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SHOPPING FOR DISABILITY INSURANCE?
Who would pay the bills if you were laid up? Your family may
be well protected by insurance on your life, but would they be
exposed to financial hardship if you were unable to work?
It's a risk you shouldn't ignore. There are 3.3 million disabled
Canadians; just a few are children. Almost 1.8 million of the
disabled are between the ages of 14 and 64. For most, the disability
has an effect on how much work and what kind of work they are
able to perform. You may find it hard to believe that you could
be seriously affected by an illness or an accident, but a third
of all people now aged 35 will be unable to work for at least
six months before reaching age 65. The chances that you'll suffer
a disability rather than die before retirement are close to three
to one.
Getting a handle on disability insurance can be frustrating.
In terms of life insurance, if you die, you collect, and if you
don't, you don't. But what constitutes a disability? It's complicated
by definitions, exclusions, occupational classifications, and
options.
When you're looking for disability protection, you have to know
what the policy means by the term "disability." This
is the policy's disability definition, and you should read it
carefully. There are three common definitions of disability: "Own
occupation" or "regular occupation": Disability
is sometimes defined as the inability to perform the duties of
your usual job. This is called an "own occupation" or
"regular occupation" definition. Thus, a sales agent
who developed a mental disorder that impaired his ability to deal
with the public would be considered disabled, even if he was able
to work at some other job. These policies are well suited to those
occupations that demand special education or experience and are
sensitive to even minor health problems. Surgeons would be considered
disabled if they developed a nervous tremor; airline pilots would
be able to collect benefits if they suffered an eye injury. On
the other hand, an accountant could lose an eye, a hand, or a
foot and still work as hard as ever. Some companies add the phrase
"and not otherwise gainfully employed." These few words
significantly water down the protection. Some companies add "one
or more of the essential duties of your regular occupation."
These words add strength to the definition.
"Any occupation": Some policies will consider you to
be disabled only if you are unable to work at any job for which
you are qualified by education, training or experience. This is
an "any occupation" definition and is normally not recommended.
"Total disability": The shallowest protection is from
a policy that considers you disabled only if you're unable to
work at any job at all. This definition is seldom found in private
insurance plans but common in group disability plans.
The disability definition is the key to the quality of your plan;
it will determine whether or not you'll receive a disability benefit
if you're not able to work. Not only should you read it carefully,
but you should also look at the time period during which the definition
is in effect. Some policies will use the "own occupation"
definition for the first two years, but will continue to pay benefits
only if you qualify under the "any occupation" definition
after that time.
Make sure your policy will pay benefits whether your disability
arises from an accident or a sickness. Some will protect you only
from disabling injuries and not sickness. A few, called "non-occupational
policies," exclude disabilities that arise from the hazards
of work on the assumption you'll be protected by workers' compensation.
You want a policy that will cover a disability, whatever the cause.
There are a few exclusions you can't avoid: you are not protected
if your disability arises from war or normal pregnancy. Some policies
exclude self-inflicted injuries, yet many accidents could be considered
"self-inflicted." There are policies that even exclude
claims that arise from alcohol or drug abuse, very common causes
of disability. Avoid any policy that won't pay for mental or nervous
disorders.
All of the options are nice to have -- just like a car fully
loaded with all the extras -- but in buying disability insurance
you will also run up against the affordability barrier unless
you are fortunate to belong to a professional association. Look
for insurance that is non-cancellable (by the insurance company,
except for non-payment of premium) and protects you from any kind
of disability, whether it arises from an accident or an illness.
Remember, you can keep your premiums lower by choosing a longer
waiting period but the waiting period should reflect the need.
Associations are an excellent source for finding coverage and
should be investigated only through a source qualified such as
an appointed authorized representative or appropriate call center.
Most agents cannot sell association products so the adage consumers
beware applies. Note most associations are user friendly at claim
time.
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