Can you pay your bills if disabled?

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Disability insurance (DI) can be purchased from a life insurance company to cover up to 80% of your regular income (or more) if you become disabled. This coverage is referred to as “income replacement” insurance.

If you work for a corporation, your employer may offer a group plan with short-term disability (DI) coverage. Could you review it to determine the coverage period and ensure it meets at least 60% of your current income for longer than three months?

Additional DI can be purchased (and owned privately) to extend the income payment period and increment payments to the increasing cost of living. Some policies increase paycheques according to the consumer price index (CPI).

If self-employed, If you have dependents, it is essential to ensure that you have income replacement insurance to pay your expenses until age 65. Caring for your own needs is also wise if you are single.

Consider the following questions about where the money might come from if you could not earn a living for a month, a year or forever.

• Would withdrawing part or all of your retirement savings and money on deposit at the bank to use as income when convalescing affect your retirement?
• If you need to access the equity or your home to create an income, will this deplete your net worth?
• Could you borrow money if your banker knew you might never work again?
• Could you live on your spouse’s income?
• Could you ask a parent, sibling or friend to loan you money? How would you repay it?
• Would you rely on the government to pay a disability income that lasts until you retire?
• Would you want to sell your house or cottage?

Note: Life insurance taxation varies in accord with the strategies used by the life insurance specialist, changing legislation, and hiring an accountant to guide effective business strategies relative to succession or an estate.

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Life Insurance policies vary according to contract terms. Please read any Life Insurance policy contract provided, or the segregated fund summary information folder prospectus before the time of purchase. Full details of coverage, including limitations and exclusions that apply, are set out in the policy of insurance. Commissions, trailing commissions, management fees and expenses may be associated with segregated fund investments which may not be guaranteed and their market value changes daily and past performance is not indicative of future results. A description of the key features of a life insurance policy, a segregated fund; and any applicable individual variable annuity contract is contained in information provided by the company from which it is purchased. Talk to your advisor before making any financial decision. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors. The information provided is accurate to the best of our knowledge as of the date of publication and is general in nature, intended for educational purposes only, and should not be relied upon as a substitute for advice in any specific situation. For specific situations, advice should be obtained from the appropriate legal, accounting, tax or other professional advisors. Rules and their interpretation may change, affecting the accuracy of the information.