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Comparing Canada’s Top Disability Insurance Plans

November 27th, 2017
We reached out to Tim Landry to provide us LSM Insurance with an in-depth analysis of Canada’s top disability insurance plans. 
Tim is been offering disability insurance solutions to Canadians for over 45 years and has a real passion for this market. 
Plan Names: Lifestyle Protection Independence
Market: Professional, White & Blue Collar
Pros: “Build your own plan” product, fit product to budget, excellent policy wording; sickness coverage.
Cons: Because of the “build your own plan”, you may not have coverage in your own occupation and may not have coverage for “non-total” disabilities. Independence premiums may be increased and coverage canceled if occupation becomes uninsurable.
Unique Features: (Lifestyle Protection) “Catch up”, “Expense Equalizer”, “Sale of Business Facilitator”, Lifetime Accident and Sickness
Plan Names: Protector, BOSSPlus, Professional, Competitor
Market: Protector is aimed at employees, BOSSPlus at business owners, Professional at higher (2A, 3A, 4A) occupational classes, Competitor at otherwise uninsurable occupations.
Pros: Known as “Blue Collar” company but excellent at all occupations, excellent policy wording, plans designed to fit all needs and budgets.
Cons: Questionable claims reputation, Competitor prices can increase and coverage may be cancelled.
Unique Features: 1st Day Accident, Lifetime Accident and Sickness, Savings Protector
Plan Names: ProGuard, Venture, Synergy, Personal Accident
Market: ProGuard is for higher (2A, 3A, 4A, 4S) occupational classes. Venture has versions aimed at Business Owners, Full-time employees, Permanent Part-time employees, and Farmers. Synergy is a combined Life Insurance, Critical Illness Insurance, and Disability Insurance product. Personal Accident is aimed at those looking for limited coverage, retired, and otherwise uninsurable clients.
Pros: ProGuard has the best policy wording in the industry (as of November 21, 2017); products include PensionGuard and optionally the most liberal Health Protection rider.
Cons: Personal Accident premiums may be increased but the coverage may never be canceled.
Plan Names: Professional, Quantum, Foundation, Bridge, Fundamental, Retirement Protector
Market: Given that they have the most experience to draw on in Canada in this product, they have something to suit every market and every budget. Personally, I would rank them (1) Professional (2) Foundation (3) Quantum (4) Bridge and (5) Fundamental. They are the best for doctors and dentists.
Pros: Guaranteed Standard Issue
Cons: Frankly, I can’t think of any except that they have become slower to update their existing policies.
Unique Features: If you have a large or “different” case, they can probably help more than others.
Plan Names: Blue Flex, Blue Vision, Tangible
Market: Clients who are prepared to accept lower cost and lower quality products.
Pros: Can include health and dental protection as well as a conversion to Long-Term Care Insurance.
Cons: Prices not guaranteed
Unique Features: (See Pros)
Plan Names: Solo Disability Insurance, Solo Essential Disability Insurance
Market: Any occupations (Solo Essential is accessible to those who don’t otherwise qualify), prime target market clients of unions/Caisse
Pros: Priced to be accessible to those who can’t afford better products.
Cons: Premiums can be adjusted.
Unique Features: Critical Illness benefit
Plan Names: Superior Program
Market: Any insurable occupation- the company is strongest in the Professional Association and Union markets, but is very active in all markets.
Pros: Options for 5 years renewable or level to age 65 premium structures.
Cons: Premiums are not guaranteed.
Unique Features: Able to guarantee occupational class and certain benefits
Plan Names: P.A.G.E. and P.A.I.R.E.
Market: Any insurable occupation
Pros: Company is trying to get active with all potentially insurable clients.
Cons: Premiums are not guaranteed.
Unique Features: Limited coverage available for LIFE.
Plan Names: Pillar
Market: Self-employed, Business Owners, and those difficult to insure.
Pros: 1st-day sickness coverage and products specifically designed to insure their market.
Cons: Prices are not guaranteed- you can get better coverage but it will be more expensive.
Unique Features: 1st-day sickness
I have been involved with Living Benefits since October 1969. I have worked for companies as well as MGA’s. Originally, my strength was my product knowledge, but Easter Weekend 1988 taught me that product knowledge – no matter how great – is not enough. That weekend I learned that disability can affect everyone and it hit my brother hard. He was in his car driving from Orangeville to the Toronto Airport when some idiot passed him where he should not have. Result: a head-on collision at a combined speed of 200 kmph. We thought we lost him. He has had seven hip rebuilds and the last time I saw him without his cane, he was dancing with his daughter at her wedding.  Still, all this is minor. The blood transfusions that saved his life gave him Hepatitis C. I will do everything in my power so that no one has to live with something like this.
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10 Facts You Need To Know About Disability Coverage

