What Do You Know About Long Term Disability Insurance?
One of the most frequently asked questions in regards to disability insurance in Canada is, “Do I really need to buy long term disability insurance?”
There’s no way to know if or when an injury or health issue will occur that might prevent you from being able to work for an extended period of time. In a matter of seconds, a serious accident could happen or a dire medical emergency or diagnosis might be made.
Your potential for earning future income could change and drastically change your way of life, and have very serious consequences for you and your family’s income and standard of living.
Here are seven questions you can ask yourself when determining if you should buy long term disability insurance or not.
These seven questions cover most of what you will need to know about a long term disability, about disability insurance coverage, and how it will affect you and your family.
- Can I afford the consequences of not having long term disability? (Who is depending on my income?)
In the case of an accident, disability insurance can help you focus on rehabilitation and getting better rather than worrying about how you will pay for ongoing daily expenses, such as your mortgage, car payments, child’s tuition, groceries, and so on. How would you continue to make ends meet? How would you maintain your standard of living? You may have other income earners in your family or you may have alternate savings plans in place that would help keep you monthly finances afloat while you are unable to work. But what if you don’t? What are your options?
- Does my employer offer long term disability insurance coverage?
If you work for a large company or have an employee benefits package through your employer, you may have a small Canadian disability insurance policy. Talk with Human Resources or your Policy Holder for the specific details on your insurance coverage and decide if you are comfortable or not with its level of coverage. Do you need to look at additional coverage options?
- Does my employee benefits plan offer enough disability coverage?
Even if you know you have disability insurance through your work’s employee benefits policy be sure to double check the details. Many disability insurance benefits cover between 54 and 70% of your gross taxable income. These plans often cap the monthly payout (ex. $2,500). Depending on your salary, this may or may not be enough to cover your monthly expenses. This is why private disability insurance plans are very attractive to large income earners.
- How will my age affect disability insurance coverage?
A younger person has significantly more years of earning potential and income to support disability insurance than a person nearing retirement. That is, the cumulative risk of suffering a disability lasting more than 90 days before retiring is much greater for a younger person than an old person.
For example, a 40 year old has an 18% cumulative risk of suffering a disability in their next 25 years of work before retiring at 65. Compare this to just an 8% cumulative risk of a 60 year old who has just 5 years left of work before retiring.
- What is my family medical history?
If you have a family history of medical conditions that you anticipate could be in your future that could prevent you from working, you may want to purchase disability insurance. Keep in mind that medical history plays a large role in qualifying and determining the cost of disability insurance in Canada.
- Does my profession have occupational factors that would make it difficult to return to work with a disability?
Some professions require significant physical requirements. For example, it would be very difficult to continue as a fire fighter with soft tissue damage or a knee injury. On the other hand, a professional with a desk job (or workload that could be adjusted given an injury) would likely be able to return to work much earlier on following an injury. They may even be able to fulfill their job description in spite of an injury that does not heal.
- What is my risk tolerance?
For a risk adverse personality, having the peace of mind in knowing that your family is secure in the case of a potential injury is worth much more than the disability insurance rates and premiums. Purchasing disability insurance may just help you sleep better at night.
Do you have more questions you need answered about disability insurance in Canada?
Contact a disability insurance advisor online at Benefit Strategies in Edmonton, Alberta or call our office at 1-780-437-5070 if you would like more information about disability insurance policies in Canada or to get a group disability insurance quote.
