No one wants to think about “worst case scenarios” when it comes to saving for the future. Ideally, we would all live healthy lives without accident or illness. However, this is not the reality. As many as 20% of Canadians over the age of 16 have experienced a severe illness or accident, rendering them unable to work during recovery. This is where disability insurance, also known as “income replacement insurance”, comes in handy.
We often recommend to clients to have at least 3 months’ worth of income saved as an emergency fund should something happen to your job. Unfortunately, we live in a time where additional savings are not always an option, so having an insurance plan in place that can supplement lost income is vital.
Consider the following;
if you lost your job today how would you cover your expenses? Ask yourself these questions:
Do you have enough additional savings to cover all your expenses during recovery?
Would your partner’s income be enough to pay your bills?
Do you have friends or family to assist you financially? And if you are borrowing money to make ends meet, how will you be able to pay them back?
Would you qualify for Employment Insurance benefits or other government programs, and if so, for how many weeks?
Would you be forced to dip into other savings, like retirement, prematurely?
If your only other option is to rack up debt on your credit cards or line of credit how will you be able to pay off that debt?
Keep in mind that an illness or injury may extend longer than you think and, in some cases, may leave a person permanently unable to work. This can a have a devastating impact on your financial well-being and your overall quality of life not to mention a significant delay to when you will be able to retire and the lasting impact it may have on your retirement income.
If you’re covered with the appropriate insurance, you can breathe easier knowing you have a dependable income should you be unable to work.
What are your coverage options?
This is a personal policy you pay into which supplements your income in case you’re unable to work. For many people, individual disability insurance is an additional “top-up” to help make up for areas where other plans such as group benefits, lack. Plans are available if you are an employee, self-employed or own your own business.
Individual Disability Insurance
If your employer offers a group benefits package, you should be able to opt-in to benefits through your employer once your probationary period is over. If you have coverage under your employer’s benefits plan, keep in mind that your coverage will end should you leave the company and there are often time or payout limitations to your coverage.
Group Disability Insurance