July 27th, 2017
Disability Insurance Facts

Imagine not being able to work and earn a living for your family. It’s not something most people want to think about on a daily basis. Protecting your livelihood with adequate disability insurance can mean the difference between maintaining your standard of life or being forced to make drastic cuts in household spending after being hit with a life-changing injury or illness.

Your ability to earn a income is your single greatest insurable need. Being prepared for the worst and having adequate protection in place is key to ensuring your family will not suffer any decrease in their standard of life should you suffer from a disability.

The first step is understanding how much coverage you need and are eligible for. The next step is to find out how much existing disability insurance you currently may have in force and the definitions of disability that cover you. Many Canadians don’t even know how much of their income is covered or the definition of disability used under the workplace group insurance plans.

It’s a good idea to employ a broker who can help you determine your disability insurance needs, uncover existing coverage features and benefit amounts, and then offer top-op or replacement plans. This way you are covered for as much disability insurance as legally permissible, without overpaying for coverage you can never claim on. 

For more facts on disability insurance, check out our infographic below.

Facts About Disability Insurance

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Andrew McKeown | Insurance Consultant, Great-West Life

April 12th, 2017

Andrew McKeown life insurance expert
Disability Insurance Expert Andrew McKeown

Andrew McKeown

Insurance Consultant, Great-West Life 

1. What type of disability insurance do you own?

I own a Non-Cancellable Great-West Life Professional Disability Plan.

2. What factors did you consider when determining the coverage amount?

I didn’t want to buy a crap plan that I was sure wouldn’t pay. Insurance is expensive enough, why would you cut costs on something as important as disability insurance. It’s like buying a sausage from the cheapest vendor, you’re just asking for trouble.

In terms of benefits, I bought the most I could, as there really is a hard cap on how much you can buy. You can only buy as much income as you make, really easy math.

3. Do you think people underestimate the importance of disability insurance, and if so, why?

Yes, because most don’t understand what being disabled means. I really wish they started calling this income insurance or paycheque protection. It means you can’t work for whatever reason. I think the term disability really throws a lot of people off what it actually is.

Also most people think they are protected at work. But, I’ve gone through Group Long-Term Disability contracts for clients and they are a bottomless hole, there are so many exclusions where they won’t pay. Some plans still won’t pay for anything but salary. Imagine you are in sales making a small salary and a large bonus, you can’t work and they only pay you a small salary. What a catastrophic loss for that person, but proper disability insurance planning would have resolved that.

I just think that most people think of it as a checked box, “do you have disability”, “yes” they can answer. They don’t realize that the question should be, “Do you have enough disability insurance and do you have the right kind for you.” Lots of high income earners are walking around thinking they have good coverage; little do they know they’re nearly naked. We are constantly topping up an individual disability plan to complement the coverage they have with their group.

It’s funny that the #1 market for individual disability coverage is doctors; we have something like 85% market share into an individual plan. I haven’t seen a doctor who says, “No I have great coverage through my group.” That would never happen.

4. What are some limitations or exclusions people should watch out for?

I think if you can afford it, you should only be purchasing non-cancellable disability insurance, unless: you can’t get it due to health or you can’t prove income/working hours. Don’t buy a step down, if you can avoid it in anyway.

All the major carriers that sell Non-Cancellable insurance: Manulife, RBC, Canada Life and Great-West Life all have great products, and there are almost zero exclusions built into them; my favorite thing. Of course, based on health you can have exclusions, but those are pre-existing condition exclusions. Even if they slap one of those on you, you should still take it.

Having a policy with one or two pre-existing condition exclusions is still better than no policy at all. And the other types of policies have pages of exclusions already built into the contract. Don’t buy one of those if you can avoid it.

