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When was the last time you reviewed your disability insurance?



It is probably a question that has not occurred to anyone recently. 

I often ask people that simple question: can I review your disability insurance? If you haven’t guessed, the answer is usually a polite refusal. People often tell me that they have enough insurance, that their group insurance is fine and it works or that they have no need of disability insurance.


In that same breath, I can also say that I have lost count of the number of people who have run into trouble later. That later account usually doesn’t come from the same people to whom I have asked the question. It usually comes to my attention from a friend, a colleague or someone we have in common. 


The story comes to my ears as a health event; one that was “unanticipated, unpredictable and unexpected”. It is seen as an incident that could not have been foretold. It could be a white collar professional who started experiencing the pains that come with fibromyalgia or polymyalgia, or a blue collar professional who ended up in hospital with breathing problems. It is then that a person often thinks about what they will do next. It comes with panic and worry. Either way, it is at that point, that they wished that they had taken an insurance professional up on their offer.


After all, the value of disability insurance is buying a policy when nothing is wrong. There are no problems on the horizon, there is no immediate need because there is no problem. In fact, buying disability insurance requires you to act when the urgency feels lowest.


Human nature pushes us to solve today’s visible problems, not tomorrow’s theoretical ones. When you’re healthy, working hard, and feeling invincible, paying a monthly premium for a scenario you can’t see feels like buying an anchor for a boat you haven’t built yet. With that being said, disability insurance is one of the few products on earth that is purchased with money and inline with your present health. This leads to a very ironic situation: those that want disability insurance may not be able to buy it for any sum of money; while those who have little perceived need for disability insurance often find that they have little desire to buy it.


Sometimes, in my experience, individuals point to their workplace group benefits as their safety net. They indicate that they have little need for disability insurance because they “have group benefits”. However, this optimism may be without merit. Because while group benefits coverage is better than nothing, it is not a replacement for individual disability insurance. 


As an example, I have seen employers drop their long-term disability coverage. On the other hand, employers don’t have to go so far as dropping long-term disability coverage, they can simply shift the definition - from “own occupation” to “regular occupation” coverage; or from “regular occupation” coverage to “any occupation”.

 

The flip side of that is that employees often down know that they need to apply for additional coverage because of income caps or because their income breaks the “non-evidence maximum” ceiling. 


Lastly, it is important, and somewhat obvious, to remember that Disability coverage through a Group Benefits plan also leaves one in trouble if your employment is lost. Thus, the favourable tax treatment and the portability of an individual disability plan are quite important notions as well. 


With all that being said, an individual disability insurance policy can act as a foundation for one’s personal financial future. It stays with you regardless of career shifts and may even give you the confidence to make a career leap when necessary. An individual disability insurance plan can provide  (when paid with personal after-tax dollars), and it provides a tailored form of coverage that matches your profession and income. 


If we can agree that your ability to earn income is your most valuable financial asset, protecting that income is essential. Just think about it, over a 30-year career, a professional earning $100,000 a year will earn at least $3 million dollars before taxes. If you wouldn’t leave a $3 million asset unprotected, my point has been made. 


So I have a question for you: when was the last time you took a close look at your disability insurance coverage?


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