What are Income Replacement Benefits?

Income replacement benefits are one of the benefits available to you under the no-fault accident benefits portion of your automobile insurance policy. If you have been involved in an automobile accident and you are unable to work because of your injuries, these benefits allow you to replace some of your income while you focus on recovering getting treatment for your injuries.

When discussing the terms of your insurance policy with your broker, you are given several options, like what the policy limits will be for liability, what will the income replacement amounts will be, etc.

When it comes to income replacement benefits, the basic coverage is a 70% of your gross income to a maximum of $400 per week. You have the option of purchasing increased coverage to $600, $800 or $1000 per week of income replacement benefits.

Should you need to avail yourself of the income replacement benefits of your policy because of an automobile accident, the amount you are entitled to will be based on your income before the accident (the rules for calculation are a bit different whether you are self-employed or an employee). Essentially, the coverage provides for 70% of your gross income, up to the limit your purchased with your policy.

What does that mean?

For example, if you purchased the basic coverage, which is $400 per week, you will not receive more than $400 per week, even if 70% of your gross income is in fact $650 per week.

$400 per week translates to $20,800 per year. This is equivalent to minimum wage.

Purchasing a higher income replacement amount, especially if you have no access to long term disability benefits through work or a private policy, may be worthwhile and may give you some peace of mind in case of a car accident. This is something you should discuss with your broker or insurance company. Ask for some advice on the benefits available to you and the additional premium cost. You can then weigh your options and make a decision that works best for you.

Even those who do not have their own car insurance may be entitled to an income replacement benefit in the event of an accident. For example, a pedestrian, cyclist or passenger in a vehicle who does not own a car and is not insured under the policy of a parent or spouse but has been injured would be entitled to accident benefits including an income replacement benefit under the policy of the person who caused the accident.

If you have been injured and have questions about income replacement benefits, please reach out to us for a free consultation with one of our lawyers to learn more about your rights and your options, so you can make an informed decision about next steps.