Are You Asking for Trouble?

If you're 30 years old, what's the likelihood that you'll have a long-term disability – lasting more than 90 days – at some point in your life?

1 in 10
1 in 5
1 in 3
1 in 2

Answer: 1 in 3

And if you become disabled, how long will you likely remained disabled?

6 months
14 months
28 months
32 months

Answer: 32 months

One of the biggest myths about disability is, "It won't happen to me." Really? Because you're very special? Or because bad things don't happen to good people? Or maybe you're thinking to yourself, "I'm covered at work. That's good enough."

Since work-related plans seldom have the kind of coverage available on individual disability insurance policies, you could be in for a shock.

Imagine the horror of being diagnosed with a progressively debilitating disease. Imagine the relief of knowing that while you have to stop working, you have a group disability plan that will help to make ends meet. Imagine your disbelief when your claim is declined by the insurance company because you just aren't disabled enough in their eyes.

Want to avoid a nasty surprise just when you can least afford it financially and emotionally. Take these questions to your benefits administrator at work and make sure you understand the answers you're given:

What's the policy's definition of "disabled" and how long will benefits be paid? If you can't do the job you were hired to do, will you be paid regardless of what other work you may be able to find? Will partial benefits be paid if you can only work for a few hours a day? A weak definition of disabled can be one of the biggest holes in a plan. If your policy has an 'any occupation' clause, which is pretty typical of a group plan, the only way you'll collect is if you're unable to do any work at all. If the insurance company deems you could be a parking lot attendant, they won't pay.

How much am I covered for, and how will it be taxed? Most group policies cover employees for a certain percentage of their salaries  – often 60 to 75 percent. Some also have a cumulative maximum. But many people have no idea how much they're covered for or even if their disability income will be taxed. If you pay the premiums directly from your after-tax income, or if your premium is a taxable benefit, then the money you receive on a claim are tax-free.  If you find that the income you receive from your disability coverage is taxed, the next question is this: Will the money be enough once tax is taken?

Does my policy have a residual disability feature? In the case of a slow recovery or a slow deterioration from a progressive disease, this feature becomes very important. Without it, years may pass before your claim can begin because you must meet the insurance company's definition of "totally disabled". Since most group plans have limited benefits for residual disabilities, the seams of your safety net may not be as strong as you think they are.

What are the exclusions on my policy? An exclusion is something you aren't covered for and typical exclusions include travel outside Canada, pre-existing conditions, mental, nervous disclosure, and alcoholism. The list can be wide and varied. And if your malady falls within the list, you've got a hole in your safety net.

If you don't think you've got an iron-clad disability policy at work, or you have no disability insurance at all, it's time to wake up and smell the coffee! Disability causes nearly 50% of all mortgage foreclosures. And close to 90% of disabling accidents aren't work related. Still not convinced?

Write your name on a piece of paper. Now write the name of two of your best friends on separate pieces of paper. Now, drop 'em in a hat? Pick a name. Are you praying it isn't yours?

Smart people who want to make sure that they and their families are well protected don't ask for trouble by relying on the off-the-shelf disability coverage available through most group policies. And they don't stick their heads in the sand and hope for the best. They look to an individual policy to make sure their butts are covered.

Buying private coverage that kicks in after your group coverage expired may not be as expensive as you imagine. Since the wait period – the time before benefits on your individual policy must kick in – is long because of your group plan, you could have peace of mind for a lot less money than you think. If you're buying individual insurance because you have no other coverage, getting it young – under 30 – will be the key to an affordable premium.

The other important issue in favor of an individual policy is that you may not always have your group plan.  A change in jobs, the decision to stay home to raise a family, self-employment could all leave you with no coverage.

Since buying disability coverage can be complicated you'll need the help of a qualified insurance advisor when you go shopping. With so many sizes and styles out there, it's very easy to buy one that looks good on the hanger but just doesn't fit. Using a generalist will get you in trouble. The good fit comes with a fine tailor who can custom make a disability plan just for you.

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