This article provides information to Canadians about short
term disability insurance, a coverage plan that pays part of your
salary when you are prevented from working for a short period of
Short term disability insurance is a coverage plan that pays you part
of your salary when illness or injury prevents you from working for a
short period of time. We have all heard the expression “save your
money for a rainy day!” What if that rainy day turns out to be an
injury or illness that prevents you from working? How long would you be
able to survive on your savings?
An injury or illness can occur on or off the job, and can cause you to
have to stop working for an extended period of time. Although many of
us think we could manage, purchasing short term disability insurance can
alleviate several concerns and ensure a comfortable income while you are
unable to work.
Term Disability Coverage
Short term disability insurance can cover you
anywhere from 13 weeks to 2 years, depending
on the plan you choose. For a longer period
of coverage, you would require long
term disability insurance (see article12-long-term-disability-insurance.html).
The benefit amount allocated to you will be based on the type of policy
you have opted to buy, and a few other factors, including your level of
disability (partial or otherwise). As long as you are under a doctor’s
care, and are advised not to go back to work, your benefits will continue
according to the specified terms of your policy.
You can expect to receive the first benefit payment from your
insurance company anywhere from one to 14 days after becoming injured
or sick. It is comforting to know that payments are immediately
issued if you suffer an injury. However, if you become ill, the waiting
period for compensation will most likely be longer, simply because an
illness must be pronounced grave enough to prevent you from working, and
that can take time.
Short term disability insurance covers various situations. In 2008, a
study was conducted in order to examine the main reasons for using short
term disability insurance. It was reported that pregnancy accounted for
21 percent, injuries for 10 percent, digestive/intestinal diseases for
7 percent, and back injuries for 6 percent.
How to get Short Term Disability Insurance
Your employer may offer you disability insurance as part of your benefits
package, or optional insurance for which you would be responsible for
paying the premiums. You can also purchase an individual short term disability
insurance policy, which will cover you up to two years, as would the one
offered by an employer. However, it is recommended that you purchase the
coverage through your workplace, if possible, as an individual policy
is subject to the state of your health. Moreover, it is more expensive,
in most cases.
Should you buy Short Term Disability Insurance?
It is a good idea to invest in a short term disability insurance
policy if you fall under any of the following categories:
- You do not have enough savings to cover your living expenses for
6 months or more
- Your savings are set aside for a long-term project or financial goal
- You have debts (mortgage, car, and/or credit cards), requiring payments
on a regular monthly basis
- You are the sole “bread winner” of your family.
What to consider when purchasing Short Term Disability Insurance
- Premium waiver: some insurance
companies will waive (defer) the premium payments
during your absence from work due to sickness
- Waiting/elimination period:
all policies have a waiting or elimination
period, extending from the time of your injury/illness
to the receipt of your first payment
- Inflation rider: this is
a good option to have in the event you are
unable to work for a long period of time;
however it will up the cost of your insurance
- Non-cancelable clause:
providing you are paying the premiums, the
insurance company cannot cancel your policy
or raise your premiums
- Renewable: although every
policy has different renewal rules, an insurance
company cannot modify or increase the premium
rates when the policy specifies that it is
About the Author:
Adriana Stefania is a freelance writer for Canada
Health Insurance. For more information on health insurance for Canadians
please visit www.canada-health-insurance.com.