How to protect your biggest asset: the ability to earn an income

Ermos Erotocritou, CFP

By Ermos Erotocritou, CFP

Special to the Financial Independence Hub

When a person suffers an illness or injury, it may take some time to know how long it will last, and how long it will keep the person from earning an income.

Hopefully, the disability will last a short time. However, in many instances, the disability can last for a long period of time, perhaps for life. The consequences facing an individual will tend to vary with the length of time a person is disabled.

The consequences will also extend beyond financial concerns. While every everyone is different, and will react differently to events in life, there are some commonalties that tend to occur among people who experience a disability.

Possible consequences of short-term disability

When a person experiences a short-term disability, there tends to be an emotional boost from the fact that recovery is within sight. The drain on financial resources will not be extensive. Friends may feel at ease in the relationship knowing that the conditions faced by the person are temporary. A spouse will generally draw on energies and emotions for support knowing that, even though it may be tiring and stressful, it will be for a limited  time. Usually the person’s job will be secure and will await the person’s return.

However, short-term disabilities also place strains on relationships. For example, if the disability leads to the need for a spouse to take over the role of the disabled spouse, this can result in stress. There may also be a diminished sense of authority for the person who is disabled and this can have an impact on relationships and conditions in the household.

There is no doubt that disabilities of any sort for any period of time result in stress and anxiety. All the more reason why you will want to ensure that you are well prepared. Life will be difficult enough in the face of a disability without having to be preoccupied with financial affairs and figuring out how the bills are going to be paid.

If disability is “long-term,” consequences frequently more severe

It becomes harder for the person to maintain hope and see the light at the end of the tunnel. The person may even lose hope for recovery and become despondent. The potential for financial stress and draining of accumulated resources is much greater. Often, friends, who were caring and attentive in the early stages become less so over time and may start to forget about making contact. The burden on the spouse of someone with a prolonged or permanent disability is quite severe. The stresses and strains may push the spouse to the point where the load seems unbearable. At the same time, the disabled person will likely see that the job he/she held has been filled and previous co-workers adapt to the change and become less attentive and involved.

As a result, it is not uncommon for those who face long-term disability to experience emotions such as rejection, anger, and depression prior to resolution and acceptance of the realities. In some cases, however, they may not reach the point of resolution and acceptance. They may become severely depressed with the loss of their career, loss of past social networks and associations, and a changed relationship with a spouse and possibly children. Such feelings associated with low self-esteem will be compounded if the person finds that he/she is totally dependent on society for support.

While money cannot eliminate these consequences and emotional problems, a lack of money can certainly compound them. Financial security available through disability protection can help the situation by easing some of life’s pressures, providing support for a burdened spouse and children, providing some degree of financial independence, enabling leisure/pleasurable activities, and so on.

The numbers make the case for Disability Insurance

The only reason more people do not have disability insurance in place is because too many people think it will never happen to them. Reality proves otherwise. According to Statistics Canada, an estimated 3.8 million adult Canadians reported being limited in their daily activities due to a disability in 2012. This represents 13.7% of the Canadian adult population. Accidents and illnesses are a fact of life. They could happen to anyone at any time. Canada Life claims that 1 in 3 people, on average, will be disabled for 90 days or longer at least once before age 65 and the average length of a disability that lasts over 90 days is 2.9 years. Could your finances handle the loss of your income for almost three consecutive years?

Hypothetically speaking, let’s assume you are a 35-year-old male given the option of choosing one of two identical jobs. Job A pays $50,000 per year if you stay healthy but pays nothing if you become disabled. Job B pays $49,489 per year if you remain healthy and will pay $35,100 tax free for as long as you are disabled or up to age 65. Which job would you choose? The difference in gross pay would be the cost of having your own personal policy in place.

It’s important to note that Disability Insurance comes with many variations and options. It’s recommended that you speak with a Certified Financial Planner to discuss your needs and how a Disability Policy can best protect you and your family.

Ermos Erotocritou is a Regional Director with Investors Group Financial Services Inc.  

Disclaimer: This is a general source of information only. It is not intended to provide personalized tax, legal or investment advice, and is not intended as a solicitation to purchase securities. Ermos Erotocritou is solely responsible for its content.   For more information, please contact an Investors Group Consultant. Insurance products and services distributed through I.G. Insurance Services Inc.




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