WHAT DOES IT MEAN
Employment Insurance (EI)
Provides a disability benefit of 55% of your net income up to a maximum of $435 per week ($22,620 per year). Benefit is taxable. It starts on the 14th day of disability and pays to the 120th day for both injury and illness.
Workman’s Compensation Benefit (WCB)
Pays for injuries only - on the job site only. Starts immediately after an accident and pays 90% of your net-net income (ie. ‘take-home pay after all deductions). Income splits with your spouse, shareholder loans, dividends, etc. are not included for this benefit calculation. This is mandatory for all ‘employees’ but is optional for sole proprietors. Minimum benefit purchased is about $1,500.00 even if you do not qualify for it.
If WCB can attribute the accident to a failure of equipment or environment provided by the employer, they can refuse to pay but will sue your employer for you. If the employer then declares bankruptcy… WCB is a a piece of legislation – not a contract.
If you are salaried or hourly paid, it means your full wages before deductions for taxes or EI. If you are an independent business person, it means what is left after subtracting all of your business tax deductions from your gross total income on your tax return. Most disability insurance companies use this method to determine income.
Total business earned receipts less cost of goods less wages paid to employees. This is the preferred method to determine income for business owners – Edge Benefits has a plan that accepts this method.
Personal Disability Insurance (‘DI’)
A plan that covers you for either Injury only, or both Injury and Illness. It pays a tax free monthly income for up to age 70. It can include partial disability coverage and other options. It is paid directly to the claimant. The premiums are not tax deductible except as part of a ‘group’.
Overhead Expense Insurance
Reimburses the business for monthly business expenses that continue while you are on claim. Some expenses such as gas, inventory increase and the cost to pay someone to replace you are not covered. Premium is tax deductible to the business. This is based on business expenses – not your income.
Business Buy-Sell Insurance
Should a partner in your business become disabled, you will want to buy out his share of the business if he is still disabled at the end of one year. The plan provides the cash, usually on a lump sum basis, to achieve this. Depending on how the buy-sell agreement is set up, taxation situations for the business and the claimant will differ. Ask Consultdoug about this.