Disability and Critical Illness Insurance - Why You Need Both

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The purpose of insurance is to reduce risk and be able to take care of family responsibilities after a catastrophic event. Life insurance is a good start but without disability insurance and critical illness insurance, it’s an incomplete solution. Today, we’ll talk about what disability insurance and critical illness insurance are, why you need both and how small business owners and their employees can purchase this protection within a simple, flexible and affordable benefits plan.

(This article is designed to provide general information regarding disability insurance and critical illness insurance; it’s not intended to serve as legal, tax or other financial advice.)

What is disability insurance?

Disability insurance is insurance that protects against loss of income due to temporary or permanent disability. Whether you become disabled because of a sudden event (like falling off a roof) or a degenerative disease, disability insurance protects you. For example, group disability insurance coverage is based on an employee’s current salary. If an employee becomes disabled and eligible for disability insurance, their monthly disability payment will be 66% of their salary (tax-free).

Short-term disability coverage lasts for six to 52 weeks. Long-term disability coverage typically starts when short-term disability stops and most coverage lasts until the employee is 65-years-old.


What is critical illness insurance?

Critical illness insurance provides a lump-sum payout after being diagnosed with a critical illness such as cancer, heart attack, stroke, etc. Even when provincial health care covers most major medical expenses including hospital stays, becoming ill comes with additional expenses both medical and non-medical. There are no spending restrictions associated with the critical illness payout; if you receive this payment, you can spend it at your own discretion.

Critical illness insurance can be purchased in coverage increments of $20,000.

Why income loss protection matters to most Canadians

Some people work because they love what they do; they don’t need the money and they have enough personal wealth to retire at a moment’s notice. However, most people aren’t in this situation, even with savings.

BDO Canada’s 2019 Affordability Index found that 53% of Canadians live paycheque-to-paycheque and 25% of Canadians are overwhelmed by debt.

If you can no longer work due to disability or critical illness, insurance gives you the peace of mind that comes with knowing you can pay the mortgage and put food on the table for your family.


Why do I need both disability insurance and critical illness insurance?

The 2017 Canadian Survey on Disability found that “22% of Canadians had at least one disability.” For working-aged Canadians, the number is slightly lower at 20%. The most common disabilities are related to pain (15%), flexibility (10%), mobility (10%) and mental health (7%).

It’s important for employees and employers to know one more disability statistic: The employment rate for people without a disability is 80% while the employment rate for people with a disability is only 59%.

On top of that, critical illness is also common. In the 2019 Canadian Cancer Statistics report by the Government of Canada and the Canadian Cancer Society, they estimate that 50% of Canadians will be diagnosed with cancer in their lifetimes. In 2019, they estimated that 220,400 new cases of cancer will be diagnosed; another report published in the Canadian Medical Association Journal estimated slightly higher numbers (225,800) for 2020.

Heart disease is Canada’s second leading cause of death after cancer. The Government of Canada reports that every year, 63,200 Canadian adults have their first heart attack (that’s 2.3 heart attacks per 1,000 adults).

For all of us, whether we’re employees or business owners, we must appreciate that becoming disabled turns the inability to work into a real risk. And while it’s hard to think about, many Canadians are diagnosed with a critical illness every single year.


Disability and critical illness insurance for small business owners and their employees

Employers can offer group disability and group critical illness insurance for their employees, for example, through the BeniPlus Benefit Wallet. Small business owners can cover themselves this same way. Group disability and critical illness insurance typically doesn’t involve medical underwriting though increased coverage may be available after qualifying with a medical questionnaire.

For employees, coverage typically terminates when employment ends. That’s why employees may also want to purchase their own disability and critical illness insurance policies independent of their employer. With the BeniPlus Benefit Wallet, this can be done through a healthcare spending account (HSA) or a wellness spending account (WSA). Plans purchased individually are generally subject to medical underwriting.

If you’re a small business owner who’d like to provide your employees with a simple, flexible and affordable employee benefits program that includes group disability and critical illness insurance, take 10 minutes today to get a quote.

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