Friday, October 26, 2012

What is your probability of disability or critical illness before age 65?

Statistics show that workers between the ages of 35 and 65 are many times more likely to become disabled for an extended period than they are to die.  For example, for a 45-year-old female the probability of becoming disabled before age 65 is 31%, her probability of being stricken with a critical illness is 17% and her probability of dying before age 65 is 4%*   Try this calculator to find out your risk of disability between now and your age 65. 

Many Canadians have disability insurance through their employers.  Disability insurance provides a replacement income in the event of a serious illness or injury during your working years.  However, disability coverage has limitations and doesn't cover all eventualities.  It doesn't replace your full income but only a portion of it.  Depending on the type of coverage, you may qualify for benefits for only a limited time.  And coverage usually stops at age 65. After you retire, you might no longer be insured.  Self-employed people or people working in small businesses often have no disability insurance. What would happen to you financially if you were to become unable to work?

For those who have disability insurance through work, we suggest that you review your benefits booklet with your Human Resources department to find out just what your disability coverage is. Most people do not know how much income replacement coverage their disability coverage gives them, nor how long they have to wait to collect it, nor how long it will last if they are disabled for an extended time.  Individual disability policies can be purchased from a licensed Life and Health Insurance Broker to provide or supplement disability insurance. 

How is critical illness insurance different from disability insurance?
Critical illness insurance provides a lump sum of tax-free money 30 days after diagnosis of any one of the major illnesses listed in the policy, such as heart attack, stroke, or life-threatening cancer.  Since heart disease and cancer are diseases of aging, these illnesses are more likely to appear after age 65. Disability coverage generally stops by then, but critical illness insurance can go to age 100.

The incidence of these illnesses is rising, but survival rates are also increasing.  The Heart and Stroke Foundation of Canada reports that 92% of patients hospitalized for a heart attack survive.  While disability insurance may cover basic living expenses, critical illness benefits will allow you to pay for whatever extras you choose, such as private nursing care, housing modifications, alternative treatments or even a trip around the world.
While disability insurance is tied to your ability to work, critical illness insurance is not.  You can be eligible for critical illness coverage even if you don't work, don't have an income, and therefore aren't entitled to disability insurance.  And for employed people, if after a diagnosis you return to work and therefore aren't eligible for disability benefits, you can still be entitled to the critical illness lump sum.  In many cases you can receive both.

Here's a summary of the key features of disability and critical illness insurance, and how they complement each other.
Waiting period

Generally between 30 and 180 days for disability insurance;  30 days for critical illness.

A pre-set percentage of income, paid monthly for disability, usually for a limited time; critical illness pays a lump sum from $10,000 to $1 million.

Disability benefits are taxable to employees if they are funded by their employers, and tax-free if self-funded.  Critical illness benefits are tax-free.
Coverage period

Usually to age 65 or until retirement for disability;  up to age 100 for critical illness.
With our professional advice, you can design a comprehensive package to provide income, cover extra costs, and still allow your family to build toward important savings goals.  Visit us at, or e-mail us or call us at 416-230-2703

*Source: InsureRight

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