Why Do I Need Disability Insurance?

Consider these staggering statistics

• During a man's 35th year, he is 10 times more likely to suffer from a disability than to die!
• At age 35, the average long-term disability (LTD) in Canada lasts 3.1 years, according to publications 1985 Commissioner's Individual Disability Table and CIA 86-92 Aggregate Mortality Table. Because this is just an average, LTD can be have a shorter length of time or even last several more years!
• At age 35, 37% of Canadian men will be disabled for a period of 90 days or longer before the age of 65, according to publications 1985 Commissioner's Individual Disability Table and CIA 86-92 Aggregate Mortality Table. That means the odds of suffering a long term disability (LTD) is about 1 in 3.
• At age 35, a permanently disabled person would lose a lifetime income of $2,434,085, assuming earnings of $5,000 per month and a 2% raise each year.
• Six months of total disability can wipe out 10 years of savings.

Is disability insurance important to you?* If you are like 65% of the working population, you haven't ever
considered this question. Take a minute to review the following statements.

 

My investment income represents more than 50% of my total income.	True	False
My children will not need my financial help for their education.	True	False
I am prepared to sell my home in the event of financial difficulty.	True	False
I have no expensive hobbies.	True	False
If I were disabled, the government would take care of me.	True	False
I do not know anyone who has been disabled for a month or more.	True	False
My family would happily pay for all my living expenses if I could not.	True	False
My mortgage payment is less than 10% of my total income.	True	False
I could afford to take a two-year vacation.	True	False

 

 

If you answered "false" to any of the above questions, then disability insurance may be very important to
you. In fact, anyone who works to earn an income and depends on that income to provide for their living and lifestyle expenses needs disability insurance. Why then does 65% of the working population not have any form of private disability insurance? When asked, the number one reason is that they have never been told about it.

Most people own life insurance and understand the value it provides. They know that a premature death could have serious financial consequences for the people who depend on them. Perhaps these people should consider how different the consequences would be if they were to become permanently disabled. Wouldn't their dependents be in a worse position than if they had actually died? Not only would their income stop, but they would become a financial drain on the scarce resources available to those dependents. This drain would take the form of both on-going living expenses and the additional cost of medical expenses for the disabled person.

Beyond the financial problems of disability are the psychological implications. When a person becomes
disabled, initially there is sympathy for the disabled person. As time goes by, this sympathy can develop into resentment. It's human nature. And certainly there is the personal impact of the loss of dignity that a former productive and self-sustaining person will feel. The old lifestyle is quickly replaced by "no lifestyle", and friends and family drift away as they get on with their lives.

 

There are also health implications of not having disability insurance. The burden of financial worry and the
feeling of helplessness can actually prolong a disability. It is known that those who have disabilities that are "recoverable" actually recover faster if disability insurance is acting to remove the financial worries during the disability. If "laugher is the best medicine", then "worry is a slow poison". Those without disability insurance may recover into a life where savings are gone and debts are high. If you save 10% of your income each year, six months of disability will deplete five years of savings. Many people have spent years contributing to an RRSP because they know this money will be needed for retirement. The prospects of completing a retirement plan, starting over at ground zero after half a career has past, are very bleak.

 

On several levels, a disabled person's quality of life would be greatly enhanced if they had the foresight to
purchase disability insurance.

 

Excerpt By Marc Furois, Senior Disability Insurance Analyst, Canada Life Assurance Company

 

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Disability Insurance for Outplaced Or Terminated Professionals and Executives

 

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