5. If you had to choose between Critical Illness and Disability Insurance, which one would you choose and why?

This is an easy question, if you don’t have disability insurance or enough or the right kind, put your money to a good disability policy. After that, you can make a decision what is more important, Life or Critical Illness Insurance. However, when it comes to term rates, you can probably get both Life and CI in an affordable range.

Everyday Andrew sees a different story: a single mom, a married contractor, a retired couple, the list goes on. His job is to make sure: There is insurance if it’s needed (Life, Disability and Critical Illness Insurance) and reduce the taxes that theses amazing Canadian will have to pay over their lifetime. He helps his Financial Advisors help their clients buy insurance when it’s needed!

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Mike Castagna | Consultant, J.W. Larmond Life Insurance and Benefits

September 17th, 2016

Mike Castagna
Disability Insurance Expert Mike Castagna

Mike Castagna

Consultant, J.W. Larmond Life Insurance and Benefits 

1. What type of disability insurance do you own?

I own a professional series disability policy that is non-cancellable, payable to age 65, with a 90 day wait period. I also made sure to add the future income option and cost of living adjusted benefit riders to my policy as I am young and wanted to guarantee my future insurability if I have a change in health.

2. What factors did you consider when determining the coverage amount?

I purchased as much as I was allowed to purchase based on my current annual income. As mentioned above, I also made sure to protect my insurability by adding on the future income option rider to my policy, which allows me to purchase more coverage as my income increases.

3. Do you think people underestimate the importance of disability insurance, and if so, why?

Disability insurance is absolutely underestimated. Many of my clients understand the importance of life insurance, but many don’t ever think about what their situation would look like if they got sick or injured and weren’t able to go to work and earn an income. Our ability to earn an income is the most important asset that we have and disability insurance is the best way to protect that asset.

4. What are some limitations or exclusions people should watch out for?

The benefit period and the definition of disability are two aspects of a disability policy that people need to be aware of. Many group plans only cover you in your “own” occupation for the first two years and then definition switches to “any” occupation. This means that after two years, if you are capable of being employed in “any” gainful occupation (not necessarily your own), then you can be cut off your disability benefit.

5. If you had to choose between Critical Illness and Disability Insurance, which one would you choose and why?

While I believe both are very important to a proper insurance plan, I would definitely choose a disability insurance policy. This is because disability insurance protects your income long term. Critical illness is meant to pay you lump sum benefit to help you recover from a major illness, while disability insurance is meant to protect your income long term by paying you a monthly benefit while you are unable to earn your income.

Mike Castagna is a consultant at J.W. Larmond Life Insurance and Benefits. Mike is focused on helping his clients protect their financial well-being through the use of Life Insurance, Disability Insurance, and Critical Illness Insurance. Mike works with families, professionals, and business owners in developing extensive individual insurance plans as well as group insurance plans for businesses.

In his spare time, Mike enjoys playing soccer, hockey, and basketball recreationally as well as coaching soccer and football at both the high school and travel levels. Mike believes it is important to offer his time to coaching as he has had so many great coaches in the past that motivated him throughout his life.

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Why Being Financially Unprepared for a Disability Could End Up Costing You

April 29th, 2016
prepared for workplace disability

A recent poll conducted by RBC revealed a disturbing fact: 48% of Canadians said that they weren’t prepared to be off work due to a disability.

This stat shows that many Canadians still don’t take the threat of losing their income due to a disability very seriously. Many individuals, especially those from younger age groups, feel like they aren’t at risk from serious disabilities and don’t need to have contingency plans in case they are ever unable to earn an income due to a long-term disability.

Other working individuals assume that their employee health benefits plan and government health plan will take care of all expenses and replace their lost income should they ever be unable to work because of a long-term disability.

These assumptions couldn’t be further from the truth. According to Mark Hardy, Director of living benefits at RBC Insurance, nearly one-in-three Canadians will experience a period of disability lasting longer than 90 days during their working lives.

Hardy also explains that many employee health benefits offer limited coverage and do not cover 100% of the disabled worker’s lost income. Meanwhile, the government health plan usually doesn’t cover the cost of most medications and other expenses such as recuperative therapy, dietician consultations, exercise programs, home nursing, prosthetics, home care, child care, meal preparation and moving expenses.

So, what happens when you have to deal with a long-term disability that leaves you unable to work for an extended duration of time?

