Most people never expect to be off work for an extended time due to an illness or injury, but if they are, having adequate disability insurance coverage will do more than just help tide them over financially. According to Mark Hardy, director of Living Benefits at RBC Insurance, disability insurance helps us and our families avoid the mental and physical stress of wondering how to make ends meet.
“All Canadians want to work and live healthy, productive lives. But the reality is that one in three Canadians will experience a period of disability lasting longer than 90 days in their working years. That’s why it’s important that they take steps to ensure they’re prepared and protected,” he says.
In 2015, RBC Insurance conducted a survey on disability insurance that showed that 78 per cent of Canadians felt finances were tight when they were off work, and 48 per cent said they were not financially prepared to be off work.
Of those who responded to the survey:
76 per cent said being off work due to disability was stressful for their household;
31 per cent said their partner had to find extra work to help out financially;
29 per cent dipped into savings to pay for expenses;
17 per cent took on more debt; and
17 per cent borrowed money from family and friends.
“When faced with a disability – short- or long-term – many people are shocked to find that employee benefit plans may have limited coverage,” says Mr. Hardy. “Having a solid picture of your financial situation and knowing what disability coverage you have are important first steps in protecting yourself from a big drop in income at the same time that you’re dealing with a disability.”
Only about 18 per cent of Canadians have purchased a form of individual disability insurance outside of their workplace coverage, but even with extra coverage, finances can be tight when someone is off work for an extended time, he adds.
“Regularly conducting a thorough review is the best way to be prepared,” says Mr. Hardy. “Know what coverage your employer provides, review your expenses and then assess what additional coverage you might need to ensure that you can cope financially if you’re off work.”
Coverage should be reviewed whenever there’s a substantial change in a person’s earnings, he adds.
“We tend to adjust our lifestyle to what we earn, so it’s important to make sure that our disability coverage meets our needs.”
Mr. Hardy says people should consider taking out disability coverage early in their careers rather than waiting until they have a big liability such as a mortgage or family responsibilities to think about.
“Many people make a substantial investment in their future by going to university, law school, business or medical school, for example. In essence, they finance their education with their future earnings. That’s what they are protecting with disability insurance, so it makes sense to understand the risks early on and cover them,” he adds.
For more information, visit rbcinsurance.com/protectyourincome
Investigate the coverage you have through your employer plan. Understand how the plan defines a disability, and what is and isn’t covered. Ask about employee assistance programs.
Be proactive and formulate a “return to work plan” with your employer and family.
Ask your medical professionals about services or programs that may be available to ensure you’re getting all the care you need to recover.
Explore any of your ‘Return to Work Benefits’ such as financial planning, job search and retraining, rehabilitation and other services to help make a smooth transition back into the workplace.