Long Term Disability Insurance

Why have Long Term Disability Insurance?

If you became sick or injured and were unable to work for a long period of time, the financial impact could be devastating. If you can’t earn an income, how can you pay your bills? The household costs remain. In fact, research shows that nearly half of mortgage foreclosures are due to a disability.

Long Term Disability Insurance Protects You From a Real Risk

The risk of disability is very real. If you formed a group of 1000 people all aged 40, statistics show that 453 of them would suffer a long term disability before age 65.

So where will the money come from?

Long Term Disability Insurance is a solution. But let's look at the other alternatives:

• Your spouse? Is your spouse already working? Do you need both incomes? If your spouse is not working can your spouse find an adequate job to replace your income? This is likely not the best solution.


• Your RRSP? Do you have enough saved in your RRSPs to last the rest of your life in the event of a long term disability? Probably not. And your RRSPs are subject to tax on withdrawal. So unless you have saved a small fortune this is not the best solution (in fact, those that have saved a small fortune often recognize that disability insurance protects that investment)


• Loans or Credit? do you want to sink deeper into debt when suffering a disability? Could you even get a loan if you were unable to work?


• Government Disabiltiy? The disability benefits provided by the government are for the most prolonged and severe disabilities. You must be unable to work at any job to qualify and the benefit is minimal (well below the poverty line). This will not maintain most family’s standard of living.


• Employment Insurance Benefit? This too is a very limited benefit


• Sale of your assets? first, would you want to sell assets to survive financially? Second, would you have the time and energy, and third, is the asset going to be able to sell quickly and for full value? You won’t know until it is too late.


• Family & Friends? Are your family and friends able to support you? Do you want to rely on handouts?


• Group Disability? Group disability insurance plans are a great start. However they often have exclusions and limitations. It is strongly recommended that you supplement that protection with a private long term disability plan.

So what is the best way to protect your income in the event of long term disability? Buy an individual long term disability insurance policy for the most certainty.

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