The Independent Consultant’s Newsletter

“Russian Roulette” - Gambling With Disability   


Most people recognize the need for life insurance.  Life insurance protects your family financially,  should you die prematurely.  But many people do not understand the need for disability insurance.  Disability Insurance is, in essence, “income replacement” insurance.  You buy it as protection against the chance of losing income while disabled and not being able to meet expenses.


FACT: Almost half of all mortgage foreclosures are due to a disability.


Did you know that disability strikes working people far more often than premature death? 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 the age of 65. And a 35 year old woman is about seven times more likely to face disability than  death before 65!


When you are disabled, your income stops - but your bills don’t!


Could you pay your bills if you were unable to work because of illness or accident? Where would the money come from?


Clearly, your greatest asset is your ability to work and earn an income. Cut this off and you and your family are in trouble! You are potentially saying goodbye to millions of dollars of earnings over your lifetime.

*What Is Your Earning Potential to age 65?


Age Current Monthly Income
  $5000 $7000 $10000
30 $5,419,218 $7,586,906 $10,838,437
35 $3,986,331 $5,580,863 $ 7,972,662
40 $2,863,626  $4,009,076 $ 5,727,252
45  $1,983,957 $2,777,540 $ 3,967,915
50 $1,294,714 $1,812,599 $  2,589,428


* This assumes a 5% annual increase.




You probably didn’t realize just how big of an asset you really are.


What are you doing to protect your millions of dollars worth of income?


A well designed disability insurance program based on your personal needs and budget can give you up to 2/3 of  your  income, tax free.

How Much Coverage
Should You Have?


How much disability insurance you should apply for depends on many things:


Lifestyle: What does your current standard of living cost and how do you feel about having to cut back?

Family Responsibilities:
How many

people depend on your income? Are


you a single parent or a non-custody parent with financial responsibilities?  Do you have parents or siblings who depend on your income?


Employment Flexibility: Would you be willing and able to change jobs?


Debts: What is your total debt obligation and how would you continue to make payments? How long would your savings last?


Dreams: What sort of retirement plans or goals could you achieve with no income and your savings depleted?


Loans: Is your bank president likely to loan you money if you are disabled and have no income replacement plan?

If you already have a disability insurance policy, you probably have a basic idea about the terms of coverage. But unless you’ve actually made a claim, you may be a little sketchy on the details.


The definitions of disability, benefits, and waiting periods often vary widely from one plan to the next.




The strength of the definition of disability, in your contract, is the most important component and should have been the determining factor in your decision to purchase your Disability Insurance Policy.





How Well Do You Know Your Disability Policy?


Q. ARE you disabled if you can sell hotdogs on the street corner?


A. It all depends on the DEFINITION!


Some other important points to consider when comparing your policy:


Percentage of Income Covered


As an incentive for you to return to work, only a percentage of your income will be covered in any plan. But the percentage can vary. Also, some plans cap benefits when they reach a certain dollar amount, leaving higher income earners without adequate coverage.


Guaranteed coverage to age 65


Most individual plans held directly with an insurance company are non-cancellable and provide coverage at level premiums to age 65. If you are covered by an association or group plan, check if the terms and costs of coverage are subject to change or cancellation.

Waiting Period


Find out how long you have to be disabled before you start receiving an income. Standard waiting or elimination periods for long-term disability benefits are 30, 60, 90 or 120 days.


Duration of Benefits


If you become permanently disabled,

a maximum benefit period of two years would be financially devastating. You should know the maximum period of time your disability payments will continue and if cost-of-living adjustments will be made to your disability benefit over time.


Partial Disability Coverage


If you gradually re-enter the workforce and begin working part-time, some plans will pay the difference between your part-time earnings and full disability income.  Other plans pay 50% of the full monthly benefit if you suffer a loss of time or a loss of duties due to your disability.





(Is It A Good Deal?)


If you are part of an association plan you may be in for a surprise if you become disabled.


These plans are usually  bare-bones

and poorly explained in the association brochure.


A built in list of EXCLUSIONS makes these plans very restrictive. Also many association plans halt benefits after two years if you can perform “any occupation” for which you’re reasonably qualified. Note - “any occ” clauses are based on ability to work, not the availability of a job.


Premiums for association coverage


increase as you get older and coverage has to be renewed every few years, which means you may have to provide medical evidence of your insurability.


Association Plans are experienced based. Meaning, if a lot of people start claiming, you can expect a rate increase. If too many people file claims, the insurer could cancel the entire plan altogether.


Strength & Stability


Many things have been said about an insurers strength and stability ratings.  Agents representing strong companies tout their high ratings, while agents representing weaker companies say they don’t mean much and that Comcorp will cover their clients in case of another failure such as Confederation Life.


We say, “If you can buy a loaded Mercedes at the same price as a base Hyundai, buy the Mercedes”.


It just makes sense!



The Consultant’s Insurance Consultants

90 - 1206 Burnhamthorpe Road West

Mississauga, Ontario

L5B 3C3


(905) 276-5505     1 (800) 604-0040

Fax (905) 270-1177





Call or fax us for a personalized quotation