Thursday, October 15, 2015

Mind the Gap

If you travel to the United Kingdom and board the underground trains, an automated voice announces: “Mind the Gap.” “Mind the Gap.” “Mind the Gap.”  The repeated reminder insures everyone is protected against an injury in case they aren’t paying attention to the spatial gap between the train and the station platform.  When I think about disability insurance and how little attention people pay to its importance, I remember this warning, “Mind the Gap”. Many think they may be adequately covered when a disability occurs. Perhaps they are but there’s the chance they aren’t.  Benefits offered through an employer’s group plan, the government’s employment insurance (EI) program, or the Canada Pension Plan Disability Benefit, may mislead many into believing they are adequately covered. If someone is self-employed, then the onus of funding disability insurance is entirely their responsibility.

What about you? Have you given any attention to the gap in your insurance coverage?  A long term disability can be detrimental to your life’s plans.


The Facts

Did you know that the probability of suffering a disability of 90 days or more before the age of 65 is considerably greater than the probability of death before that age?  We generally think nothing could ever happen to us. We feel invincible until the facts presented in the chart below stare at us and show us the reality.  

Probability of a disability lasting 90 days or more before age 65
Average duration of disability, in years

Source: 1985 Commissioner’s Individual Disability Table A. Developed from actual claims experience on insured lives. Note that, although this data is over 20 years old, it is still commonly used as a general reference throughout the industry.

Accidents, unexpected injuries, and illnesses can change your life in a second.  The intention is not to put the fear in you but rather take the fear away by encouraging you to investigate your options for disability coverage. Although you may discount the above chart as being dated, here is additional proof that disability is a common occurrence.

Even though the focus is on creating safe workplaces through “Mission Zero” initiatives, injuries still occur.  According to this latest report in 2014, the number of Saskatchewan workers covered by Workers' Compensations Board was 402,894.  Although the injury rate had declined, the total injury rate in Saskatchewan was 6.99 percent for 2014.   This statistic is shocking. You can easily be one of these statistics.

Injuries are also very common as a result of traffic accidents. Saskatchewan’s Traffic Accident Information System (TAIS) Report provides detailed information on the number of collisions occurring on Saskatchewan highways.  I researched two popular highways, #1 and #16, which are travelled by the most people at any given time of the year.  In 2013, the number of persons injured travelling Highway #1 were 279 while the number of persons killed was 11. On Highway #16, the number of persons injured was 152 and the number of persons killed was 10.  Living in rural Saskatchewan, people are accustomed to driving.  We are putting ourselves at risk every time we take control of the steering wheel.   

Other “doom and gloom” statistics can be found at the Canadian Cancer Society website. Although all the National Statistics are relevant, one particularly addressed the need for long term disability protection: At the beginning of 2009, there were about 810,045 Canadians living with a cancer that had been diagnosed in the previous 10 years.  At the Heart and Stoke Foundation website, we learn there are 500,000 Canadians living with heart failure and 50,000 new patients are diagnosed each year.  Again, these statistics are staggering.

If these statistics don’t jolt you into action, then I encourage you to think of the people in your life: family, friends, colleagues, neighbors, or acquaintances who have faced an unexpected injury or illness.  Can this be your wake-up call?  Have you considered ways you would deal financially with the identical challenges?


Options for Coverage

Investigating your options in case you face a disability is a sensible thing to do. Checking benefit programs which may replace your income and determining the amount you will receive, provides a clear indication whether you have sufficient coverage.

If your injury happens at your workplace, Workers’ Compensation will pay 90% of net earnings in addition to medical and travel expenses incurred as a result of the injury. In terms of disabling incidents, an injury at work would be the one where the benefit matches most closely to your net earnings.

Employment insurance sickness benefits are based on only 55% of your average insurable weekly earnings up to a maximum amount for a maximum period of 15 weeks. This source of income is valuable only for short term disability.

Only if your disability is severe and prolonged, preventing you from work, will you be entitled to receive a disability pension from the Canada Pension Plan.  Also, you would only qualify if Canada Pension Plan contributions were made for at least four of the last six years.   In 2013, the average monthly CPP disability benefit was $841.95. 

Insurance coverage offered through an employer and association group disability plan is popular.  However, these plan policies are only available as long as you remain with the employer or the association. Since group plans have limitations with regards to benefits and other factors, understanding your coverage is crucial.    Knowing the waiting period, maximum benefit period, and amount of your coverage will determine the financial responsibility you will need to assume. For example, the waiting period for short term disability income benefits may be 30 days; the maximum benefit period 26 weeks; and the amount of benefit 65% of your weekly earnings. Therefore, you will be financially responsible for the first 30 days of lost income in addition to funding the balance of 35% of your weekly earnings for the 26 weeks. Group Benefit Plan booklets provide specific details of the coverage. They’re worth reading.   

If you determine a gap exists, you may choose to fund an individual insurance policy. Because there are so many variations with individual policies, matching the benefits, limitations, and exclusions to the premium costs and your needs is important.  Analyzing your best options should be done with an insurance representative.   


The Recovery

A person’s life can go spiraling downward when faced with a disability, just as quickly as a plane can lose control. But like a pilot can maneuver a plane back to safety, you too can recover from an injury or illness with the appropriate medical attention and healing time.  The most important thing you want to do is concentrate on getting healthy again. The last thing you want to concentrate on is your finances.   

Take a few minutes today to focus on your current situation.  Ask questions if you don’t know about your current coverage.  Don’t say, “Nothing will ever happen to me.”  It’s better to have peace of mind, knowing that if your life goes off-kilter, your financial circumstances won’t. You will be covered with the right “financial products”.  So heed the warning: Mind the gap between what you currently have and what you need.   

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