TYPES OF DISABILITY INSURANCE
Association Plans
Many professional associations, business groups such as a Chamber of
Commerce or Board of Trade or even university alumni groups, offer disability
insurance to their members. These types of plans may be useful for people who
are self-employed. Others join these plans to top up their employers' group
benefits or to ensure they are covered if they change jobs. Be aware that premiums
for association coverage usually increase as you get older and coverage has to be
renewed every few years. This means you may have to provide evidence of your
insurability, such as answering a detailed health questionnaire, when your coverage
is renewed.
Disability Insurance for the Self-Employed
If you are self-employed, your financial responsibilities go well beyond yourself and
your family. Your business partners, employees and creditors also depend on your
ability to work.
Good planning can save your business. When you can't work, routine bills can
quickly eat up your investments, RRSPs and even home equity. And if you miss
quarterly income tax instalments, the Canada Revenue Agency can demand full
payment plus interest after one year . . . and garnish your disability benefits.
Finally, worried creditors can force you into receivership or bankruptcy.
To guard against all of this, individual disability plans can be tailored to provide you
with not only income replacement, but also to:
• cover business overhead costs;
• pay off your deferred income taxes; and
• pay most bank loans, or at least the associated interest.
If you are in a partnership, your business can buy disability insurance for each
partner. This would ease the impact from temporary disability and provide the funds
to buy out a disabled partner if the disability is permanent. The business can also
be insured against the disability of key employees.
TIP: Have you read all of your group benefits information? Take the time to review it.
Your benefits are valuable and you may not be fully aware of what your group benefits cover. Discuss any questions with your Human Resources Department or benefits
administrator.
6
