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.