You may have short-term or long-term disability insurance through work, but it may not be enough. For example, a short-term disability plan may replace up to 100% of your income for a certain number of days. If you have a long-term disability plan, it will combine with government plans to replace about two-thirds of your normal income.
Need more? You may want to buy your own disability insurance or critical illness insurance.
How do I buy disability and critical illness insurance?
If you can, try to buy this extra insurance through your workplace while you are still healthy and well. In most cases, you will pay less than buying it outside of work.
Before you buy, take a good look at your choices. Most plans have a waiting period before you get money. Disability insurance plans that pay a monthly benefit often have longer wait periods than critical illness plans that pay a lump sum. Still, the wait may be worth it.
Example: You may wait longer for a disability policy that pays $2,500 a month, but it could be worth more in the long run than a critical illness plan that pays $200,000 in a lump sum. If you develop a lifelong illness at age 40, the total benefit from the monthly disability plan would add up to far more than $200,000.
Some plans only give you the maximum benefit for a certain time, then they cut back your benefits. Find out before you buy.
Tip: If you decide to get disability insurance, make sure you know how the plan defines disability. Some plans will only pay benefits if you can't work at any job. A more generous plan will cover you if you can't do your current job, or any other job that matches your education, skills, and experience.
Remember: The insurance you have at work may not be enough
But if you can buy more through your workplace, you may save money. Just be sure to compare the benefits of different plans with care. You want to make sure you're getting enough coverage.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.
