Term life insurance is one of the most popular options for life insurance coverage due to its uncomplicated application process and its straightforward and affordable policies. Despite its comprehensive nature and flexibility, it does not automatically offer disability coverage. However, it is possible to add disability riders to the term life insurance policy purchased if desired.
If you are reading this, you may want to enhance the term life insurance coverage you have to provide income protection for your loved ones if an injury or illness prevents you from generating income to meet your financial responsibilities.
With this in mind, it can be an excellent idea to add a disability income rider to your life insurance policy to provide better coverage for your beneficiaries. Therefore, they can receive a monthly benefit if you suffer an injury or illness, which acts as an income replacement.
What Is Term Life Insurance?
Term life insurance is a contract between you and the insurance company, with the objective that your beneficiary/beneficiaries will receive a monetary benefit in the event of your death. In order for the selected person(s) to receive the death benefit, you will have to make premium payments during the term of the life insurance policy.
Regarding the protection offered by term life insurance, it does not provide financial assistance to an insured who experiences a disability. Rather, as the name implies, term life insurance pays out in the event of the insured’s death. As we’ve previously mentioned, you can add extra protection to your life insurance policy through an optional add-on known as a “rider” For example, if you add a disability income rider, your life insurance policy will pay you income if you suffer an illness or injury that results in a disability on top of your standard coverage.
What Is Disability Insurance?
Disability insurance protects your most valuable asset — your ability to earn income to provide for you and your family. How does it work? Quite simply, disability coverage pays the policyholder when diagnosed with a disability and cannot work due to health. Disability benefits are provided through monthly payments during the period of disability, although this will depend on the characteristics of the disability insurance taken out.
Most life insurance policies have optional add-on disability riders added to help policyholders protect their income in the event of disability. A disability rider often offers less protection and customization than disability insurance itself.
Finally, life and disability insurance offer different coverage, and it will depend on your circumstances to choose the policy that best suits your protection needs.
Getting Disability Coverage Through Life Insurance
Disability insurance is one of the most reliable options to replace lost income in case an injury or illness prevents you from working or earning income. However, if you cannot afford to purchase another policy, consider adding disability riders to your existing life insurance for a reduced cost.
There are different life insurance riders that may be useful if you suffer an injury or illness that leaves you disabled. The following are the ones that can bring the most benefits to your coverage.
Disability Income Rider
In the event of an illness, the rider pays a monthly payment. The policyholder must select the duration of the payment and the monthly payment (typically capped). Typically, this rider has a retroactive payment of 30-90 days. Payments begin at the end of this waiting period.
Total Disability Waiver For Premium Rider
This Rider provides protection in the event that you have permanently lost your job or have been diagnosed with a long-term chronic illness. After that, the insurance company will waive payment of the policy premiums for as long as the insured remains totally disabled. In general, disability waiver riders payout after an individual has been totally disabled for 4-6 weeks. The rider will remain valid until a specified age for the insurance claimant, usually up to 60 – 63, after which it expires.
Mortgage Disability or Credit Disability Insurance Riders
A Mortgage Disability Rider covers the entire loan or mortgage payment in the event the insured is permanently disabled. Payment is made for a defined duration such as two years from disability, five years after disability, or up to 65. During the application process, you will be required to provide proof of outstanding debts.
Accelerated Death Benefit Rider
When you purchase an accelerated death benefit rider for your life insurance policy, you (as the insured) can receive a portion of the death benefit if you become terminally ill. In addition, this will allow your family members to balance the financial needs related to treatment and other care that may be necessary.
In most cases, the amount you can receive is based on a percentage of the policy’s death benefit amount.
Why Do I Need Disability Coverage?
Life can be unexpected. Similar to savings and investments, insurance is the third cornerstone of holistic financial planning. According to a government statistic from 2017, the prevalence of disability among Canadians increased with age, from 13% for those aged 15 to 24 years to 47% for those aged 75 years and over. With that in mind, insurance is a reliable way to save for the future without having to rely heavily on your savings should the need arise.
Consider this statistic: in 2017, one in five (22%) of the Canadian population aged 15 and older – or about 6.2 million individuals – had one or more disabilities.
Most long-term disabilities are caused by ill-health. This could limit your ability to generate income, which can severely devastate your and family’s finances.
While publicly funded disability programs do provide somewhat of a security net, these programs often provide a meager sum. As of 2022, Ontario Disability Support Program provides 1,169/month, while BC’s Persons With Disability program provides $1,358.50/month, with other provinces around the same. Disability insurance supplements this amount in order to maintain quality of life both in the short-term and long-term.
If you think about it, the vast majority of Canadians should have better protection in the event of a disability.
Alternatives To Life Insurance With Disability Coverage
If you are looking for other life insurance alternatives with a disability policy that may better suit your needs, here are a few different options:
Short Term Disability Insurance (STD)
Short-term disability can help in the event of a temporary absence of the insured’s ability to work. Generally replaces between 60% and 85% of your regular income. Most short-term policies offer income protection for several months, though it is also possible to find policies that offer income protection for up to two years.
Most common conditions covered by Short Term Disability Insurance include:
- Short-term illness
- Recovery following surgery
- Back, joint, and digestive disorders.
- Non-work-related injuries
- Pregnancy or complications of pregnancy
Long-Term Disability Insurance (LTD)
Long-term disability insurance usually lasts between 2 to 5 years and can extend until your retirement. The payment comes every month after the use of sick leave and disability benefits. LTD typically covers conditions such as:
- Nervous system disorders
- Musculoskeletal disorders
- Mental health problems
- Injuries due to an accident
Can I Depend Only On The Canada Pension Plan (CPP) Disability Benefit?
There are risks in relying solely on the government’s compensation programs. Workers’ Compensation covers workers-related accidents and illnesses, whereas CCPDB disability benefits have very strict eligibility criteria. Here you can find more information about the Canada Pension Plan Disability Benefits.
We Are Ready To Help Ensure The Financial Security Of You And Your Loved Ones
If your paychecks are used to cover the monthly cost of living, repay loans or save for your future, you must have life insurance. Keep in mind that disability coverage can only be useful for you in the right circumstances, so take a moment to find out what coverage is right for you.
Term Life Insurance can assist you with choosing the best possible life insurance policy. We specialize in term life insurance and offer a variety of plans for Canadians.
- Term 10 life insurance offers ten-year coverage that is both affordable and reliable.
- Term 20 life insurance offers up to 20 years of coverage.
- Term 30 life insurance is our most comprehensive policy, which provides 30 years of financial security.
The plans provide up to $1,000,000 in coverage with no medical exams required to qualify. Moreover, all our coverage plans offer lifetime renewals and guaranteed premiums, so you’re covered whenever you need it.
Thousands of Canadians have found the coverage they need with our help. Please complete our short online application now to get a free no-obligation quote and a list of options that can meet your needs.
If you still have more questions about term life insurance, please take a look at our FAQ which outlines the answers to many common questions that we receive. If you haven’t found the answer you are looking for, we encourage you to contact us and we will be happy to assist you directly.