Do I need disability insurance if I’m covered through work?

Relying solely on your group disability insurance to replace your income when the need arises, is not enough. Many working professionals often assume that their group disability insurance is sufficient. While there are certain benefits of being covered through work, this coverage often falls short, leaving gaps that become evident when needed the most. 

Just because you’re covered through work doesn’t mean you shouldn’t look at augmenting or replacing your coverage with individual disability insurance. Read on to know why you should supplement your group disability coverage with individual disability insurance or click on the button below to speak to one of our advisors for further information. 

How does group disability insurance work?

Group disability insurance covers a group of people. It is owned by the plan sponsor, usually the employer, or the professional association of which you are a member.

If something happens where you are unable to perform the duties of your job due to a disability caused by an illness or an accident, some portion of your income is replaced, while you recover. There are several pros and cons to being covered by group disability insurance.

Advantages of group disability insurance

• No individual underwriting 
• In most cases, your employer pays for most (if not all) of the premiums
• If you do pay the premiums yourself, they are usually less expensive, since the insurance company pools the risk
• Coverage is offered to those who have a pre-existing condition 

Disadvantages of group disability insurance

• One-size-fits-all approach does not work for everyone 
• Group plan may not cover all your income like commissions and bonuses
• Depending on the plan, it can be inadequate for your needs, especially if a long-term disability lasts for an extended amount of time
• There is a lapse in coverage if you change jobs and you have to re-apply at your new job
• And, if your new job has no built-in group benefits option, you have to then obtain your own disability insurance later in life when premiums would be much higher
• If your employer paid all or some of the premiums, your benefits will be taxed

Depending on how your role and seniority is classified at your job, you may only be eligible for regular occupation disability insurance – a less comprehensive insurance option which limits your ability to earn back a similar amount of money when you were without the disability. 

Group disability insurance may also end earlier for more recently hired or lower level employees, as opposed to the longer benefit period for executives and more senior level employees at the same companies.

What is individual disability insurance?

Individual, private, or personal disability insurance is something you buy directly from an insurance company. Unlike a group policy, individual disability insurance only covers you, and your dependents if you add them to your plan.  

With an individual disability insurance plan you pay the premiums yourself and choose the level of coverage you get. The benefit amount, waiting period, and other plan details are customized for you based on your occupation class. With this amount of control, you can tailor a disability insurance policy to your needs and specific occupation. And it stays with you forever, whether or not you move jobs.

Payments from individual disability insurance are tax-free – since you already paid your premiums, after-tax.

Supplementing a group disability plan with individual disability insurance

First things first, go through your current group disability insurance plan if you have one and understand the level of coverage you have. If you decide you want to supplement your existing group disability coverage with an individual policy, you would be wise to crunch the numbers – especially if you are paying all or a portion of the premiums through your group plan. 

Logically, you would think to take what you can get through group insurance since it is either cheaper or available to you for free. However, sometimes the cost of keeping your existing coverage and adding supplementary private coverage is greater than just crafting a comprehensive private plan for yourself and paying the full cost.

Group insurance will have limitations around amount, length or type of benefits and you may be paying for coverage that will not protect your individual needs or circumstances. Based on your own preferences, you could possibly qualify for much better coverage if you applied individually for disability insurance.

Can I buy disability insurance on my own?

Of course! If you want more control over your benefit amount and occupation choices, head to our Disability Insurance tool to see your options.

For an in-depth analysis of how disability insurance works in Canada, read our Honest Guide to Disability Insurance or learn how much disability insurance costs here. We get it – this is a lot of food for thought. But, securing your income during a personal health issue can offer peace-of-mind both today and in the future on your possible road to recovery.

Still have questions? Reach out to the PolicyAdvisor team – we’re happy to chat!