You are working hard to create the lifestyle you want to live and to build a strong financial future for yourself and your family. Like many Canadians, you have a set personal budget, and your spending habits are somewhat predictable. If you were unable to work due to an unexpected illness or accident, would you be able to pay your bills?

Unfortunately, you can’t predict the future of your health. Insurance is a straightforward solution to protecting you and your family from the unexpected.

What are your options?

Critical illness and disability insurance are designed to help provide you and your family with financial support during a period of crisis. Despite some similarities, they have important differences that aren’t always as straightforward as you think.

How does critical illness insurance work?

With advances in modern medicine, people are more likely to survive once-fatal medical conditions. However, the unfortunate reality is that many Canadians bear a heavy financial burden for things like treatment, medication, or ongoing care at home or in a facility. In the case of an unexpected life event, critical illness insurance helps protect your lifestyle and savings, so you can concentrate on your recovery.

If you are diagnosed with a covered medical condition, examples include a heart attack, stroke, or cancer, among others, this type of coverage provides you with a one-time, tax-free lump sum that you can use any way you want. This lump sum benefit can be used as you wish, including to:

• Take advantage of private or alternative medical treatment, both in Canada and outside the country;
• Make RRSP contributions that may have lapsed during recovery;
• Replace lost income;
• Pay off a mortgage or other debts;
• Modify your home or vehicle to meet any new mobility requirements;
• Continue to fund your children’s present or future education needs;
• Allow a spouse or family member to take a leave of absence from work; or
• Help your business endure while you recover

How does disability insurance work?

Developing a disability is more common than you think. For instance, one in three people, on average, will become disabled for 90 days or more at least once before they reach age 65¹. If you are under 65 and unable to work due to a serious injury, accident, or mental health issue, disability insurance helps protect your most valuable asset – your ability to earn an income.

This coverage provides monthly payments to help cover living expenses that are normally covered by your income, including monthly bills, mortgage payments, regular savings, and much more. Depending on the level of coverage chosen, disability insurance usually provides you between 60 to 80 percent of your regular, pre-tax income.

What if I already have employer-owned coverage?

Many employers offer some form of insurance, and while this coverage is always welcome, these plans often come with limitations that you might not be aware of, such as:

• Employers have full control over the coverage you receive and can change the coverage, or even cancel it, at any time;
• Benefits might be capped;
• This coverage is often terminated if you leave the company; and
• If your employer pays the premium for the group coverage, those premiums are tax-deductible for the employer, but the benefits you receive are taxable as income.

If you already have coverage through your employer, you might want to consider supplementing that plan with an individual insurance policy. That way, you can mitigate these limitations, benefit from the protection of complementary solutions and maximize your income sources when it is needed most.

^¹ Canadian Life and Health Insurance Association Inc. A Guide to Disability Insurance.