DEFINITION: Long-term disability insurance is a type of insurance coverage that provides financial protection to individuals who are unable to work due to a disability for an extended period of time.
1. What does long-term disability insurance cover?
Long-term disability insurance typically covers a portion of the insured person’s income if they become disabled and are unable to work for an extended period. It may also provide benefits for medical expenses related to the disability.
2. Who is eligible for long-term disability insurance in Canada?
Most individuals who are employed and pay into the Canada Pension Plan (CPP) are eligible for long-term disability insurance. Self-employed individuals can also purchase private disability insurance policies.
3. How much does long-term disability insurance cost?
The cost of long-term disability insurance can vary depending on various factors such as the individual’s age, occupation, income, and desired coverage amount. Generally, premiums range from 1% to 3% of the insured person’s annual income.
4. How long does long-term disability insurance coverage last?
The duration of long-term disability insurance coverage varies depending on the policy. Some policies provide coverage until the insured person reaches retirement age, while others may have a specific time limit, such as 5 or 10 years.
5. Is long-term disability insurance taxable in Canada?
If the premiums for long-term disability insurance are paid with after-tax dollars, the benefits received from the policy are generally not taxable in Canada. However, if the premiums were paid with pre-tax dollars, the benefits may be taxable.
6. Can I receive long-term disability benefits while also receiving Canada Pension Plan (CPP) disability benefits?
Yes, it is possible to receive long-term disability benefits and CPP disability benefits simultaneously. However, the total amount of benefits you receive may be adjusted to ensure that you do not exceed a certain percentage of your pre-disability income.
7. Can I purchase long-term disability insurance if I have a pre-existing medical condition?
It may be possible to purchase long-term disability insurance even if you have a pre-existing medical condition. However, the insurer may impose exclusions or limitations on coverage related to the pre-existing condition. It is important to review the policy terms carefully before purchasing.