When it comes to financial planning, disability insurance is one area that often gets overlooked. This is especially true if someone has coverage through their employer as they may presume that it provides adequate protection.
While workplace disability coverage can offer you great security, there are many policies that come with a long list of limitations. Here we’ll see what you should be looking for and how to get the perfect coverage for you.
Understanding Employer-Provided Disability Benefits
Disability insurance is there to cover your income should you become unable to work due to disability, and many employers will offer some form of disability package. While this may sound great, often there are limitations and exceptions which can make it almost meaningless.
To get a clearer picture, let’s look at some of the limitations of employer-provided personal disability policy benefits.
Limited Coverage – Most policies through your employer will only cover a percentage of your income (often around 60-70%) and not all of it. Due to this, it may not be enough to cover all of your financial responsibilities, which is what it should be designed for.
Tax Implications – Depending on how the premiums are paid, the benefits you receive may be subject to income tax. This can eat into the money you will receive which is already likely to be less than your full income.
Job Dependence – The insurance you’re receiving will be tied to your current job. If you switch jobs or your employer stops providing the benefit, then you’ll find yourself without a policy which can be a vulnerable situation.
Lack of Customization – Disability insurance for employees is rarely flexible. They are usually standard policies which are the same for all employees. This most likely won’t align with your specific circumstances and may lead to some significant gaps in your coverage.
Partial Disabilities – Many of these plans will focus on complete disabilities, where you are completely unable to work. However, partial disabilities that significantly affect your ability to work may not be covered.
The Benefits of Personal Disability Insurance
As we can see, while employer-provided insurance can be a decent safety net, there are often significant holes in the coverage. Now let’s look at some of the advantages of disability insurance when choosing your own policy.
Fits Your Circumstances – When getting your own disability insurance coverage, you can ensure it’s designed to meet your needs. You’ll have much more control over the benefit amount you receive, exactly what it covers and the duration of the policy.
Continuation – Unlike any employer coverage, you’ll have the peace of mind that you’ll always be covered, even if you change jobs. You don’t need to worry about losing your coverage so long as you keep up the payments.
Comprehensive – You can also choose to get a comprehensive policy that can cover not only 100% of your income but also a broader range of disabilities. This gives you more protection that you’ll be covered in a greater range of scenarios.
Tax-Free Benefits – For those who pay for personal disability insurance out of their own pocket, the benefits are usually tax-free. It means you don’t need to worry about a large chunk of it being taken and leaving you financially vulnerable.
Supplementing Workplace Disability Coverage – Of course, personal cover won’t replace your employer policy but simply add to it. This can mean you’ll get an even greater income should the worst happen.
Making an Informed Decision
The decision to get extra disability insurance or not can be a tough one. You’ll need to weigh up many different factors which will include your financial responsibilities, the job that you have and also your lifestyle.
The first thing to do is assess your needs. Here you’ll want to evaluate your expenses and consider your financial goals. The crucial question to ask is whether the coverage provided by your employer is enough to maintain your lifestyle and pay your expenses.
Following that, you should thoroughly review the policy from your employer. Perhaps the policy is fantastic and gives you everything you’re looking for. More likely, it will have some significant limitations that you’ll want to consider.
Finally, compare the personal policy you’re looking at to the one your employer is giving you. Specifically cross reference the benefit amounts, waiting periods, elimination periods, and definitions of disability to see how the two policies compare.
Understanding disability insurance options can be tough and a little confusing. If you’re unsure on what your next steps should be then it’s a good idea to speak to an insurance specialist who can give a more bespoke recommendation based on your individual situation.
Disability Insurance for Ontario Residents
There is no doubt that employer-provided disability can be a valuable benefit. While it can be helpful, it may not provide the comprehensive cover you need. This is where personal disability insurance can be a great idea.
It will offer you more customization, continuation, and a wider range of coverage options. If you’re considering choosing disability insurance in Ontario, then Buckler Insurance can help. Contact us today and we’ll happily answer any questions on disability insurance.
