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!


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.