At the bottom of almost every refrigerator is a calcified lime, kale stain. Last year, Canadians threw away $50 billion worth of food.1 52% of us bought a lottery ticket.2 And two-thirds of us paid less than our full credit card balance.3 These are objectively bad decisions. And yet, when it comes to the right, objective decision – buying disability insurance – far too many Canadians fail.
Many of us have disability insurance as part of our benefits, but in total only 8% of working Canadians pay for their coverage themselves.4
We understood. Who wants to pay for something they hope never to use? But the reality is that even the mildest days hold the potential for cataclysmic changes in fortune: a missed red light, an unexplained muscle spasm, a piano falling out of a window (seriously, it happened.5) And disability insurance ensures that your income is protected, or at least it should be.
We spoke with Lawyers Financial Advisor Jim Thompson about the realities of disability insurance, the gaps in group benefits, and the importance of protecting against life’s worst-case scenarios.
Q: IN GENERAL, DO PEOPLE HAVE SUFFICIENT DISABILITY INSURANCE?
A: No. In my personal experience, people rely too much on group benefits. They think that just because their workplace has an insurance plan, that’s enough and there’s no need for individual coverage. In my experience with lawyers, they often say, “I don’t need this, I have group benefits.
Whenever I meet anyone, whether they’re there to discuss life, critical illness, or any other type of insurance, I always say, “Let’s review your disability coverage. It might be a good policy, but let’s get insurance.” And what I find is that very often people don’t understand how little coverage their group insurance gives them.
THE SCENARIO I SEE ALL THE TIME IS SOMEONE WHO EARNS, SAY, $100,000 A YEAR, FIND OUT THAT HE HAS A POLICY THAT WILL ONLY GUARANTEE HIM AN INCOME OF $30,000 A YEAR. IT’S MORE COMMON THAN YOU THINK.
Q: SO, JUST BECAUSE SOMEONE HAS A DISABILITY INSURANCE POLICY AT WORK DOESN’T MEAN THEY ACTUALLY ARE ADEQUATELY COVERED IF SOMETHING HAPPENS?
A: Exactly. A lot of lawyers I meet are underinsured and they don’t even know it.
You would think that an employer would have more pressure to inform employees of what benefit plans entail, but that is not necessarily the case. The kind of scenario I see all the time is that somebody who makes, say, $100,000 a year, finds out they have a policy that would only guarantee them an income of $30,000 a year .
It’s more common than you think, and people don’t talk about it. It’s terrifying but it’s also embarrassing for people because they’re simple mistakes. Smart people have misunderstood their cover, so the worst happens and it’s too late to do anything about it. But if you’re informed and proactive, these are simple things to put in place and make sure you have a plan that will cover all of your needs.
Q: ARE THERE ANY DISABILITY THAT LAWYERS OR PEOPLE WORKING IN THE LEGAL COMMUNITY ARE PARTICULARLY AT RISK?
A: I don’t know the medical answer to this, but let’s just assume that many of these people work in very stressful environments and stress can have a negative impact on the body.
A significant percentage of claims are related to mental health.
But in general, disability is much broader than most people realize. It’s anything that gets in the way of you doing your job. Any type of accident: in the yard, on the road, the possibilities are endless.
Q: WHAT FACTORS GO INTO THE DECISION OF WHICH TYPE OF DISABILITY INSURANCE POLICY IS RIGHT FOR YOU?
A: In a typical first meeting, we go over things like existing assets, debts, if you’re married, single, have kids, etc. We paint a picture of your life to understand what your level of risk is.
And there are so many factors to consider. For example, for a single person, disability insurance is important because they don’t necessarily have a support system to take care of them if something happens. For a married person, it’s also important because they have to protect their dependents.
Q: WHAT IS THE BIGGEST THING YOU WANT PEOPLE TO UNDERSTAND ABOUT DISABILITY INSURANCE THAT THEY DON’T UNDERSTAND?
A: I wish more people would recognize that you can be caught off guard.
Life happens to us fast, and that’s how disabilities arise. Life is much more fragile than people realize. I understand that insurance on an individual basis is counter-intuitive. People say, “I’m fine, I don’t need it now.” But we are generally never healthier than today.
You have to be direct. You can’t be afraid to talk about these things. Financial jargon is boring and difficult to understand, so you need to put these things in a familiar context. I’m always willing to share experiences, good and bad, to help people understand what’s at stake here. Insurance isn’t a fun topic for most people – I think it’s fun, I could talk about it all day – but I understand that most people don’t feel that way. After meeting me, people come out and say, “I knew I needed coverage, but I put it off for so long because I thought the process would be difficult.
WE CAN HELP.
A wise woman once read on a tea bag that her personal income was not important. Then she went home (where she paid off the mortgage), had dinner (at her favorite restaurant), and talked to her kids about everything they wanted to do on their next vacation. While it’s true that our salary isn’t the most important thing about us, the money we earn allows us to do the things we couldn’t live without. A good disability insurance plan that’s both comprehensive and understandable protects what matters most to you, no matter what.
1. Second Harvest and Value Chain Management International, “Avoidable Food Waste Technical Report and Roadmap,” 2019.
2. Statistics Canada, “Study: Who Gambles and Who Has Problem Gambling in Canada,” 2018.
3. The Globe and Mail, “Many Canadians in the Dark on Minimum Debt Payments,” 2017.
4. Investment Executive, “Fewer Canadians have disability insurance,” 2018.
5. Washington City Paper, “Do Piano Falls Really Kill People?” 2013.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.