By Leo van den Berg
President, IMAX Financial Services Ltd.
Have you insured your cost of living? While death destroys the human value, it also removes the need for an income for the deceased. There is one less consumer. Disability also impacts the human life value but the victim is still here and, often, with greatly increased expenses. Disability insurance not only helps take care of physical needs but it may give a disabled person peace of mind as well.
Here are some of the problems caused by disabilities:
They limit a person's opportunities for normal occupational advancement in several ways: by reducing the number of hours per week one can work, by causing a shift to a less demanding type of work or by causing loss of your employment. Savings may have to be used to maintain an acceptable standard of living.
What are possible options to disability insurance?
Employment Insurance? Maybe, but benefits are inadequate and only good for up to 15 weeks. CPP? Unlikely because of the very stringent "total and permanent disability" definition. Workers Compensation? Injury must be job related; you're not even covered when traveling to and from work. Relying on this benefit makes no more sense than relying on accidental death insurance. Your employer? Perhaps, providing the group plan has adequate provisions, and you are able to stay with that employer. Personal assets? Unlikely, unless your savings are both in liquid form and substantial. If you had $120, 000 in the bank and if you could earn 10 per cent interest, this would give you $1, 000 a month income.
Individual disability income insurance? Yes, since you control the contract. It's custom designed for your own situation, completely portable, proceeds are non taxable and it is the only disability income that will allow receipt of UIC benefits in their full amounts.
Many group plans have long and short term disability. Short term, which usually runs for a duration of between four and six months, is payable on the first day of an accident and usually begins on the eighth day of sickness. Short term disability is available only through group plans.Long term disability, available through either group or individual plans, usually follows short term disability. It can start on the first day after an accident. The waiting period for sickness varies. Long term disability can go to the age of 65 or 70 years old. It can even be extended for life.
Generally disability insurance replaces between 60 and 75 per cent of the employee's income. The most common percentage used is 66.7 per cent of the employee's taxable income.
How do you find out about a properly designed plan and the cost for it?Contact an insurance broker. This could be somebody you know or that you know has been in the business for some time (five years or more) and has access to several insurance companies.
Remember, a disability is only an accident away!
Leo van den Berg is President of IMAX Financial Services Ltd. and Education Planners. You can reach him by calling (403) 617-4629 (or toll-free 1-888-383-9559) or e-mail him at [email protected].