What is Disability Insurance?

When you think about your most valuable asset, what comes to mind? Your home? Your car? The truth is, it’s something even more important — your ability to earn an income.

Consider this: a 40-year-old earning $100,000 annually will make around $2.5 million by the time they retire at 65. That’s a significant asset. And just as you insure your house and car, your income needs protection too. That’s where disability insurance comes in.

Disability Insurance: Your Paycheque Protection Plan.

Disability insurance works when you can’t work. If an illness or injury prevents you from working, disability insurance provides a tax-free monthly income (when structured correctly). It helps cover your mortgage, bills, groceries — everything you depend on your paycheck for — without depleting your savings, selling investments, or incurring debt.

What Conditions Qualify as a Disability?

Disabilities are not always visible, nor are they always permanent. Disability insurance may provide coverage if you are unable to work due to issues such as:

• Recovery from a car accident
• A broken arm or injury that makes physical work impossible
• Chemotherapy treatments drain your energy
• A stroke that impacts your speech or mental functions.
• Mental health challenges like depression, anxiety, or burnout

If a health condition, physical or mental, prevents you from doing your job, your policy could step in to ease the financial burden while you recover.

How Does Disability Insurance Work?

Once your claim is approved, you’ll enter a waiting period (ranging from 30 days to a year — you choose this when you apply). After that, the policy begins to pay you monthly, replacing some or all of your take-home pay. Payments continue until:

• You’re able to return to work
• You reach the end of your benefit period (often age 65)
• You hit the maximum benefit amount in the policy

Types of Disability Insurance.

There are two main types of coverage, and they often work best together:

• Short-Term Disability (STD): Typically offered by employers, providing coverage for up to 6 months.
• Long-Term Disability (LTD): Begins after short-term coverage ends and can provide support for years — even up to age 65.

If you’re self-employed or don’t have strong workplace coverage, an individual policy is critical. Check out this short video explaining critical illness and disability insurance for business owners.

Optional Disability Insurance Features (a.k.a. Customizing Your Plan).

You can customize your policy with added benefits like:

• Future Income Option: As your income grows, your coverage can too — without requiring medical approval.
• Cost of Living Adjustment (COLA): Safeguards your benefit from inflation through annual increases.
• Own Occupation Coverage: Particularly valuable for specialized professions. It pays out if you cannot perform your specific job, even if you can technically work elsewhere.

Why Disability Insurance Is Worth It.

• 40% of Canadians will experience a disability lasting longer than 90 days before age 65.
• It protects your lifestyle, your savings, and your future goals.
• It safeguards the investment you’ve made in your education, career, and business.
• It may be more affordable than you think. Premiums usually cost just 1–9% of your income, depending on your age, health, occupation, benefit amount, waiting period, and coverage length.

Think of it this way: You invest thousands into building your career. Disability insurance protects the return on that investment.

Isn’t Government Coverage Enough?

While programs like CPP, QPP, EI, and Workers’ Comp exist, they’re not always enough. They often have strict eligibility requirements and limited payouts, which is why individual coverage is essential, especially for higher earners or self-employed individuals.

Final Thoughts

When you truly stop and consider it, protecting your income means safeguarding your entire way of life: your home, future plans, and your family’s security. All are secured by one simple yet powerful plan. It’s all about protecting your most valuable asset — you!

Curious about how disability insurance could fit into your financial plan? Let’s connect—I’d be happy to walk you through your options and customize a plan that works for you. As a certified financial planner, I help people assess their life and health insurance needs and get a policy that is right for them. Schedule a 15 Minute Complimentary Call with me to learn more.

Christina Wyatt. Managing Advisor – Life Insurance Division, Bauld Insurance