Page 58 - A Canuck's Guide to Financial Literacy 2020

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Elimination Period

Elimination period is an insurance feature that refers to the time period that must pass
before the insured can start receiving payments. The policy holder must be disabled for a
certain period of time before they start receiving payments. The elimination period was set
up in order to discourage frivolous claims.

• The elimination period is typically 30, 60, 90, 365, or 720 days. The average is 90
days or 3 months.

Keep in mind that the longer the elimination period, the lower the premiums as the insured
bears most of the risk.
Benefit Period

The benefit period is the period in which the insured is eligible to receive monthly disability
benefit. The monthly income benefit tends to replace between 60% and 85% of your regular
income.

• The benefit period varies but most common are 2-year, 5-year and to age 65.

At age 65, the disability benefit usually stops but there are exceptions and certain contracts
which provide benefits to age 70 or for lifetime if the disability occurred before age 65.
Insurance company would also typically provide payments until age 66 if the insured
individual is disabled at age 64.

Benefit Maximum
Insurance companies have a maximum benefit that they would pay out. This is typically
66.66% of an individual’s pre-disability, before tax, income.

Type of Disability Policies

Non-Guaranteed

With non-guaranteed policies, premiums are not fixed and can change in relation to how
many claims your line of occupation files for. The more claims for a specific occupation
class, the higher the premiums. When submitting, a claim the insurance company would ask
for proof of income. The monthly benefit can be reduced if there was a change of
occupation since purchasing the policy.