Disability Insurance

Disability Insurance

Disability insurance is designed to protect you from the possible loss of income with a steady source of income in the event you are unable to work.

People often forget just how important their earning potential is. Protecting your earning potential is as important as insuring your car or home. A few months of interrupted income due to a disability can have a devastating effect on family’s finance. What is the possibility of this happening? Illnesses and accidents are responsible for 1 in 3 Canadians being unable to work for 90 days or longer at least once before reaching age 65!

A few points to consider when evaluating your specific need for Disability insurance

  • When do you expect to retire? The further out in the future this date, the longer your financial well-being is exposed to the risk of disability.
  • What percentage of your income comes from your investments? The lower this percentage, the more dependent you are on your ability to work and earn a living.
  • How long could you maintain your current standard of living on savings alone? The shorter this period, the more vulnerable you will be if disability strikes. Also, keep in mind that withdrawals from an RRSP are subject to income tax.
  • To what degree do your children, spouse or parents depend on you financially? If you become disabled, your dependents will still need financial support.
  • How much income do you think the government will provide if you become disabled? The major forms of government disability benefits are: Employment Insurance, Workers’ Compensation and the Canada Pension Plan. All three have eligibility and benefit limitations. We can tailor our plans to kick in when these benefits run out.
  • How much money do you think you could borrow if you became disabled? From your lender’s perspective, if you are not working, will they want to loan you money? Do you want to borrow from friends and family?
  • If you were to become disabled and unable to work, would your spouse be able to generate enough income to make up the shortfall? Even when this is possible (by working extra hours for example) many spouses may instead want to reduce the amount of time at work to be able to help their partner.
  • How much disability insurance do you already own and how comprehensive is it? Even when people have disability insurance through their employer, a review of the coverage can reveal that they do not have enough, or identify potential benefit limitations.