7 disability insurance myths to stop believing now

7 disability insurance myths to stop believing

By Special to MoneySense on September 22, 2023
Estimated reading time: 3 minutes

Disability insurance can be a life saver if you’re seriously ill or injured. Here’s how it works.

A worried-looking man looks out the window of his living room

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Disability insurance can be a tricky topic, and misinformation is common. Luckily, insurEye, a Canadian insurance education site, has compiled a list of more than 100 disability myths that need busting. We’ve picked seven that we think are most prevalent.

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1. MYTH: I do not need disability insurance; the chances of something happening to me are very low.

FACT: The chances of becoming disabled are much higher than the chances of getting into a car accident or having your house burn down. There is a 25% chance that a 20-year-old person will be disabled during their career. If you own a home, you likely have home insurance. What’s the justification for not having disability insurance?

2. MYTH: My insurance at work covers me, should something happen to me.

FACT: It depends on what protection is in place. If your employer has workers’ compensation (a form of workplace insurance), you’ll be offered that if you’re injured on the job. But the chances of getting disabled at work are typically lower than outside of work—your employer wants to minimize the chances of you being disabled. Some sources indicate that as many as 90% of disability cases originate from outside of the workplace. If your employer also has a group disability policy, it likely covers you outside of work, but this coverage ends if you leave your employer.

3. MYTH: Workers’ compensation will pay in full for my disability.

FACT: That’s not always true. Not all companies have workers’ compensation, especially smaller companies and start-ups. Even among those that do, workers’ compensation can cover only a part of your earnings prior to the accident and some additional medical expenses, including prescription drugs, medical treatments, chiropractic, physiotherapy, rehabilitation and training.

4. MYTH: The more disability policies I have, the better. If something happens to me, I can cash out all of them.

FACT: Your disability policies are linked to your income, meaning that the value you can get from all of them is capped and will not provide you with a luxurious lifestyle. Unlike critical illness insurance policies, disability insurance policies are not “stackable.” Usually, people are covered for a certain percentage of their income, such as 50% to 70%.

5. MYTH: If I have a group disability insurance policy at work, I don’t need an individual disability policy.

FACT: Although a group disability policy is a great protection mechanism, you need to understand its exact conditions, what the coverage provides and the percentage of your salary it covers. Many companies also have workers’ compensation in place; that offers another security net. Nevertheless, if you lose or change your job, you will not be protected—that’s when individual disability insurance can fill the gap.

6. MYTH: Disability insurance works similarly to life insurance—once I’m disabled, I will get a lump sum.

FACT: Disability insurance is different from life insurance. It does not pay a one-time lump sum; it offers regular payments while you are disabled, substituting your income or a part of it, depending on the policy you have.

7. MYTH: If I become disabled, my disability payments start immediately.

FACT: Many disability insurance policies do not pay out within the initial 120 days, since the company needs to assess and decide on each case.

These facts originally appeared on InsurEye. Check out the entire list of 111 Insurance Myths.

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bub slug says:

September 26, 2023 at 9:26 pm

The truth is ,”you never know how good (or bad )your insurance is ,until you make a claim”
My advice,put $50-$100 a month away until you need it for any emergency”
When you make a claim on insurance(unless it’s for a total loss scenario) you’re just taking a loan out.
The insurance company will just jack your premiums up( for the next 6 years) and recoup their losses, three fold.
Of course that’s more applicable to property theft,but you get my drift. They never lose.

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