How Much Is Disability Insurance Worth?

Are you disabled and young?

If “Yes,” it is worth quite a lot. I have a client who has collected more than $10,000 per month plus inflation and all without tax for 14 years. He thinks it is valuable.  But, then again, so was his medical career.

The premiums seemed like a lot when he was paying them. He seems happier about them now. To break even, for the ten years or so he paid them, he would have had to investment very wisely indeed.

Not everyone gets disabled.

That’s how and why insurance works. Most people don’t have a claim that will exceed $2,000,000 soon. Many will claim nothing. Are they worse off for it?

Probably not if the value of peace of mind is included in the equation. Better yet, not being disabled keeps the rest of the things in your life in balance. Like skiing – still do it. Like playing with the children – still do it. Like moving about and driving – still do it.

The ones who do not become disabled, pay a little money and keep a lot of other things. Those that do, can maintain the dignity of their lives.

Disability insurance is not for amateurs

Disability insurance is a contract of definitions and options and limits. Not everyone is a 4A risk, but some that are not can upgrade. Not everyone can get “own occupation” coverage. Not everyone fully understands how start times affect cost. Not everyone seems to know that if you are disabled for more than 6 months, there is a pretty good chance you aren’t ever going to work again. A two year pay period might not work for you. Look longer.

What’s the difference between partial disability and proportional disability. Should everyone care?

What are the differences among, own occupation, regular occupation and any occupation? It matters when it comes time to decide when the insurer can stop paying you. Easy one to miss.

Did you know you can buy a future earnings protector option? You can get more coverage when income justifies it, without a medical. If you become disabled and go on claim, some of the option can be exercised while disabled.

Is “Return of Premium” worth the price? You can calculate the benefit in investment terms.

Who should own the coverage. Could be your corporation and there are ways to make the premium tax deductible, but at the price of making benefits taxable. Could be you with non-deductible premiums and after tax income.

Seek professional help.

It is possible to buy acceptable term life coverage from nearly anyone if all you care about is the next few years. All you need to know is there is no pre-existing condition clause. With car insurance, house insurance and life insurance, it is possible for a careful shopper to compare.  Not to say they are comparing the right coverage, but for the coverage they understand, they can compare.

Disability insurance does not fit the comparable mode. The design matters too much

Do-it-yourself is a trap

All insurance is too important to leave to chance. A skilled advisor can get you better coverage than you can design yourself, even with the help of an online robot. A skilled advisor can help you understand the value of the options. They can also find the carrier that offers the best price for a responsible coverage package.

There is not one chance in a hundred, you can get it right on your own. Disability insurance is the one package where cheap is expensive.

Don’t try this at home, kids.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you.  866-285-7772

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