Sean Cooper | Pension Analyst and Financial Journalist

Posted on September 15, 2014 and updated May 30, 2019 in Disability Insurance, Disability Insurance - What The Experts Own, Life Insurance Canada News 6 min read

Sean-Cooper

Sean Cooper 

Pension Analyst and Financial Journalist, www.seancooperwriter.com

1. What Type of Disability Insurance do you own?
My employer provides me with group disability coverage in the event that I’m injured or ill and unable to work for an extended time. The plan comprises two parts: short-term disability (STD), which pays a benefit for up to 6 months (this is the elimination period), and long-term disability (LTD), which begins to pay a benefit after 6 months. For any validated medical absences, STD will replace 100% of my base salary for up to 13 weeks and 66 2/3% of my base salary for the balance of the elimination period. If I remain unable to work after 6 months, I’ll be eligible to apply for LTD benefits. LTD will be equal to 60% of eligible earnings in the event that I’m injured or ill and unable to work for an extended time. In addition, I can purchase a Cost-of-Living Adjustment (COLA) that will index my benefit to the Consumer Price Index (CPI), to a maximum 3% annual increase.

2. What factors did you consider when determining the coverage amount?
The group disability insurance my employer provides is more than sufficient for someone who is single like me. Besides my mortgage, which I plan to pay off before age 31, I am debt-free — I don’t have any car payments, credit card debt, or student loans to worry about. If I were to become disabled, my short-term disability would be more than sufficient to cover my mortgage and living expenses. I live a frugal lifestyle, so if I was disabled for more than six months, my long-term disabilities benefits would be more than enough.

3. Do you think people underestimate the importance of disability insurance, and if so, why?
Yes, definitely. Most people wouldn’t think twice about protecting their home and vehicle, but what about your most valuable asset: your ability to earn income? As I wrote in this article for RateSupermarket.ca, (“Why Your Disability Coverage May Not Be Enough”), disability insurance is overlooked by a lot of individuals (most don’t even know what their coverage is), and it’s an area where individuals are often underinsured. Here’s a shocking statistic. One in three people will be disabled for 90 days or longer at least once before age 65. While most people are aware of the benefits of life insurance, when it comes to disability insurance, a lot of people are still in the dark. The sad reality is, a lot of people would be better off if they died instead of became disabled. Disability insurance protects our human capital — the ability to earn income. If you became disabled, not only could you have costly medical bills to deal with, but you may also no longer be able to work. Disability insurance means you won’t be forced to stock shelves at a supermarket if you suffer a brain injury and are no longer able to work at your white collar job.

4. What are some limitations or exclusions people should watch out for?
While your employer may offer group disability insurance coverage, it may not be enough. Most disability benefits only cover 60 per cent of your salary. Many plans will only provide coverage for the first five years of your disability. In order to save on costs, many work policies have a two-year duration of benefits. If you become disabled, you’ll get paid for two years and then you’re on your own. Some group plans have no short-term disability. This means you have to be totally disabled and wait six months or longer to get paid. If your group disability benefits and government benefits aren’t enough, that’s when you should consider individual disability insurance. If you take one lesson away from this, it’s that you should take the time to review your disability coverage to ensure it’s sufficient.

5. If you had to choose between critical illness and disability insurance, which one would you choose and why?
Similar to a lot of people, my employer offers optional critical illness insurance. While both types of insurance are important, if I could only choose one, I’d have to go with disability insurance. While having adequate disability insurance coverage is essential, I consider critical illness insurance a nice-to-have complement. I have an emergency fund with six months’ living expenses, which is more than adequate for someone who is single. However, if I were to get married or start a family, I would definitely reconsider my insurance needs.

Sean Cooper is a pension analyst at a global pension consulting firm by day and a financial journalist by night. He is a first-time homebuyer and landlord passionate about real estate. He was inspired by Income Property’s Scott McGillivray to live in his basement and rent out the upstairs of his house. He is well on his way to reaching his stretch goal of mortgage freedom by age 31. He is on Twitter @SeanCooperWrite. You can request his services and read his blog on his personal website, http://www.seancooperwriter.com.

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