Do your clients have adequate protection in the event they become ill and unable to work? If not, now may be the time to initiate a discussion with them about owning an individual disability insurance policy. Let them know where their coverage may be lacking if they are part of a group policy. Use this checklist as a script to cover the bases when talking about disability insurance to clients.

Introduction to the concept

  • There are really only two ways to earn income—either you’re working, or your money is working for you.
  • You probably set aside funds in an RRSP or pension plan every month so that when you retire, your investments will generate enough revenue for you to pay the bills and travel.
  • But what if you had to stop working before your planned retirement age? Who would pay the bills then? That’s where disability insurance, often called “DI,” comes into play.

What is DI for?

  • Simply put, DI coverage insures your ability to earn money.
  • It guarantees that your family’s lifestyle will not suffer if you become sick and unable to work for a period of time. It provides a regular monthly income to pay the bills when you’re not on the job.

Why would I need it?

  • The risk of disability is very real. If you filled a room with 1,000 people all aged 40, statistics indicate that nearly half of them (453 to be precise) will suffer a long-term disability before the age of 65.1
  • Provincial health plans may help you to deal with your drug costs and hospital fees, but they won’t pay your mortgage or put your children through school.

How much does DI pay?

  • Disability insurance is calculated as a percentage of your current salary, and usually offers coverage equal to about two-thirds of your earned income. If you bring home $5,000 a month when you’re healthy, DI would pay about $3,300 a month if you were unable to work.
  • The good news is that while your paycheque is subject to income taxes, that $3,300 cheque is tax free provided you pay the premiums yourself!

What types of coverage are available?

  • Disability insurance coverage can be divided into two broad types.
  1. Any-occupation coverage will pay if you are totally disabled and unable to work at any job of any kind. Under this kind of coverage, a disabled surgeon, for example, would not qualify if he or she could work as a taxi driver.
  2. Regular occupation coverage pays if you are disabled and unable to perform the important duties of your normal job. If you can’t work in your profession, your disability payments will continue.
  • Some plans also offer residual benefits, which will top up your earnings if you are only able to return to work on a part-time basis.

If I become disabled, how long will the payments last?

  • You are free to decide how long a benefit period you require. Insurers often give you a choice between two years, five years, or payments until age 65. Obviously the longer the benefit period, the higher your premiums will be.

Can I obtain coverage through your employer or a professional association?

  • Group and association DI coverage usually costs much less than an individual plan, but remember that you get what you pay for. Under a group plan, you are merely the certificate holder—you are not the owner. The group plan may be changed—or even eliminated—without your consent.
  • Also, remember that most group plans only offer two years of regular occupation coverage—after that point, it switches to an “any-occupation” definition of disability. If you can theoretically obtain any other kind of work (even if a job isn’t actually available in your community) after those two years are up, your disability coverage will stop.
  • Purchasing an individual DI policy will put you in control of your insurance coverage, allowing you to choose exactly the level of protection you want.

Next steps

  • Do you have any questions?
  • Would you be interested in obtaining a no-obligation quote to see if an individual disability insurance policy suits your circumstances?

1 According to the 1985 Commissioner’s Individual Disability Table A.