For starters, there’s the sudden drop off in your total income. If you are financially unprepared to deal with this monetary loss, you could lose the ability to afford the lifestyle you’ve created. This could include being unable to pay for your house, car and other regular expenses. If you are the primary earner in your family, losing or having a reduced income because of a long-term disability could cause financial burdens for the rest of your family as well.

The RBC poll cited above revealed that 78% of Canadians who go on long-term disability report that their finances are tight and they struggle to meet their daily expenses. 67% reported that their lost income causes financial strain on the other members of their household.

In order to cover their expenses, 29% of Canadians on long-term disability said that they needed to dip into their life savings. 34% said they had to take on more debt in the form of loans from banks, family and friends. 9% said that they had to cash in their RRSPs and leave themselves financially unsecured for their retirement years. 31% even said that because of their disability, their partner had to go out and find extra work in order to supplement the family’s lost income.

These figures show that Canadians often end up financially struggling along with the rest of their family if they become unable to work due to a long-term disability and have to deal with lost or reduced income.
This is where having disability insurance could prove to be crucial. In an event of a long-term disability that leaves you without your regular income, having the proper disability coverage could allow you to maintain your lifestyle, cover medical expenses and provide for your family while you recuperate.

Experiencing a long-term disability and recovering from it are stressful enough tasks on their own. Don’t add the financial burden of your lost income to your list of worries as well. Have a proper contingency plan in place and get disability insurance coverage, especially if you are primary earner in your family.

INFOGRAPHIC: Disability Insurance Demystified

August 27th, 2015

As explained in our infographic below, there are some important definitions and points in a disability insurance policy that would confuse an applicant because of the fine print involved, or in a worse-case scenerio, prevent them from paying you a cent because you didn’t understand the insurance contract.

Disability Insurance Definition Demystified

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6 Insurance Policies Self-Employed Professionals Should Consider

April 20th, 2015

insurance products for self employed 00

Being self-employed has its perks. You have a flexible schedule, control your own income potential and make decisions based on your own self-interests. But, when it comes to being insured, that’s where being self-employed can be a little tricky.

Working for an employer usually allows you to be a part of a group insurance plan that covers you and your family for a variety of insurance products. If you decide to take the self-employed route, you will usually be cut off from these group plans and need to seek individual coverage.

If you are currently self-employed, or thinking about going this route in the future, then strongly consider looking at these six insurance products.

Life Insurance

Life Insurance pays out to your beneficiaries in the event of your death. There are two primary types of life insurance policies: term life insurance and permanent life insurance. Term life insurance covers you for a certain amount of time while permanent life insurance guarantees lifetime coverage.

As a self-employed person, it’s important that you take out a life insurance policy in order to minimize the financial consequences of your death to your loved ones.

For example, if your self-operated business owes money to a creditor, that debt would be passed on to your beneficiary who inherits the business in the event of your death. Getting a payout from a life insurance policy would give your beneficiary the ability to clear out your debts. They can then either continue to operate or sell the business without any further hassles.

Disability Insurance

If you are self-employed and end up being unable to operate your business because of a disability, you would have no alternate means of earning enough income to provide for yourself and your family. This can quickly put you in debt as bills continue to rack up.

Keep in mind that you also still have to deal with operating expenses for your business, such as rent, even when you’re not actually working and earning anything.

Disability insurance provides you with a monthly income in case you are unable to work due to a serious illness or injury.

Many people are simply content to take out life insurance and forget about other insurance products. Just a reminder: the chances of you passing away are much, much lower than the chances of you being disabled.

So, for self-employed people, having a disability insurance plan in place is absolutely critical.

Critical Illness Insurance

Like its name implies, critical illness insurance pays out when you are diagnosed with a serious medical condition (eligible medical conditions for this insurance are agreed upon during the underwriting process). Unlike disability insurance, critical illness insurance usually offers a one-time lump-sum payout.

If you are self-employed and operate your own business, having critical illness insurance provides an opportunity to have a fallback plan that entitles you to receive a large sum of money in case of a serious medical problem.

This money could help bring you some flexibility while you decide how to deal with your serious illness and manage your business. For example, you could hire help to manage your business in your place while you focus on treatment.

