DISABILITY INSURANCE
SCARBOROUGH

Protecting Your Income When You Can’t Work

When you are too ill or hurt to go to work, disability insurance comes to the rescue by replacing part of your paycheck, usually 60-85 percent of your regular wages. What this entails is that you are still able to hold up your mortgage payments, rent, groceries and other expenses without draining your savings and getting into debt.

Short-Term vs. Long-Term Coverage

• Short-Term Disability Insurance

It can be your backup plan when having a temporary setback. Perhaps you are recuperating after a medical procedure, fighting off a bad case of the flu, on maternity leave, or recovering from a fracture. Mental conditions, such as anxiety or depression, are also covered under short-term disability in case they take you out of work temporarily.

Here’s what to expect:

• Benefits last anywhere from 9 to 52 weeks (13 or 26 weeks is pretty standard)
• You usually wait 0-14 days after becoming disabled before payments start
• You’ll receive about 60-75% of your regular income

This coverage works best when you’re dealing with something that’ll get better with time and treatment.

• Long-Term Disability Insurance

This is serious stuff— conditions that may take years out of your working life or even take you out altogether. Cancer, a heart attack, serious injuries, neurological diseases such as MS, chronic pain, or severe mental issues are referred to here.

What you need to know:

• Coverage may be for a period of 2 years, 5 years, or until retirement
• A 90 to 180-day waiting period usually precedes benefits initiation
• How “disabled” is defined matters—some policies only require that you can’t do your current job, while others require that you can’t do any job you’re qualified for

Why You Might Want Both

Many people pair short-term and long-term coverage together. The short-term policy handles those first few months when you’re recovering, then the long-term policy takes over if you need extended time off. This way, you’re covered no matter how long you’re unable to work.

Many policies offer optional riders that enhance coverage, such as:

1. Cost-of-Living Adjustment (COLA) Rider

• Purpose: To secure your benefits against inflationary problems.
• How It Works: When you are disabled and begin to receive benefits, your benefit will be raised annually by the COLA rider, usually by the Consumer Price Index (CPI) or a fixed amount (e.g., 3 percent per year).
• Why It Matters: A severe disability may take years. Without COLA, your benefits may not increase with the escalating cost of living, which would leave you at risk financially in the long term.
• Considerations: This rider makes premiums higher, though it is particularly plausible with younger policyholders or with long-term protection needs.

2. Partial (or Residual) Disability Benefits Rider

• Purpose: To provide income if you’re only partially disabled and can still work in a limited capacity.
• How It Works: In the event you lose a percentage of your earnings because of a disability and are working part-time or in a lesser capacity, this rider pays a proportionate benefit to replace the loss.
• Why It Matters: Many disabilities don’t result in total work stoppage. This rider ensures you’re covered even if you’re only partially impaired.
• Considerations: Definitions and computation of benefits differ with each insurer, so see how they count income loss and how partial disability is determined.

3. Future Increase Option (FIO) Rider

• Purpose: To allow you to increase your coverage later, without proving insurability again.
• How It Works: You may increase coverage to a specified limit at designated intervals (e.g. yearly or every several years), or following significant life events (such as a pay raise), irrespective of whether your health condition has altered.
• Why It Matters: Your income likely grows over time. This rider helps your disability coverage keep pace without requiring additional medical exams.
• Considerations: Premiums for the new coverage will be based on your age at the time of the increase, and you’ll need to show income justification, but not go through underwriting again.