April 12, 2023

Disability Insurance and Small Business: How a Small Business Owner Used Disability Insurance to Stay Afloat While Managing Depression

Chris Lubell

Before it hit Sandra like a tonne of bricks that she needed to make a change because she was chronically sad, she managed a thriving insurance agency business for almost ten years.
Sandra needed some time away from the office to rest and get therapy after being diagnosed with acute burnout brought on by a mix of ongoing stress and her 12-year-old son's recent Type 1 diabetes diagnosis. Her despair was so severe that it could have had a fatal impact on her business and finances.

Sandra, whose name has been altered to protect her privacy, was fortunate to have bought two disability insurance policies eight years earlier that would support her during such a difficult period. Sandra worked in the insurance sector and understood how crucial it was to safeguard against losing your job in the event of a crippling illness or disease.

Sandra remarked, "We would witness the financial destruction that a disability or an untimely death could wreak. "That had a significant impact on me, and I wanted to protect my income and my business."
A $10,000 per month office overhead insurance policy that insured Sandra's business and paid for office expenses for 18 months was one of two disability insurance plans she bought. Personal disability insurance, the second policy, provided income replacement coverage up to the earlier of her 65th birthday or the duration of the disability. It provided her with a $10,000 monthly income that was tax-free, allowing her to take the time off work she required for treatment. This safeguarded her personally. Sandra was particularly pleased to find that she could continue to get the benefits while still devoting a little amount of time to managing her company.

Having the policy offered her piece of mind because she knew what could have happened and ultimately did.

Disability insurance, or DI as it is more frequently known, typically pays a claim if the insured cannot work due to illness or an accident after the customary waiting period has passed. Disability insurance pays out in monthly installments while the insured is disabled, unlike critical sickness insurance, which only pays out in one large sum. Sandra's insurance plan provided disability benefits up until the age of 65.

After receiving treatment for several months, Sandra made the decision to sell her company and launch a new one with her husband, one that would provide her the freedom to focus more of her time on her family's and her own needs. She was able to make that change on her own terms and without suffering financial hardship thanks to her disability insurance, all the while working with trained medical specialists to treat her depression.

Sandra's experience is not unusual. While the majority of working adults would want to think they are impervious to disaster or harm, sadly, that is not the case. 33% of workers between the ages of 30 and 64 will be disabled for more than three months, according to Statistics Canada. And serious illnesses, not accidents, will be the main cause of disability claims.

What disability insurance plan is the most suitable for me?

Determine which kind of living benefits best suit your needs by consulting a financial expert. But to get you started, we can lay down the fundamentals here.

Insurance for temporary disability: A transitory illness or injury will be covered by short-term disability insurance if it results in income loss. The tax-free period normally lasts six to 26 weeks, and payments start once your sick absence from employment has expired. These plans are frequently offered by employers and typically cover up to 70% of your income.

Insurance for long-term disability: Long-term disability insurance, as the name suggests, will provide coverage, depending on your policy, for a longer length of time. Monthly payments are made through long-term disability insurance starting after the elimination period, which is typically 30 to 90 days after the onset of disability, and can last up to age 65.

Office Overhead Insurance: If you become disabled, office overhead insurance will pay for your office expenses. Rent, utilities, and employee wages are all considered eligible expenses.

Group Disability Insurance: An employer normally offers this kind of disability insurance. The disability benefit is tax-free if the employee covers the premiums.

Questions? If you're interested in learning more about the disability insurance options that would best meet your needs, get in touch.

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