Protecting your income
While most of us think about life insurance to protect our families in the event of an untimely death, fewer of us take the time to make sure we have adequate disability coverage. Corporate employees may feel that they have sufficient coverage through their group benefit plans at work, while the self-employed sometimes feel that private disability coverage is too expensive.
But consider this – not only are our chances of becoming disabled much higher than our chances of a premature death, the financial impact on our families can be much greater. In addition to the loss of earning power, there will likely be ongoing expenses for care and treatment. It behooves us to review the impact such an event could have on our personal finances.
Corporate employees, particularly at the senior levels, are often underinsured. While your group disability policy may normally provide a benefit of two-thirds salary, the amount payable is often capped at a certain level per month. Higher income earners may very well find that the group plan doesn’t provide as much benefit as they expected. In addition, the group plan may be designed to provide benefits for a limited period of time, or benefits could cease completely if the disabled employee is able to perform any type of work at all.
Private disability insurance can be purchased as a supplement to a group plan, in order to top up the monthly benefit to the required amount, or to protect the employee who is not able to perform the duties of his own occupation, but could earn money through some other occupation.
Self-employed individuals must rely exclusively on private disability insurance. While CPP does offer a disability benefit, the amount is small (a maximum of $1,153.37 per month in 2011), and it is only available in situations of severe and prolonged disability.
Although disability insurance can be expensive, the cost can be controlled through the selection of various policy features. For example, increasing the elimination period from 30 days to 90 or 180 days can decrease the premiums significantly. However, the trade-off is that you must be prepared to cover your own expenses for the first 90 to 180 days of disability.
We would be happy to help you evaluate the adequacy of your disability coverage. Click here to discuss this with us