Segregated Funds

Segregated funds are offered by many insurance companies as an alternative to mutual funds. While these two investment funds are similar, segregated funds have several advantages over mutual funds. Some of these include having a maturity guarantee of 75% of your principle investment, protection of assets from creditors and resetting privileges to lock in growth. Many insurance companies also allow you to put segregated funds into a RRSP or a TFSA.

Having that protection from creditors makes segregated funds an extremely important product for self-employed individuals who are looking to safeguard some money for retirement.

For example, let’s say that you undergo some rough times and have to declare bankruptcy. In this scenario, you stand to lose your assets to creditors. But, if you have a segregated fund set into a life insurance contract in your RRSP, it is fully protected from creditors.

So, by having a secured segregated fund set aside, you have a backup plan in case you don’t reach retirement with sufficient assets.

Personal Health Insurance

If you live in Ontario, your dental and vision treatments are not covered by OHIP. These treatments are generally covered by group insurance plans. But, if you’re self-employed, you won’t receive that coverage.

In this situation, the best insurance product to get is personal health insurance. This insurance protects you from unexpected health expenses not covered by provincial health insurance plans.

Many personal health insurance plans not only cover medical treatments, but also reimburse you a portion of the amount it costs to buy prescription drugs or supplemental health care products such as hearing aids.

Without having a personal health insurance plan in place, you could quickly find yourself in debt if you get afflicted with a medical condition that has expensive treatment costs and is not covered by a provincial health insurance plan.

Travel Insurance

There are generally two different types of travel insurance plans available: travel medical insurance and non-medical travel insurance.

Travel medical insurance covers you in the event that you require medical treatments for an injury or a sickness while abroad. This plan can include reimbursement for hospital stays, medication and even the cost of emergency repatriation. Here is a comprehensive list of items that you need to make sure your plan covers.

Non-medical travel insurance can provide coverage for lost luggage, cancelled flights, rental cars and much more depending on the plan.

If you’re self-employed, then it’s absolutely critical that you purchase at least travel medical insurance when leaving the country. Getting sick or injured while abroad could put you on the hook for thousands of dollars in treatment fees if you’re uninsured. This could set your business back for years.

If you conduct business internationally and are travelling with valuable cargo, purchasing non-medical travel insurance with baggage protection is highly recommended. This plan will protect you in the event that your cargo gets lost, damaged or stolen during the journey.


The Financial Stress Test That Canadians Are Failing

February 12th, 2015
Canadian financial Stress Test
The Financial Stress Test That Canadian Are Failing

Are you prepared to support yourself or your family if you sustain an injury in the workplace? According to recent research, the majority of Canadians say, “no”. Over 75 per cent of Canadians admit that they would actually be financially devastated if they were forced to leave work due to a disability, and while many people have had to take disability leave for not more than 90 days, anyone who was considered disabled for more than 90 days found themselves off work for a period of two to three years.

These statistics are frightening if you consider all the things that can go wrong in your place of business, especially for those in the workforce who are exposed to extreme dangers, like construction workers, police officers and firefighters. Only a small percentage of Canadians have disability coverage outside of the benefits provided by their workplace, but a lot of those benefits are limited, either by a time frame or a dollar amount.

What can you do?

Luckily, many institutions offer disability coverage and benefits with many of the policies being very affordable. From accidental death benefits to accidental injury coverage, it can be very easy to round out your medical and health coverage without breaking the bank.

In the meantime, most Canadians’ back-up plans regarding financial stability range from living off their savings to depending on their spouse’s income, and finally, to cashing in their investments to get by. Shockingly, the majority of the country admits that if an emergency arose, they wouldn’t be able to get together $2,000 quickly enough to cover emergency expenses. The scary thing about this is that that makes it seem like many Canadians don’t have even the simplest of savings underway – let alone sufficient insurance policies, RRSPs or a tax-free savings account.

If the vast majority of the country isn’t in a position to financially weather an unforeseen medical condition or emergency, one could only imagine what the state of their retirement plan is in.

What’s Keeping Us Up at Night?

The Bank of Montreal conducted a survey to determine what Canadians were most worried about on the financial front, and 33 per cent of men said it was whether or not they’d have enough resources for retirement. Women were more worried about their own, or their spouse’s future health needs. Of the least concern was how they would manage a personal job loss, or that of their spouse.

So what’s a Canadian to do?

