Disability insurance provides you with an income while you are totally or partially disabled due to injury or illness. In the event you are disabled due to an injury or sickness, your insurer will pay you a lump sum in order for you to pay off your expenses. This coverage will allow you to concentrate on your recovery without worrying about your daily living expenses.

You can purchase disability insurance through the following:

• Individual Insurance Plans
• Group Insurance Plans such as employers ‘ group benefits, union or association plans
• Government plans

Disability benefits typically replace up to 60 to 85 per cent of your regular income. Some plans pay tax-free benefits while others are taxable. You can receive disability benefits from more than one source as long as the total benefits received are not greater than your normal income.

There are three types of individual disability insurance plans:

• Non-cancellable - this type of policy cannot be cancelled and the price cannot be increased during the period of time set out in the contract.
• Guaranteed renewable - The insurance company must renew this type of policy but it can raise the premiums for everyone in a certain class or category. However, it cannot raise an individual policy premium.
• Commercial - On the anniversary of the contract, the insurance company can refuse to renew the policy, or it can charge more because of any previous claims you may have had.

Do I need Disability Insurance?

Ask yourself these questions:

• If your ability to earn income stops due to accidents or sickness (not including medical expenses), can you live on your savings indefinitely?
• Would you be able to get a loan from your parents or your financial institution to cover daily living expenses until you are well?
• Would your obligations for making mortgage payments or rent stop when you are injured or sick?

If you answered "no" to any of these questions, then you should consider getting yourself protected before it's too late.

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