Menu

disability insurance

Disability Insurance for Small Business Owners

Disability Insurance for Small Business Owners

As a small business owner in Nova Scotia, you’re probably the heartbeat of your operation. 

But what happens if you can’t work due to a disability?

Statistics from the Canadian Life and Health Insurance Association show that one in three Canadians will experience a period of disability lasting longer than 90 days during their working life. 

For Nova Scotian small business owners, that translates to halted operations and significant loss of income – unless you’ve got a safety net like disability insurance. 

Disability insurance can ensure your business and personal finances stay on track even if life throws a curveball!

Key Takeaways:

  • Income Protection: Disability insurance ensures your income and business operations don’t suffer if you can’t work due to injury or illness.
  • Types of Insurance: Options include short-term and long-term plans, personal disability coverage, and business-specific plans like overhead expense insurance.
  • Planning Ahead: Without proper planning, the future of your small business is in jeopardy.

The Importance of Disability Insurance for Small Business Owners

Let’s say you own a small landscaping business and get injured (outside of work) during peak season or are too ill to work for an extended period. 

That could spell disaster for your business if not for disability insurance. 

This financial tool is designed to replace a portion of the income lost due to illness or injury and can be especially beneficial for small business owners who don’t have employer-sponsored coverage.

Types of Disability Insurance

In Canada, small business owners have access to several types of disability insurance. 

Personal Disability Insurance can compensate you for living expenses like mortgage payments or groceries until you are back on your feet. 

A Business Overhead Expense Insurance policy can protect your business by covering fixed costs like rent, utilities, and employee salaries, ensuring your business stays afloat while you recover.

You also have options like short-term and long-term disability insurance and Worker’s Compensation which provides coverage for work sustained injuries. 

These types of disability insurance work together to protect your livelihood and your business’s future.

Disability Insurance – Costs and Coverage Options

The cost of disability insurance varies based on factors like age, occupation, and health. Premiums can also vary depending on coverage length, benefit amount, and exclusions.

Small business owners in Nova Scotia can expect a disability insurance policy to cost on average between 1-3% of annual income.

Short-term policies provide benefits for a few months and generally have lower premiums. Long-term plans can last for years or even until retirement but are more expensive.

Typically, disability insurance policies cover 60-85% of your lost income. The higher the percentage the more the policy is likely to cost.

It is always best to shop around, compare quotes from different providers, and consult an insurance broker to find a plan that best fits your needs and budget. 

Another top tip is to read the fine print carefully and be aware of pre-existing conditions or high-risk activities that may impact coverage and eligibility. 

Why You Need Disability Insurance for Your Small Business

Here are reasons why your Nova Scotian small business needs disability insurance coverage.

  • Safeguards your business by ensuring expenses are covered
  • Get you back on your feet through work benefits such as rehabilitation and job training
  • Protects your partners by compensating them for lost income or providing them funds to buy your share of the business via a buy/sell agreement
  • Allows you to keep employees on the payroll
  • Ensures business continuity 

Choosing the Right Disability Insurance Plan

As a small business owner, you likely have a stringent budget and want to keep costs as low as possible. 

However, having a disability insurance plan is an expense that can’t be ignored. 

The right insurance plan can help protect you, your employees, and your business from financial turmoil. 

But how do you choose the right disability insurance plan for your business needs?

You start by calculating your monthly expenses and business costs to determine how much coverage or benefit amount you’ll “actually” need. 

Short-term disability insurance can offer benefits of up to 80% of gross monthly income while long-term disability plans usually provide a benefit of up to 60%. 

You will then need to figure out your ideal benefit duration. Short-term disability insurance will provide a benefit duration of three to six months while long-term disability offers benefits for two years, five years, 10 years, or until you retire. The longer the benefit duration the higher the premiums.

That’s not all! 

You will also need to determine what waiting period to opt for. Shorter waiting periods (14 days or less) mean faster payouts but higher premiums and vice versa.

Armed with this information you will now look for insurers with strong ratings and positive reviews, especially those with experience serving small businesses in Canada. 

When considering different policies, look for limitations, exclusions, policy provisions, and optional features. 

By being aware of all terms and conditions you can make more informed decisions about which policy works best for you!

Consult A Trusted Disability Insurance Broker

Whether you are a small business owner wanting to protect your business’s future or an individual wanting to add disability insurance to your existing group plan, McIver Insurance Inc. is your most trusted disability insurance broker in Nova Scotia.

We offer free consultations and have a five-star rating on Google Reviews.

To get in touch, call now at 1-902-220-3279 or email [email protected]. 

FAQ Section

Q1) What’s the difference between short-term and long-term disability insurance?

Short-term policies cover temporary disabilities, usually lasting a few months, while long-term insurance kicks in for extended periods, potentially up to retirement.

Q2) How do I calculate the amount of disability insurance I need?

Add up your living expenses and fixed business costs. The total will give you a good idea of the coverage you’ll need.

Q3) Can I deduct the cost of disability insurance from my taxes?

Yes, premiums for business overhead insurance are generally deductible in Canada, but personal disability insurance premiums aren’t.

Q4) What happens if I never use my disability insurance?

