Disability Insurance: Canada’s Forgotten Insurance

disability insurance canada

When you’re young it’s easy to think you’re invincible and nothing will ever happen to you, but the hard truth is, if you’re under 65, you’re 60% more likely to become disabled than you are to die.

The second leading cause of bankruptcy in Canada, behind over extension of credit, (29%) is injury or illness leading to disability (15%) because it prevents people from working. Yet, most Canadians don’t understand how disability insurance works and why they may not be adequately covered.

If you were to ask a group of working people whether or not they have disability insurance, most of them would answer, “Yes.” In truth, most of these individuals are either under-insured or do not have adequate coverage. Government disability plans are very limited in scope and coverage amounts. Group plans generally cap the monthly disability benefit for employees. For example, employees earning $75,000 a year may only receive $2,000 a month or less in disability benefits.

According to Neil Patton, president and CEO of The Edge Benefits, many insurance brokers and financial advisors neglect to broach the subject of living benefits with their clients. “Statistics indicate that only around 6 per cent of them actually engage in a living benefits conversation with their clients,” he says. “The industry has a lot of complexity in the products, so brokers shy away from them.”

With an increasing number of Canadians working for themselves or as contract workers, this is a dangerous oversight. The issue needs to be addressed.

Even those with full-time jobs frequently find themselves working from pay cheque to pay cheque. They have very little savings. If they are suddenly unable to work, they could be in serious financial trouble. People eligible for Employment Insurance (EI) may receive benefits up to 120 days. However, in the case of a prolonged disability, they won’t have the income needed for daily expenses (rent, food, utilities, etc.).

William Shung, Senior Insurance Advisor and Elder Planning Counselor with LSM Insurance Services Ltd. states that the self-employed will suffer even more serious financial consequences. Apart from normal living expenses, self-employed people also have business expenses to pay even when they are disabled.

Mr. Shung says, “There is more to life than working to pay for our basic living expenses. Canadians should be able to sustain a decent standard of living and maintain a certain lifestyle within their social environment. Disability insurance is about Lifestyle Protection. There is a cost to maintain our Lifestyle and when we become disabled and cannot work we need money to sustain our lifestyle. Lifestyle is about the cars we drive, the home we live in, our vacations, the education we provide our kids and savings for retirement (contribution to CPP, RRSP etc.).”

Where will the funds come from if you become totally disabled and cannot work for a period of time? Your mortgage payment alone is likely a huge chunk of your monthly income. Should you become totally disabled, you could also face substantial medical expenses.

Paul Lalonde, President and Advisor for Twin Power Financial Inc. agrees, “Your greatest asset is your ability to earn an income which is why it is so important to protect. If you had a machine in your home that printed money every day, people would think you are crazy not to insure it. We insure our cars and homes without a second thought even if they are things that could be replaced if destroyed. Our incomes make the mortgage and car payments, the house and car insurance payments yet many of us have no coverage for the one asset that makes all our lifestyle choices possible. People need to see themselves as the money printing machine and make sure they make room in their budget to protect it. Its’ the insurance no one wants to claim but one that is so much better to have and not need than to need and not have.

Becoming disabled is often the single greatest defining moment in our lives physically, emotionally and also financially. Having disability insurance in place is imperative to keeping you healthy financially and allowing you and your family to focus on taking care of the emotional and physical aspect. It’s what keeps families together, lifestyles intact and your financial future secure.”

Promod Sharma, Actuary, FSA and FCIA with Taxevity feels disability insurance is extremely important during your working years because statistics show that under the age of 65, you are much more likely to have a disability than to die.

Mr. Sharma says, “There are too many gaps in employer coverage. You may think you have great Long Term Disability insurance from work. Have you looked deeper? Group plans tend to limit claims via strict definitions and weak coverage. Personal disability insurance helps fill gaps and strengthen your protection. Also, you keep your insurance if you change employers.”

Additionally, qualifying for disability insurance is much tougher than for life insurance, and gets tougher each year since your health can change. According to Mr. Sharma, “Disability insurance looks expensive compared to life insurance but that’s because a claim is much more likely. You can save by choosing smaller benefits (say $2,000/month tax-free which increase with your income and while you’re receiving benefits).

Jim Ruta has been involved in the sale of disability insurance since 1978 and in 1992 became one of Canada’s first Registered Health Underwriters. In all that time, Mr. Ruta says he has been amazed that one great disability policy is hardly ever sold – Business Overhead Expense Insurance. Businesses can also become temporarily disabled. Jim says disability insurance is, “The best insurance policy nobody sells.”

Disability insurance helps everyone. It is especially valuable for single people with no other source of income. The bills don’t stop coming just because you are unable to work.

Individual disability insurance can preserve your income for your family in the event that you become too disabled to work. We can help you find the lowest disability premiums in Canada with our online Instant Quote Page.

But more importantly, we can help you get the right answers to the following questions:

  • What elimination and benefit period are right for you?
  • What are the different definitions of disability?
  • What are the benefits and drawbacks of both Non-Concealable and Guaranteed Renewable coverage?
  • How can I maximize the probability of my claim being paid out?
  • What riders, if any, are best to add to my policy?
  • Can I be over-insured?

If you have any more questions, or would like me to customize a plan to your specific situation, please contact me directly at 1.866.899.4849.

Call us: 1-866-899-4849

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What Clients Say About LSM

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  1. Allan 08/20/2010 at 3:55 pm

    Looking for a quote on disabiliy ins to pay the mortgage payment should my wife become sick or injured and not able to work. She is 57 yrs and in excellent health.
    Tk You
    Allan Francis

  2. Kamel Hafsi 08/04/2011 at 2:57 pm

    Please send me some info regarding Disability Insurance , I am 63, and how much will cost me a month, I am a simple worker not a CEO.
    Thank you.

  3. LSM Insurance 08/04/2011 at 4:46 pm

    Thanks Kamel – the premiums will depend on the elimination period, benenfit period and monthly benefit amount.

  4. PW 04/23/2012 at 2:23 pm

    My employer pays me 66% of my salary for LTD after a 90 day waiting period, can I top it up to 100% through a private policy purchase?

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