Over half of Canadians say that they have a financial plan, and that plan is responsible for helping them achieve their goals, however, on the flip-side, most of these financial plans are ALL about achieving goals and leave very little wiggle room. What does this mean? This means that most of these plans are developed and carried out under the best of circumstances. This could mean that they were made with two incomes in mind, one child to care for, two car payments and a mortgage to consider.

Unfortunately, few Canadians stress-test their financial plans, in other words, they don’t run the numbers to see if their financial plan could survive the loss of one income, or perhaps a surprise addition to the family.

Stress testing current financial plans is an important part of maintaining your financial health, even in dire circumstances. Being able to pay your bills under the worst of situations is something everyone should consider. What if the economy tanks? What if your company goes bankrupt? Have you considered what may happen if you are in a car accident or sustain a workplace injury? What happens if you undergo the financial strain of a divorce? It’s time to take your financial plan and begin applying all different worst-case scenarios to it. Can you survive?

How do we manage?

For all of those people out there who have not taken most major life events into consideration when building their financial plan (25 %), they are the ones that end up diverting earmarked resources to deal with the problem at hand. This often means diverting contributions that would otherwise be headed toward retirement accounts. The fact of the matter is that life doesn’t happen under the best circumstances and neither should your financial planning strategies.

So what are Canadians prepared for?

Luckily, most Canadians are better prepared for things like death – their own or their spouses. According to the same Bank of Montreal survey, just over half of Canadians have made some sort of plan to cover themselves financially in the case of a death in the immediate family. For most, this means having life insurance, either independently or through their place of business. But for just over half of Canadians, having such coverage still means that just under half of us don’t.

What are our options?

There is a lot you can do to prepare for an unforeseen life event, aside from stress-testing your financial plan – although if you do have a financial plan, this is where you should start. For those who have no financial plan in place, it’s a good idea to begin developing things like a tax-free savings account, RRSPs and even purchasing investments, like annuities or GICs.
While you’ll want to make more reliable investments for something like retirement, if you are young enough, there is no reason why you can’t also look into developing a stock portfolio to help you build a more significant nest egg. The most important thing is to not stretch yourself too thin, and to always have a small generalized savings account that you can access immediately in the case of an emergency.

While yes, we as a nation are hugely unprepared, financially, to deal with a long-term disability if it should strike, now that we know, we can start considering our current positions. Speak to your financial advisor today. It’s time to build a financial plan if you don’t have one, or vet the plan you already have in place.

Five Disability Insurance Loopholes

December 5th, 2014
disability insurance loopholes

How well do you know your disability insurance policy?

What happens if you answered your policy questions incorrectly?

Do you have illness protection, or only injury protection? When does your coverage expire?

Having disability Insurance is critical, and it’s something everyone should have in order to protect some of their biggest assets, such as their mortgage; but do you know everything about your policy? Are you fully protected? What if something goes wrong?

Below are five insurance loopholes that you may be unaware of that could have a major impact on your life.

1. Limitations and exclusions. While these may vary from insurance provider to insurance provider, you can generally count on a few universal exclusions. Exclusions or limitations refer to instances when your policy will not be paid out.

Suicide is one of the most common exclusions, but sometimes will depend on how long you have had your policy. Pre-existing health conditions that result in your death within the first 12 months of coverage could be an exclusion. War is also considered an exclusion, which makes all disability policies out of the question for members of the military.

Also, if you participate in, and die during, a riot or civil uprising, your policy will be void. Finally, if you are killed during the commission, or attempted commission of a criminal offense, your policy will not pay the benefit.

2. Incorrectly filling out your policy questionnaires/or obtaining a poor policy. This isn’t misrepresentation because this is something that can happen unintentionally due to lack of information.

It is important that you accurately fill out your forms to ensure that, when and if the time comes, you will get the coverage you need. You need to accurately state your marital status, any pre-existing conditions, etc.

Secondary to this is choosing the wrong policy, or simply being unaware of the policy you have. This can be a big problem, particularly where group policies are concerned. The three types of disability insurance include “any occupation,” “regular occupation,” and “own occupation.”

The difference being that if you have an “any occupation” policy, you must be unable to do ANY job in order to receive long-term coverage, however, if you have a “regular occupation” policy, then you can obtain long-term coverage if you are simply unable to perform the job you regularly do.

See this difference? This can have a serious impact on your life and your financial status. If you have existing policies, look into them to differentiate between the types of policies you are currently holding. You may find you need a supplemental policy.

