How Much Disability Insurance Do You Need?

A disability can happen to anyone. Some people are born with one, but often times the dangers in everyday life can lead to an unfortunate injury.

These injuries can sometimes lead to disabilities, which your ability to earn a living. Disability insurance is a contract that protects one of your most important assets. This is, of course, your income.

If you are unable to earn money, you may have problems maintaining your quality of life. If you have loved ones that depend on you, a disability can also affect their lives.

Here is why disability insurance is important and how much you need to live comfortably.

How Likely Are You to Experience a Disability?

Unfortunately, getting a disability may be more common than you think. Estimates suggest that a quarter of Canadians will miss at least 90 days of work due to an injury or illness.

Statistically, if an injury lasts longer than those 90 days, it is likely to last for up to 6 years on average. Certain government plans may help. But, you need to meet certain conditions to qualify.

One of these plans is the Canada Pension Plan (different from Canada Protection Plan) and another is workers compensation. TO qualify for CPP, you must have a prolonged injury that prevents you from working. And not just at your current job.

Workers’ compensation only covers disabilities caused by incidents in the workplace.

What Is the Cost of Lost Income?

Most people tend to get insurance for things like their homes and vehicles. The chances of such possessions being affected by damage or theft is often not that high. Especially when compared to the challenges you may face if you lose your ability to earn.

Over time, a loss of income can add up substantially due to a disability. Inflation aside, if you earn $50,000 annually, you may earn $1.5 million throughout your 30-year career. This amount can be even higher when accounting for pay raises and bonuses.

Suffering from a disability may increase the cost of living. This is because you might need to make your home more accessible. Other expenses include things like medication and in-home care.

How Much Can You Receive Through Disability Insurance?

To put it simply, disability insurance can help you pay for your important expenses. These include things like groceries, utilities, car payments, and mortgages.

For example, if you earn $50,000 a year, on average your disability insurance may pay a monthly benefit of $2,975. This comes out to an income of $36,000 per year. Similarly, if you earn $120,000 yearly your monthly benefits should be around $6,000.

What if You Already Have Disability Insurance Through Work?

While many Canadians have the benefits of disability insurance through their employers, it may not always be enough. These benefits can be on the lower side and you may find it hard to cover your expenses.

This is why it is important to explore just how much benefits the disability insurance from your employer provides and plan for the future accordingly.

Short-Term Disability Insurance

Short-term disability insurance is a service that provides coverage for up to 6 months in case you become injured or sick.

If your employer provides a short-term coverage plan, you must claim their plan. Most employers don’t provide paid sick leave but each employer is different.

Long-Term Disability Insurance

Long-term disability insurance starts to pay off when other benefits you may have been receiving are exhausted. These include things like short-term disability insurance and sick leave from your employer.

Disability insurance is especially important if you work in a high-risk environment such as construction or the police force.

If you feel like losing your means to earn for a while will significantly impact your quality of life, disability insurance can be a great option to ease some of those worries. Consider speaking with a health insurance broker nj like to explore your options today.