Disability insurance is expensive to buy, but is arguably more important than paying your mortgage or contributing to an RRSP. After all, if you cannot work and you have no disability insurance to fall back on, how will you pay your bills?
Nothing is more important that good disability insurance, period. It will pay you a partial income (often tax free) during the period of your disability and protects most people’s number one asset…their future earnings potential!
Key Facts about Disability Insurance
- Your employer’s group disability insurance should not be relied upon alone. This coverage is limited, designed for a mass group of people and not portable if you are fired. Buy your own personal coverage designed for you. Or, at least buy a “top up” policy to go beyond what your group insurance covers.
- Make sure your disability insurance premiums are paid out of after tax dollars. This is the only way to ensure your disability benefits will be paid out tax free.
- You can control the cost of disability insurance premiums by varying the policy features. For example, if you change the elimination period to one hundred and eighty days and eliminate an inflation rider, your premiums will drop. Make sure you review all the features attached to your policy to fully control your cost.
- If your employment income has risen in recent years, make sure your disability insurance has kept pace to cover your higher income.
- Disability insurance has three categories of coverage: any occupation, regular occupation and own occupation. Own occupation coverage provides the greatest level of security as it will pay disability benefits until you return to your exact career. The other two classifications may cut off your benefits a lot sooner.