You don’t get the money back, but the peace of mind it provides is priceless. It’s like fire insurance—hopefully, you never need it, but you’re grateful to have it if you do.

Q5) How do I file a claim if I become disabled?

Notify your insurer immediately, complete the required forms, and provide medical documentation. Working with a trusted insurance broker can help streamline the process.

What additional coverage should be considered with disability insurance

What additional coverage should be considered with disability insurance?

,

Your ability to earn income is your most valuable asset. However, the likelihood of you having a disability that prevents you from working is much higher than you think with up to 40% of Canadians experiencing disability for 90 days or longer before the age of 65. 

The right disability insurance policy can be a powerful defense against one’s inability to work due to an unforeseen accident, illness, or injury. However, there’s a lot to consider as you have different types of disability insurance plans, optional riders, and policy features to account for.

This is why, for many Canadians, opting for disability insurance can seem like a daunting task. Fortunately, we are here to help! 

In this article, we will discuss additional coverage options for disability insurance in Canada and why adding these coverage options can make all the difference when it comes to having comprehensive protection for you and your family.

What is Disability Insurance?

Disability insurance is a type of insurance policy that will pay out tax-free monthly income (which is usually 60%-90% of one’s current income) if they are unable to work due to an illness or injury.

While many Canadians consider disability insurance as a means of protecting against illness and injuries, in essence, disability insurance protects your ability to earn an income and maintain your lifestyle.

However, it is important to note that the term ‘disability’ may be defined differently by various insurance companies. As such, it is essential to speak to an insurance agent about a plan’s definition of disability and its terms and conditions.

Different Types of Disability Insurance in Canada

There are two types of disability insurance; Short-Term Disability (STD) and Long-Term Disability (LTD). 

Short-Term vs. Long-Term Disability Insurance Options

An STD plan covers immediate expenses for up to six months in the event of an injury or illness that prevents you from working. 

Most employers in Canada, offer an STD insurance plan through a group benefits plan. However, the coverage for these policies can be less than desirable, as the coverage options are picked by the employer, and may not meet personal requirements. 

LTD usually kicks in when STD benefits end, you have no more sick leaves from your employer, or you no longer qualify for EI sickness benefits. This type of insurance offers continued support for several years or even until retirement and it is essential for those that can not return to work due to a severe illness or injury.

Most LTD insurance plans will compensate policyholders 60% to 70% of their normal income. As such, it is important to opt for both, STD and LTD insurance, under one coverage. This is the best and most viable insurance plan for the average working Canadian.

Optional Riders to consider for Enhanced Coverage

Apart from having a combination of STD and LTD insurance, you can also add additional coverage or ‘riders’ for more comprehensive protection. 

Some common and popular riders that should be considered with disability insurance include:

Own Occupation Rider

Highly skilled professionals should consider this rider as it offers benefits to the insured if they can no longer work in their profession due to disability. 

Future Increase Option

An excellent choice for young professionals who are expecting career growth. With this rider, the insured can increase the coverage amount as their income grows without having to take additional medical exams.

Cost-Of-Living Adjustment

This rider allows for benefits to be adjusted to keep up with inflation. This way the purchasing power of the insured remains stable over time.

Accidental Death & Dismemberment

This rider includes specific injuries or deaths caused by accidents, offering an additional layer of protection. 

Partial Disability Benefits

What if your injury or illness allows you to work but not at your full capacity? Having a partial disability rider will pay out benefits to compensate for the work you are no longer able to do due to your disability.

Return of Premium Rider

This is a popular rider that allows the insured to receive a refund of the premiums made if no claim is made over a certain time. 

Residual Disability Rider

Similar to partial disability, residual disability pays out the difference between the income you make now and the income you used to make before your disability.

Key Features to Look Out for in Disability Insurance Policies

When considering disability insurance always look for the following key features:

  • What is the cost of the policy?
  • Will you still need to pay premiums while living with a disability?
  • What is going to be your monthly payout?
  • Will the benefits received be taxable?
  • Are your benefits going to be adjusted for inflation?
  • How long will you have to wait before your benefits kick in?
  • What optional riders are available and at what cost?
  • Will you be allowed to increase coverage without taking a medical exam?

Consult with Professionals at McIver Insurance

There is a lot to consider when shopping around for an individual disability insurance plan or a group benefits plan that includes disability insurance for your employers. 

This is why consulting with an insurance brokerage firm such as McIver Insurance is advisable as we are equipped to guide you on what policy, riders, and features would be best suited to your specific needs.

Feel free to call us at 1-902-220-3279 or email [email protected] if you have any queries or would like to book a free consultation!

FAQs

Q) What should be considered when choosing between federal/provincial benefits and private insurance for long-term disability?

Private insurance for LTD has more lenient parameters than federal/provincial benefits such as Employment Insurance (EI) sickness benefits and Social Security Disability Insurance (SSDI). Eligibility criteria for federal/provincial benefits can be strict and the coverage amount can also be less than desirable.

Q) How does disability insurance support self-employed individuals?

Disability insurance can be an essential support for self-employed individuals as it can help pay for expenses to keep the business afloat if the policyholder gets sick or is injured. In the absence of employer-provided benefits, self-employed individuals can tailor disability insurance plans based on their personal needs and requirements.