Disability

Today we continue with our Life Events series, and discuss planning tips for dealing with a disability.

A disability for you or a close family member creates new challenges for you and your family. Have you ever considered what would happen if you or the main breadwinner in the family was no longer able to work? Would that income stop? Could you survive on only one person’s income? Would this cause issues for the care of your children? You should also consider the impact disability would have on a stay-at-home parent. This is a hugely important role, which may not seem like it has a monetary value, but without that person being able to continue caring for the children at home, would you need to hire help to carry out this vital job?

None of us like to consider the probability of being disabled by an accident or sickness that would leave us unable to work or go about our normal routine. The statistics are staggering; 1 in 3 people will experience a disability – whether short or long term.

Most people who have worked hard to accumulate savings for their retirement would be upset if they were forced to deplete these savings in order to continue living and paying their bills if they were to be disabled. Not to mention, their eventual retirement would be in jeopardy. So what other options do you have? First, we always recommend an emergency fund of at least 3-6 months’ worth of income replacement. Many people find this hard to maintain, as they dip into their short-term savings for vacations, renovations, and other experiences.

Secondly, we would recommend you are familiar with what your workplace benefits plan covers in terms of both short and long-term disability. This is a fantastic benefit to have, but you also have to plan for the worst in this case. What if you are let go, or leave your job to somewhere that does not have these benefits, or where they are not as good. Do you know how long you have to wait to start receiving benefits? Some plans are as long as 6 months waiting period with no income! Are the benefits taxable to you, and how would that affect the end result? We have even seen workplace group disability plans deny a claim when it is needed most; maybe due to a pre-existing condition, or some other reason.

The absolute best way to protect yourself is to have your own plan. Set up and keep the above mentioned emergency fund in place. Have a separate savings account for other things like trips and big purchases. Next, take time to explore options for and take out your own disability insurance. When you purchase your own policy, it is underwritten ahead of time and guaranteed to pay out a specific amount, and the benefits are tax free (because you pay the premiums).

There are also government benefits and tax credits available for eligible disabled persons.

This summary gives you a good start to some of the things you should consider when it comes to preparing for a possible disability. We can help with more in-depth planning, making recommendations, and help you secure the best rates for disability insurance if required.