Disability insurance replaces a portion of your income if a disability prevents you from performing your regular job duties. This can include physical injury, chronic pain or mental illness, although exactly what’s covered will vary by the insurance providers and your individual plan.
With disability insurance, you’ll receive a tax-free monthly payment to replace your income in the event that an illness or accidental injury prevents you from working. The amount you’ll receive depends on your policy and insurance providers, but a typical policy is structured to replace 85 per cent of your take-home income.
If you suffer from a qualifying injury or illness and file a claim, you will start to receive your monthly benefit after a waiting period, which is anywhere between 30 days or six months, although the average is 90 days. It is important to note that disability benefit payments are made at the end of each month. So, a disability policy with a waiting period of three months will receive its first payment at the end of the fourth month.
You will receive the monthly disability insurance benefits:
- until the end of your benefit period;
- until you reach your maximum benefit amount; or,
- you return to work successfully.
Disability insurance is different from critical illness insurance, which provides a one-time lump sum payment that can cover treatment-related costs or everyday expenses should you suffer from a life-threating illness.