What is disability insurance?
Disability insurance is a product that protects you and your family from undue financial burden if you should get sick or injured and cannot work.

Why do I need disability insurance?
For most of us, our earning potential is our greatest asset. We make all sorts of financial commitments for the future based upon our ability to generate an income to pay for them. But suppose you were no longer able to work. How would you go about paying all these financial commitments? This is where disability insurance plays its role. Disability insurance, in conjunction with other government programs, will provide a replacement for most of your lost income.

How likely am I to become disabled?
The chances of you becoming disabled are greater than you think. In fact, nearly one third of all people now aged 35 will be unable to work for at least six months before reaching the age of 65. The chance that you'll suffer a disability before retirement is five times greater than the chance you will die before retirement. Given these statistics, it is amazing that people are usually more concerned about life insurance than about disability insurance.

How much will I receive?
Each individual chooses the level of benefit they need, with the insurance company basing the maximum amount upon your income level and occupation. Usually the maximum available is close to the income you would have earned after income taxes are taken into account. The level of benefits can be increased by purchasing additional coverage, such as Business Overhead Expenses or Retirement Income Protection.

How are the benefits taxed?
Disability insurance benefits are not taxed if you pay your own premiums. However, if your employer pays any portion of your premium, or other related costs the benefits you receive will be taxed. For many shareholders of private corporations, this offers a distinct advantage; their corporation can pay the premium, which results in a tax deduction for the company, while the taxable benefits received will allow for continued tax and retirement planning.

Other sources of disability income.
As employees, most Canadians are eligible to receive benefits from EI, Workers' Compensation, the Canada Pension Plan, and in some provinces auto insurance and victims of crime programs. Most employers today also have group benefit plans covering their employees. Self-employed individuals and major shareholders in corporations are also covered by some of these programs, but the insurance companies often discount access to them when calculating coverage available on private plans. You should make sure you understand how these programs interact with your disability insurance coverage so you will be fully aware of what your income would be should you be hurt or sick and need to make a claim.

Contact our Financial Planning Department for assistance in reviewing your income replacement needs.