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What is disability insurance and how does it work?

Disability Benefits - Question 141
During our working life, we have financial responsibilities. In the event of an injury or illness leading to disability, our income is at risk. Disability insurance is marketed as a means of managing that risk. It is designed to offer a safety net and provide a source of income in the event you cannot work. Many employers offer short and long-term disability insurance as part of a benefits package. Disability insurance is designed to pay a portion of your income. Your level of coverage depends on your income and on what insurance is provided by your employer. There are many different types of policies available through many different insurance companies. 

Individuals may also take out their own private disability insurance policy – if they are self-employed, for example. In fact, many professionals benefit from taking out their own private disability insurance policy, including doctors, accountants, lawyers, architects, business owners, and dentists. Disability insurance offered by an employer is structured such that the risk of making a claim is spread across a group of people. Private policies generally cover an individual and thus are more expensive. If you are a professional covered under your own disability insurance policy, the added stress of feeling on your own, as well as maneuvering through the red tape to file a disability claim, can prove even more daunting.

Private disability policies in Canada pay benefits after the expiration of a waiting period of usually between 30 and 90 days, or longer, depending on the particular policy. Many private policies provide for long-term benefits in the event that the policyholder is totally disabled from their own occupation. For younger policyholders, it can be even more difficult to get insurance companies to agree to long-term disability benefits due to the high cost of paying benefits over their working life.

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