The Elephant in the Room
The main concern…
Nobody wants to think about becoming disabled but it happens. Most people I have spoken to in my over 20 years working in the insurance industry were concerned about losing their job, having enough money in retirement, loss or damage to their home or vehicle without giving a second thought to what would happen if they couldn’t work and their paycheques stopped coming in.
If you have acquired assets, chances are your income is the reason you enjoy your current lifestyle, but what if you became disabled today? Would your income be significantly reduced or worse, disappear altogether? How would you pay for your things like your mortgage, children’s education, trips to a warm place in the winter, or the basic necessities of everyday life? Would CPP provide enough to replace your income?
You may be reading this and saying well “Nothing will happen to me”, however your fellow Canadians who have lost their homes and have had their lives turned upside down as a result of an unexpected injury or sickness probably said the same thing. You may be thinking well “I don’t earn that much anyway”, however if you are age 35 and earning $75,000 per year, your income earning potential over the next 30 years is $2,250,000, and your ability to earn is therefore the main concern.
In Canada, there is a one in three chance of becoming disabled for 90 days or longer at least once before age 65. Disability is real and its effects can be financially devastating, and not only can disability cause you to deplete your savings, it can also plunge you into debt. The last thing you need to worry about if you are disabled and can’t work, is money.
Disability insurance provides you with a monthly cheque in the event you become disabled or seriously ill and can’t work, and is designed to replace a portion of your income. There are policies that will ensure that as long as you are disabled and can’t perform the duties of your own or regular occupation (This is very important), you will receive a monthly cheque up to age 65, and if you don’t become disabled you can get part or all of your money back at age 65. (If you think of all the money you spent over the years on car insurance, never had a claim and never received a dime in refunds, you will see that disability insurance makes even more sense because either way you get paid.)
If you have disability coverage at work ask yourself if the coverage is enough, and if you are self-employed then disability insurance is simply a no-brainer. The elephant in the room is burying your head in the sand and neglecting to seriously consider adding disability insurance to your financial fitness plan; it is like heading outside in minus 20 degree temperatures wearing shorts and a golf shirt.
About the Author
Karl Marshall is President of Marmac Financial Services Limited, an independent insurance and investment brokerage. He lives in the Durham Region and on Saturday nights he hosts The Party Mix on G98.7 FM in Toronto. You may contact him via email firstname.lastname@example.org @marmacinsurance on Twitter or on Facebook.