Financial impact of a disability
Good news: you survived a serious accident or illness. Bad news: your debt payments and living expenses will continue, or even increase as a result of your disability. And the source of funding for your retirement nest egg and other long-term savings has suddenly dried up.
How well did you prepare financially for this scenario?
If you are a full-time employee, chances are good that you will receive disability income after a certain waiting period, and possibly benefits in the interim. Benefits will likely provide about two-thirds of your pre-disability income, up to a set dollar limit, and may or may not be taxable depending on the tax treatment of the premiums initially paid by you or your employer.
The good, the bad and the ugly
In the best case, you maximized coverage with an individual policy, insured your ability to earn income in your "own" occupation and opted for a cost-of-living adjustment to preserve your purchasing power for the years ahead. Individual policies remain in force as you change jobs and are usually non-cancellable by the insurance company, thereby ensuring you are always protected.
In the worst case, you were not covered under any policy, perhaps because you recently left your employer and did not get around to obtaining new coverage. The situation gets ugly if you have no liquid savings and have to sell your home or tap into your RRSP and pay a high tax rate on withdrawals.
While it's difficult to prepare for the emotional and physical pain that accompanies a serious disability or illness, it's relatively straightforward to prepare financially for the possibility. The challenge is understanding the growing number of options available and weighing the potential risks with the cost of insurance.
Our team can customize a solution to help you lessen the financial impact of a disability or illness. Call us for an appointment to get a plan in place for a scenario like this.
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paulclark@protectorsgroup.com
This Report is written by Investment Planning Counsel, a fully integrated Wealth Management Company. Mutual funds available through IPC Investment Corporation and IPC Securities Corporation. Securities available through IPC Securities Corporation, a member of CIPF. Insurance products available through IPC Estate Services Inc. Mortgage broker services provided by IPC Save Inc. (ON Lic. #10227).