Similarly, to other types of insurance, disability insurance faced a number of challenges during the pandemic and has adjusted to the new landscape. It’s important to understand what has changed, which changes are here to stay, and what to expect going forward.
To understand disability insurance’s evolution during the pandemic, Thomas Juha, Senior Sales Consultant, Life & Living Benefits at RBC Insurance shares the following insights.
Recap: Disability insurance overview
Disability insurance replaces part of your income if you become disabled through an accident or illness as described in the policy. It is available as an individual product, through group plans, Workers Compensation Boards and some banks. Some government disability insurance programs (E.I., CPP, etc.) are also available. Disability insurance includes short-term, long-term, and accident benefits. Some lenders offer disability insurance to cover a mortgage or other type of debt. Disability insurance can be a fully underwritten product or provided as a simplified issue product. Simplified issue does not require a medical. Click here to learn more about Disability Insurance.
How will disability insurance evolve during and after COVID?
During the last two years more Canadians purchased individually-owned disability insurance than in the past. Thomas Juha believes this is because of a general trend toward more contract workers without benefits, and therefore more individuals are seeking out protection. COVID-19 has increased the amount of contract workers, but it was an already growing trend.
Secondly, many Canadians, during the pandemic, got their financial affairs in order and took the time to research financial products. Many Canadians lost their income temporarily or had major losses of income during the COVID-19 pandemic, which made most realize that injury or sickness would have a significant income loss and a major impact on their current lifestyle, along with a great impact on their long-term financial planning.
- Insurance limits: Disability insurance underwriting limits have been liberalized during the pandemic. For example, with RBC Insurance, applicants 50 and under can get up to $8,000 of monthly benefits without a full medical.
- Online sales: Despite more online life insurance sales that have emerged during the pandemic, disability insurance is a more complex product where clients seek advice and often decide on a fully underwritten product when a broker presents the options. There may be more simplified and streamlined high-quality options available in the future through online channels, but as of now, for the most part, the products available online are typically accident-only products.
As opposed to disability insurance, during the pandemic most companies liberalized their medical underwriting limits for life insurance. As an example, RBC has a temporary limit of $2 million of coverage for those 50 and under, and this policy is without in-person medical tests, just a tele-interview. RBC predicts that these liberalized non-fluid limits will continue.
Disability insurance is a very technical product, so it is very important that applicants for disability insurance seek the advice of a trusted broker or advisor to ensure they get into the right product for their needs.
Will there be any DI changes reflecting increased work from home?
Traditionally there were restrictions on disability insurance when an applicant was working from home. Underwriting guidelines for those working from home have been liberalized in the last five years and have been accelerated even further during the COVID-19 pandemic.
Disability insurance for freelancing Canadians and business owners
There is an increasing amount of contractors and freelancers in Canada. They can often be underwritten on a non-cancellable DI product with their current contracts and past incomes. So, there are not a lot of barriers to entry for people that are newly self-employed with contracts set up. Simplified DI products are available for those who do not have a proven income and work history. These DI policies are also often referred to as guaranteed renewable products. That being said, having a portable and individually owned DI policy is very important so if someone sees themselves being self-employed in the future, they should look at getting a policy set up as soon as possible.
Any changes in disability insurance reflecting a shift from 5 to 4-day working week?
To qualify for a non-cancellable DI product, an applicant must work 30 hours per week, so this won’t change. Those working over 20 hours per week are guaranteed renewable products. So, with the current products available in the market there are options for clients who do work part time or are on a reduced four-day week.
Will handling vaccinated vs non-vaccinated people change when related to disability insurance?
Insurance companies have been quite clear that getting the vaccine will not affect insurability. CLHI (Canadian Life and Health Insurance Association) says, “Getting the vaccine will not affect your insurance coverage. No one should be afraid and choose to not protect themselves from COVID-19 because they are worried about it affecting their benefits. All of Canada’s life and health insurers are supportive of Canadians receiving government approved vaccinations to protect themselves from serious illness and death.”
Looking for disability insurance?
Disability insurance is a complex product and must be structured to your needs (occupation class, risks, income level) to be effective. Work with a broker that has access to a variety of disability insurance providers in Canada. A broker shops the market for you and helps customize your policy. Brokers are free to you as they are compensated by the insurance company when they sell a policy.
LSM Insurance brokers work with more than 25 life insurance companies in Canada. Click here to learn more or to get a quote for disability insurance:
About the author:
Thomas Juha is a senior sales consultant for Life and Living Benefits with RBC insurance. He has deep knowledge of life, disability and critical illness products.