Most Canadian workers would suffer severe financial hardship if they were forced out of work with a disability, according to a recent RBC Insurance survey.
Three-in-four (76 per cent) believe that should they become disabled and unable to work for three months there would be serious financial implications for their family, such as significant debt or an impact on retirement plans.
Despite the concern, only about a quarter (27 per cent) of Canadian workers have discussed how a disability would financially impact their family. This number does not even increase substantially among workers who’ve indicated that they’ve taken time off in the past because of a disability (33 per cent).
“A long term disability can have serious consequences affecting one’s financial situation, including leaving insufficient funds to cover regular living expenses and/or delaying or reducing retirement savings,” said Mark Hardy, senior manager, Life and Living Benefits, RBC Insurance.
“Industry research shows that 26 per cent of Canadians say they could not pull together $2,000 over the next month if an emergency expense arose; and more than half of Canadians believe they would find themselves in financial difficulty if their pay was delayed by even a week. These findings emphasize the need for Canadians to ensure that they have the appropriate level of coverage in case of a long term disability.”
While few are talking about it, even fewer have coverage. Canadians are not taking the proper precautions to ensure they’re financially protected in case of disability.
The RBC Insurance survey revealed that just 16 per cent of respondents have individual disability insurance outside of any workplacecoverage. Among Canadian workers who have not purchased an individual policy, one-in-10 don’t know what disability coverage is, while a quarter (22 per cent) have not thought about their chances of becoming disabled.
If unable to work due to a disability, most Canadians would dip into their personal savings (34 per cent) to pay for essential living expenses; while others said they would rely on their spouse/partner’s income (29 per cent), government support (19 per cent) and cash in investments (16 per cent). Fifteen per cent of Canadian workers don’t know how they would pay for their living expenses if they were faced with a disability.
“The average length of a disability over 90 days is between two to three years. Canadians should ask themselves: ‘Do I have enough money saved to cover living expenses and health care bills throughout the entire length of my disability?’ Most people will realize that they don’t,” Hardy said.
“Purchasing individual disability coverage provides you with the security of knowing you will have money coming in to replace your lost income.”
Based on the survey results, Hardy points out a few things Canadians should consider:
• Disability insurance is less expensive than you might think – generally costing between one and three per cent of your income.
• Disability benefits would allow you and your family to maintain your income as though you were still able to work full-time. An online insurance needs calculator can help you assess your disability insurance needs.
• The best time to buy disability insurance is before an injury or illness occurs.