Do You Have Disability Insurance?

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Most of us understand the importance of life insurance, but what many of us overlook though is disability insurance. There’s a much greater chance that we’ll become disabled in our working years as opposed to us dying before the age of 65 so it’s a huge mistake to not have disability insurance.

Disability insurance comes in a few different forms. There’s short-term disability (STD), long-term disability (LTD), and critical illness. They all cover us from accidents and illness, but how much they pay and what they cover are different. Which policy should we get? Well it would be a good idea to have all of them, but more importantly we should understand what exactly the policies cover.

disability insurance

Short-term disability insurance

Most people confuse this with workers’ compensation, but it’s very different. Workers’ compensation provides us with an income and medical benefits if we’re injured on the job. By claiming worker’s compensation, we give up our rights to sue our employer for negligence; this might be a major issue for some people.

Short-term disability on the other hand will cover our wages in the event of any illness or accident that prevents us from working. STD insurance will pay about 70-90% of our regular income for roughly 90 days. Each policy is different so it’s important to read the fine print of our policies. Some employee plans can be very generous, but we need to make sure that the policy will pay enough for us to maintain our standard of living.

Long-term disability insurance

As the name implies, long-term disability covers any extended amount of time where we’re unable to work; think 90+ days. The payout is lower than STD, and it usually only covers 40-70% of our income. LTD insurance gets packaged with STD so you would get paid out the higher rate first before LTD kicks in. The nice thing about these insurance policies is that it covers us from any accident. Say we slip on some ice and require extended rehab, STD & LTD would help give us peace of mind since we would still have some money coming in.

Similar to STD, knowing our policy details is paramount. Our employer may offer insurance, but will the payout be enough to cover our expenses? Some policies have caps; what that means is that regardless of our income, we may only get paid a fixed amount. This might not be an issue for some people, but it may not be enough for some families so it’s probably worth purchasing a separate policy for the extra payout.

Critical illness insurance

Critical illness insurance pays us a fixed amount in the event we’re diagnosed with a serious life threatening illness. The most common illnesses would be cancer, heart attacks and strokes, but there are other conditions that would also give us a payout. Each illness has an assigned lump sum and even if we survive, we still get paid.

The insurance is meant to help survivors with any immediate medical costs, or to help our family if we pass away. The money does not need to be spent on medical related items, it’s meant to help replace lost income, or to pay off mortgages. Just like STD and LTD insurance, payments aren’t automatic with critical illness insurance; we would still have to make a claim before we can collect our payments.

Final thoughts

Critical illness and disability insurance differ from life insurance since it protects from different things. Having the right insurance policies in place is vital since we’ll never know what will happen in our lives. Our biggest source of income isn’t our jobs, it’s our ability to work. If we’re injured and unable to work, then how will we make an income? Don’t underestimate the value of insuring yourself.

About Barry Choi

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. You can find him on Twitter:@barrychoi


  1. Jaymee @ Smart Woman on January 28, 2016 at 2:48 AM

    I’m glad I read this today Barry. I have life insurance and STD/LTD via work. I don’t have a critical illness insurance but I did just email my advisor regarding this.

    I thought about this because recently one of my friends broke his elbow from playing volleyball (he’s a massage therapist and only 24 years old) and I’m hoping he has some type of insurance. It makes me think that being young and healthy isn’t enough to count on and foregoing insurance because of that is taking a risk.

    • Barry Choi on January 28, 2016 at 8:53 AM


      STD/LTD and critical illness are often overlooked. Some female employees will cancel their work benefits while on maternity to save money figuring their private life insurance is good enough. In the process they end up cancelling their disability plans which is a huge mistake.

      • Jaymee @ Smart Woman on January 28, 2016 at 7:27 PM

        Good to know about that Barry! Going on maternity leave will hopefully be part of my plan in the future 🙂 I’ll know not to cancel my disability insurance!

  2. bigcajunman on January 28, 2016 at 8:41 AM

    Disability Insurance is one of those policies folks think they don’t need especially when they are young, however, having seen enough co-workers have sudden health issues, I can assure you, you need it.

    • Barry Choi on January 28, 2016 at 8:55 AM


      Agreed. I didn’t put much though into disability until I really understood what it covered. Fortunately my employer has a good insurance plan that keeps me covered.

  3. Abigail @ipickuppennies on January 28, 2016 at 2:27 PM

    More people need this. I should know. I was 19 and pretty healthy when I became disabled — part of which involved a 3-month hospital stay. Disaster can strike at any point.

    Unfortunately, I wasn’t able to get disability insurance. They wanted a lot of money (understandable, since I was on disability for a few years) and they wouldn’t make it occupation specific. So they wouldn’t pay out as long as they thought I could still work any job. And with chronic fatigue, it’s hard to convince companies/bureaucracies of what you can and can’t manage.

    • Barry Choi on January 28, 2016 at 2:32 PM


      Yes way too many people don’t realize how important it is to have disability insurance. We all think we’ll be healthy and when we actually need it, it may be too late to get insured.

  4. Gary @ Super Saving Tips on January 28, 2016 at 9:51 PM

    Disability insurance is critical and so many people overlook it. In the US, most people assume that Social Security will take care of them in the long term, not realizing that those benefits will only replace a portion of their income and can take years to get approved. My wife’s private disability insurance has been a lifeline, particularly with her increased healthcare costs.

    • Barry Choi on January 28, 2016 at 10:35 PM


      Canadians have great medical coverage but not everything is included like disability insurance. I always tell people to check their benefits package.

  5. Courtney on March 19, 2023 at 9:46 PM

    Is there a way to purchase short and long term disability if your work does not include it?

    • Barry Choi on March 20, 2023 at 7:39 AM


      Yes, you can purchase it as a separate policy through most life insurance brokers.

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