Insights & advice

Disability insurance can help replace your income 

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We work hard to protect what matters most to us: our families, our homes, our lifestyles. We’re less likely to protect what may be our most important asset: our ability to earn  income.  That’s a problem when many of the things that matter to us, like our families and lifestyles, depend on you  maintaining that ability to generate income.

Consider that most Canadians find automotive insurance important , which, on average, cost $33,000 when new.1 Canadians also  value  protecting their homes, which now cost, on average, more than half a million dollars. And who can blame them? We love our cars and our homes and, together, these two expenses typically dominate the average family’s annual budget.2 

The high cost of a lost income

The most recent statistics on  salaries show that the average Canadian earns about $50,000 each year. Over the course of a 30-year career, with a 2.5% increase each year to account for inflation, that’s roughly $2.5 million. This is a huge amount of money for a typical  family. And that number skyrockets if you assume that, thanks to career advancement, an individual’s annual salary could increase from $50,000 to $75,000 and beyond.3 

This research shows the financial challenges posed by losing an income due to disability. Not only can a disability take the ability to earn an income away, it can result in additional costs.  Having to pay for in-home care, medications and modifications to one’s home to accommodate a disability (such as building wheelchair ramps) can really add up.

How likely are you to experience a disability? 

The chances of becoming disabled may be greater than you think. Research shows that 1 in 4 Canadians won’t be able to work due to illness or injury for 90 days or more before they reach age 65.4 Should this situation last longer than 90 days, its average length is nearly 6 years.5

 While there are government programs that can help  – such as the Canada Pension Plan (CPP)Opens a new website in a new window    - Opens in a new window  or Workers’ CompensationOpens a new website in a new window    - Opens in a new window  – you’ll need to meet certain conditions to qualify for them. For example, to receive CPP benefits, your disability must be severe enough and prolonged enough to prevent you from being able to work at any job.  Workers’ Compensation will only cover disabilities that result from workplace incidents. 

How will disability insurance help you maintain your lifestyle?

This is where disability insurance can play a role in helping you and your family maintain the lifestyle you’re used to. It’s insurance that works when you can’t. It can give you the money you need to pay for critical expenses, from your mortgage to car payments, groceries and utilities. 

Should you qualify, disability insurance can help replace some of your lost income. For example, someone earning $50,000 per year may be eligible to receive a monthly benefit of $2,975, representing an annual income of nearly $36,000. If you earn more, such as $120,000, you could qualify for a monthly benefit of just under $6,000, representing an annual income of $71,100.6

What if I have disability insurance through work? 

While it’s true that some Canadian employers offer some  disability coverage, it may not provide the level of protection needed to replace enough of your income. Additionally, it’s important that you don’t confuse critical illness insurance with disability insurance. While some employers offer coverage for one or the other, far fewer provide both options. Talk with your employer to understand your coverage. 

1 Jeremy Cato, "Savvy shoppers knock about $4,000 off car prices in Canada,”Opens a new website in a new window    - Opens in a new window  The Globe and Mail, May 30, 2014. 

2 On Canadians’ love of their vehicles and driving: Maham Abedi, "More than half of Canadians plan to keep driving past age 80: survey,”Opens a new website in a new window    - Opens in a new window  Globalnews.ca, Aug. 2, 2017; on the average price of a Canadian home: "National Price Map,”Opens a new website in a new window    - Opens in a new window  The Canadian Real Estate Association, Nov. 24, 2017. 

"So, how much are we earning? The average Canadian salaries by industry and region,”Opens a new website in a new window    - Opens in a new window  Workopolis.com, Nov. 30, 2016. 

4 Canadian Institute of Actuaries (CIA) 86-92 & 2012 Society of Actuaries – Individual Disability Experience Committee Table. 

5 Ibid. 

6 These examples are for illustrative purposes only. Situations will vary according to specific circumstances. Actual amounts are subject to your age and occupation. Some limitations apply. 

This information is general in nature, and is intended for informational purposes only. For specific situations you should consult the appropriate legal, accounting or tax advisor.

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