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Terry Doran |
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Your young newlyweds and have a
long healthy and happy life ahead of you. Or do
you? What if you become disabled?
It’s a fact.
Disability strikes working people far more often than we care to think about. A
20-year-old man is about three times more likely to be disabled for at least 90
days than he is to die before age 65. A 35-year-old woman is about seven more
times likely to face disability than death before age 65[1].
And the average claim for disabilities that last for more than 90 days is longer
than 3 years[2].
That’s a long time to go without a paycheque!
Disability
insurance coverage is critical to the health of your financial situation – but,
if you’re like most people, you probably don’t know how your group insurance
would work if you become sick or injured. You should carefully review your
group benefits booklet – and, if your group plan comes up short, you should
carefully consider an individual plan. To get you started in the right
direction, here are ten things you should find out about your disability
insurance.
1) What does
your group plan cover?
Does it cover all
your sources of income such as bonuses and commission? Does it cap the maximum
benefits payable below your income level? Is it indexed for inflation?
2) How much
does it cost – today and tomorrow?
If it’s extremely
inexpensive, is that because the coverage is extremely limited? On the other
hand, your premiums may increase dramatically over time, depending on the age
and health experience of your group.
3) Can the
policy be cancelled?
Yes – group plans
usually aren’t guaranteed.
4) What is the
plan’s definition of a disability?
Your group plan
may have a very restrictive definition of disability. It may require mandatory
participation in a rehab program, it may have limitations and exclusions,
especially for mental/nervous disorders or soft tissue damage to your back and
neck. It may also have a pre-existing conditions limitation and may not cover
you if you can work part-time. The definition of disability and the level of
benefits can change at any time.
5) Do I control
my group plan?
No – your employer
and the insurance company do.
6) Is coverage
portable?
No – a new
employer means you must qualify for a new plan.
7) What are the
waiting periods?
Make sure you find
out how long you may have to wait before benefits kick in.
8) What are the
benefits periods?
Benefits may be
capped by total amount or by a limited payment period. As well, most group
policies terminate at age 65.
9) Are the
benefits taxable?
Yes, if the
premiums are paid by your employer. When you pay them directly through your
employee deductions, using after-tax dollars, the monthly benefits received are
tax free.
10) What about
mortgage disability insurance offered through a financial institution?
Rates can increase
and your eligibility for coverage may need to be proven at time of disability,
before you can collect any benefits.
Individual
policies allow you ‘top-up’ your protection and help preserve your savings. The
plan is always yours, regardless of your employment situation. You decide on the
terms and the premium amounts. A professional advisor can help define the
personalized insurance coverage that is tailored to your unique needs.
Terry Doran is a Financial Consultant with The
Investors Group Financial Services Inc. For
questions or advice on any of his articles or
questions in general he can be contacted by
calling (519) 336-4262 or by email
terry.doran@investorsgroup.com.
