Are you protecting one of your most valuable assets?

We protect the things we find valuable – the things that are difficult or impossible to replace. We insure our homes and vehicles because most of us can’t afford to lose them.

Consider the average price of a new Canadian vehicle is $33,00011, the average price of a Canadian home is $437,6992 and the average earnings over a 30-year career is $2,008,1543.

Over a 30- or 40-year career, your accumulated income is likely to be far more valuable than any other asset you’ll own. It may be time to think about what you’re doing to protect your ability to earn a living.

Disabilities are a fact of life, one in four people4 will be disabled for 90 days or longer at least once before they turn 65. The average length of a disability is 5.75 years5 if it lasts longer than 90 days.

Questions to consider:

  • Could you maintain your lifestyle?
  • Could you continue to run your business?
  • Could you meet debt obligations?
  • Could you pay ongoing expenses?
  • Could you continue saving for retirement or a child’s education?
  • Could you take the time to recover?
  • Could you afford any additional expenses related to a disability?

Most of us don’t want to think about it, but it’s something to consider. Some of the most common causes of claims are due to disabilities we can’t plan for, injuries like: fractures, dislocations or sprains, depression and anxiety, heart attack or stroke and cancer.

The good news is there are ways to plan for the unexpected. You can keep your earnings uninterrupted with proper insurance planning. Proper plans will help you avoid having to use your savings, sell your assets or surrender RRSPs to meet your day-to-day living expenses. Disability insurance is a plan that works when you can’t. If an accident or illness prevents you from working, disability insurance provides monthly income to help pay ongoing expenses. It can replace a per cent of your earnings – short term or long term.

Two common types of disability insurance are group and individual. Group insurance is arranged by an employer, association or union to help financially protect its employees/members. It focuses on general coverage for all employees/members. Premiums are usually paid for by the employee, so any benefits can be received tax-free. Benefit coverage is generally based on a percentage of earnings and will typically last for two years if you cannot work at your own occupation but may be extended depending on the plan if you cannot work in any occupation. Premiums are not guaranteed and may change depending on the claims experience of the group of employees covered in the plan.

Individually owned disability insurance generally provides control and choice to help you financially protect what matters most. And it’s all about you:  you own it and you choose the products and options you want that are customized for your needs. You should consider individual disability insurance if your employer does not offer group insurance with disability coverage, you are self-employed, and/or a business owner. There are also circumstances where your group coverage does not provide adequate coverage. If you are not covered for bonuses or sales commissions, if you are drawing income in the form of dividends instead of salary or if the maximum monthly income coverage does not provide sufficient income replacement.

Together or on their own, individual or group disability insurance can help protect you, your family and your lifestyle should the unexpected happen.

Working with a financial advisor to review your coverage and ensure your earnings are properly protected lays the groundwork for you to continue meeting your financial goals and to maintain your lifestyle, even if a disability prevents you from working or running your business.

If you have any questions about your current insurance plans or how to find a financial advisor to work with you to develop your financial plan, connect with us.

 

1 Jeremy Cato, Savvy shoppers knock about $4,000 off car prices in Canada, The Globe and Mail, May 2014.

2 The Canadian Real Estate Association, July 2015, http://crea.ca/content/national-average-price-map.

3 Assuming annual income of $45,741 with a 2.5 per cent increase annually for 30 years. Peter Harris, So, how much are we earning? The average Canadian salaries by industry and region, Workopolis.com, February 2014.

4 Calculations prepared by Great-West Life using a blend of occupation classes, genders and age ranges based on data obtained from the Society of Actuaries – Individual Disability Experience Committee (IDEC), 2012 IDEC Claim Incidence Rate Table.

5 Canadian Institute of Actuaries (CIA) 86-92 Agreement Table & 2012 Society of Actuaries – Individual Disability Experience Committee Table.

 

Individual Insurance to Protect You and Your Home

Whether you are purchasing or building a home you should be considering individually owned insurance to protect your family and your home. Purchasing individual insurance is about you and not just your mortgage. By selecting a plan that provides options and additional benefits helps you financially protect what matters most.

Purchasing individual insurance is all about YOU:

  • You own it
  • You choose the product and options that fit your life
  • You decide how much insurance
  • You decide who gets the insurance proceeds

Unlike mortgage insurance which is paid out directly to the lender, individually owned insurance goes to whomever you choose. Your beneficiaries will choose what to do with the payment and can decide what the plan is for the funds at that time.

Typically, mortgage insurance only covers the amount of the mortgage. This coverage amount decreases over time as your mortgage amount is paid down, but your monthly insurance premium payments do not.

With individual insurance you have the option to have your premiums and coverage stay the same as you pay down your mortgage assuming you do not make changes to your policy. You also have built in flexibility to add additional coverage to your policy to cover other debts, income, tax and estate planning needs, and even your child’s education. This can eliminate the need to have more than one policy.

Individually owned insurance offers a range of product options to choose from. For example, term or permanent coverage, different types of insurance (life, critical illness and disability) optional riders and benefits that can be customized and different payment periods. You build a plan that fits your budget and needs.

The policy is controlled by you. When it comes time to renew your mortgage or if you decide to move your mortgage to another lending institution, your individually owned policy will not be automatically cancelled or need to be reapplied for. With mortgage insurance, in most cases, you cannot move the policy, you may have to re-qualify medically and your premiums can change.

When you pay off your mortgage your coverage stays with you and you can decide to keep or maintain the coverage based on your needs at that time. With mortgage insurance your policy and the coverage ends even if you still need insurance to cover other income or estate planning needs.

Mortgage insurance may seem like a good way of protecting your home and family – but is it the best option for you? Insurance is about more than just your home. It’s about protecting what matters most in your life and as such, individual insurance may be a better fit.

As part of a financial plan, the Intent team helps you identify your insurance needs and propose solutions to fit your plan. Connect with us to learn more.