3. Limited protection or coverage. Not all disability insurance policies cover all types of disabilities. Policy are generally divided between injury and illness policies, and injury-only policies. If you have an injury-only policy, you won’t be covered if you become disabled due to an illness. It is very important that you know what sort of policy you have in place. There are many illnesses that, over time, can leave you completely disabled.

In fact, 75 per cent of all disabled people are disabled due to an illness. That means that only 25 per cent of disabled people became disabled due to an injury. Injury-only policies are cheaper because the likelihood of a disabling injury if far less than that of an illness derived disability, and injury-only policies don’t have to factor in your overall health. Injury-only policies are frequently known as “accident insurance” and many institutions offer it, even banks. It’s low-risk and a narrow scope, which means it may not be in your best interests.

4. Consider your age. Regular disability insurance has a cut off of 65 years of age. After 65, you simply aren’t covered anymore. What’s the big deal? In Canada there is a rising trend for those 65 and over to still be working, or to re-enter the workforce in an effort to supplement their fixed income. This is problematic because if injured on the job at this age, there is no financial protection there for you.

While there are companies out there now offering disability policies to the 65+ age group, they too have their limitations, and generally provide financial support for no more than two years. These policies are great for minor injuries that result in a temporary disability, but if you work in a place where your injury risk is high and the injury type serious, this may still be inadequate – although better than the alternative (nothing!).

5. Refusal to seek appropriate treatment. If you do not abide by your doctors recommendations for treatment, you may not receive coverage, or your coverage may be halted. Your doctors develop a close relationship with insurance companies because of frequently reporting on injuries and your condition (progressive or stagnant).

If you refuse treatment, or refuse to follow the treatment and rehabilitation course of action your doctor has prescribed, your insurer will likely stop paying out your policy. It is important that you participate in getting well and maintaining your current state of health.

These are five of the most prominent loopholes your insurance provided can use against you to deny your coverage and void your policy. It is important that you are informed on every aspect of your policy. Are their travel addendums? What about the type of work you do? If you realize that your policy information is incorrect or out of date, be sure to contact your insurer and get the right information on file.

You don’t want to give them any ammunition that they can use against you, especially after the fact. There is nothing worse than getting injured, only to discover that your insurer is refusing to pay out your policy for any of the above reasons. Get in the know and be organized well before you ever find yourself in a position where you are reliant on your disability coverage. Without that policy, you will quickly find yourself buried under a mountain of debt.

Sheryl Smolkin | Journalist, Retirement Redux

November 7th, 2014

Sheryl Smolkin
Journalist, Retirement Redux

1.What type of disability insurance do you own?
I am self-employed and almost ten years into an “encore career” after taking early retirement and starting a pension at age 54. Therefore I “self-insure” any future disability. I do have $25,000 in critical illness insurance through my husband’s workplace benefit plan.

2.What factors did you consider when determining the coverage amount?
See above.

3. Do you think people underestimate the importance of disability insurance, and if so, why?
I think that many people do underestimate the importance of disability insurance. Everyone is healthy until they are not. It can happen in a minute. The table below printed on the Sun Life Canada website illustrates the odds of becoming disabled at various ages.

Chances of becoming disabled for 3 months or longer before age 65*

* Derived from 1985 Commissioners Individual Disability Table A.
Percentage 58% 54% 50% 48% 40% 30% 23%
Age 25 30 35 40 45 50 55

4. What limitations or exclusions should people watch out for?
Whether people are covered under a group or individual disability plans they should be aware of benefit maximums and consider if coverage should be increased when their salary increases. Also, more people are working beyond age 65 and they may not realize their employer-sponsored disability coverage will not continue beyond that age.

5. If you had to choose between critical illness and disability insurance, which one would you choose and why?
Disability insurance wins hands down, particularly for those people with big mortgages and young, dependant families.

Sheryl Smolkin is a retired pension lawyer who over the last 10 years has developed an “encore career” as a freelance journalist writing about pensions, benefits and workplace issues. For three years she blogged on moneyville and wrote a column called At Work for the Toronto Star. “Real retirement” is getting closer, but Sheryl is still trying to figure out what that means for her. Her new blog RetirementRedux: Reinventing Retirement is part of her transition to “life after work.”

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