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The Great-West Life Assurance Company, London Life Insurance Company and The Canada Life Assurance Company have become one company – The Canada Life Assurance Company. Discover the new Canada Life

The Great-West Life Assurance Company, London Life Insurance Company and The Canada Life Assurance Company have become one company – The Canada Life Assurance Company. Discover the new Canada Life

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Freedom 55 Financial is a division of The Canada Life Assurance Company and the information you requested can be found here.

Why you should have disability insurance if you’re self-employed

Key takeaways

  • Disability insurance could provide self-employed individuals with a safety net.
  • For self-employed people, their ability to work is directly tied to their business’s success.
  • Disability insurance could help to cover business overheads, allowing your business to continue running smoothly even when you’re unable to work.

If an illness or accident stopped you or your employees from working, it could significantly impact your business and your lifestyle. Disability insurance for self-employed people can help keep operations running smoothly and cover expenses if an illness or injury keeps you or a key employee from working. It can help replace your income, cover overhead expenses, and help you attract qualified candidates with a more competitive compensation package. 

You may also be able to deduct your premiums, depending on the type of plan and how it is set up. Most importantly, you’ve insured the people instrumental to the continued success of your business.

How does disability insurance work?

Disability insurance can be customized to meet your needs with optional benefits. If you become disabled, the first step is to file a claim. If your claim is approved, you will begin to receive monthly payments, once the waiting period ends. 

The waiting period, chosen at the time you apply, is the number of days from the date you’re disabled until your monthly payments start. Benefits continue, while you satisfy the terms of the policy, until the end of the benefit period.

Types of business disability insurance

Business overhead expense insurance

This policy covers eligible business overhead expenses during total disability. While the specifics can vary between insurance providers and policies, here’s a brief list of what’s commonly covered:

  • Employee salaries and benefits
  • Rent or mortgage payments
  • Utilities
  • Office supplies
  • Loan payments
  • Taxes
  • Professional fees
  • Insurance premiums
  • Equipment leases
  • Advertising and marketing
  • Maintenance and repairs

Buy/sell agreement for private businesses

This plan is ideal for owners of a privately held business to protect you and your business partner(s) if either of you become disabled. There are 2 benefit payment options, a single, lump sum payment and/or monthly payments for 60 months. Benefits under this plan include funds to purchase the shares or ownership interest of a totally disabled shareholder or partner. 

It also reassures suppliers, creditors, shareholders or partners. Business stakeholders can rest assured that should a key partner become disabled, their share of the business can be bought out and the business can continue.

Either a Lifestyle Protection plan or an Independence plan can be set up under the structure of a Wage loss replacement plan (WLRP). This would allow the business to write off the premium payments as a tax-deductible expense and offer all employees in the same category individual disability insurance. The premiums would be paid by the business. 

Employees would not require an increase in salary to cover premium payments which means less income tax needs to be paid by the employee. Only employees may participate in a WLRP. A shareholder who’s an employee may participate in a WLRP if they are doing so in their capacity as an employee, not in their capacity as a shareholder.

What does disability insurance cover?

Common disability insurance claims fall under cancer, nervous disorders (including depression and anxiety) or musculoskeletal injuries. Chronic pain or other mental health issues can also be covered under disability insurance.

Some other disorders that disability insurance may cover could include:

  • Neurological disorders: Such as epilepsy, multiple sclerosis and Parkinson's disease.
  • Cardiovascular disorders: Including heart disease, stroke, and related conditions.
  • Respiratory disorders: Such as asthma, chronic obstructive pulmonary disease (COPD), and other lung conditions. 
  • Digestive disorders: Including Crohn's disease, ulcerative colitis, and other gastrointestinal disorders.
  • Vision and hearing disorders: Including blindness, deafness, and other impairments.
  • Autoimmune disorders: Such as lupus, rheumatoid arthritis, and related conditions.
  • Diabetes: Both Type 1 and Type 2 diabetes could be covered. 

Talk to an advisor to learn more about disability insurance and how it can help protect you, your employees and your business.

What's next?

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  • Start researching disability insurance policies tailored for self-employed individuals.
  • Make sure the policy you choose meets your requirements.
  • Contact an advisor that can assist you with selecting the right disability insurance policy for your needs.

This material is for information purposes only and shouldn’t be construed as providing legal or tax advice. Every effort has been made to ensure its accuracy, but errors and omissions are possible. All comments related to taxation are general in nature and are based on current Canadian tax legislation and interpretations for Canadian residents, which are subject to change. For individual circumstances, consult with your tax, legal or accounting professionals. This information is provided by The Canada Life Assurance Company and is current as of date of publication.