Critical Illness vs. Disability Insurance – What’s the Difference?
By: Brianna Carmichael, Associate Lawyer
If you are off work due to a disability or illness, your first question is probably going to be “how can I pay my bills?” Being unable to work can be a huge financial stress. In Canada, we are lucky to have Medicare that covers many medical needs, but sometimes certain things like private hospital rooms, travel, or special equipment are not included. You may be wondering what kind of insurance is best to protect you in the event of unplanned time off work.
Disability insurance is meant to compensate part of your lost income if you are off work for medical reasons. The amount that is compensated varies, but can be as much as 80% depending on the plan in place.
Long- and short-term disability (STD and LTD) are available for purchase, usually through your employer. STD and LTD amounts are calculated based on your pre-disability income, and are often paid on a weekly, bi-weekly, or monthly basis. The amount you receive is meant to function as an income replacement.
Critical illness insurance does not function the same way as disability insurance – rather than replacing your salary or income and therefore being paid out over weeks and months, payment from critical illness insurance is often a one-time payment of a set amount, which you can receive if you have been diagnosed with a “critical illness” based on the terms of the insurance policy. The definition of “critical illness” varies policy to policy, but often includes serious diagnoses such as cancer, heart attack, or stroke.
Both types of insurance are beneficial in different situations. It is a good idea to expect the unexpected and have additional insurance if possible.
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