frame (for example, two or five years) or it can be up to a certain age (for example, age 65). 


Can I use my emergency savings instead? 

A lot of people who have a “rainy day” fund assume they’ll use these savings in case of a disability, but this might not be a realistic approach. For example, if you saved 5% of your income every year for 10 years, and required six months of income for a disability, you would draw 10 years of savings all at once. 


Can I borrow from my bank? 

Borrowing from your bank is another option, however, your current employment status could be a consideration. If you’re already off work because of the disability, this may negatively affect your loan application.


My spouse works. Do we still need disability insurance? 

Before you can answer that, consider totalling your monthly expenses. How long could you survive on one income? How would that change your family’s standard of living? 


How much does disability insurance cost? Do I need a health assessment? 

The cost depends on several factors. One is a health assessment, which is required and will be done before you purchase the policy. Other considerations include your occupation, income level, the duration over which you are eligible to receive compensation and how quickly you become eligible to access compensation after you are disabled. 

All of the medical and financial underwriting (risk assessment) is completed at the time of the application. 


How quickly does compensation arrive? 

When you apply, you can choose when you’d like to start receiving compensation after a disability. As you consider the options, think about both funds that you would have on hand and those that can be accessed in the near term. 

Compensation from a disability insurance claim usually starts after a specified waiting period and is paid in monthly instalments, either for the predetermined period, up to a certain age or until you return to work. 


Are disability benefits taxable?

In general, disability benefits are subject to income tax only when your employer pays all or part of the premium. If you pay the entire premium yourself, benefits are not taxable. 


Disability insurance is a practical peace-of-mind solution

You can purchase an individual disability plan to protect your household from the loss income that may result from sickness or an accident. This form of insurance policy provides disability coverage for a wide variety of circumstances while still being flexible for your specific situation and needs. 

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Find the insurance solution that's right for you.

Frequently Asked Questions

You can find more information about insurance solutions here . At this time ATB does not offer life, critical illness and disability insurance. Your ATB Wealth advisor may be able to work with your external insurance advisor to ensure you have the right coverage for your financial future.

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