Life insurance costs worth it when needed
Dear Money Lady: I have life insurance and I was considering getting disability and critical illness insurance too. It’s a lot more expensive and I don’t know whether I should spend the money on it. I’m self-employed. What do you think?
— Doug That’s a great question Doug and my answer is a resounding YES!!
I want to share with you a story about a long-time client of mine who was gracious enough to allow me to share it with you. Once you read it, you will see why any type of personal insurance is never quite enough, especially when you are self-employed. Today, income protection (disability insurance) is often overlooked and considered too costly by most Canadians, who often feel they have sufficient insurance with their employer.
Instead, most people concentrate on life insurance only. However, it is important to remember that 95 per cent of accidents do not result in a death and you are more apt to be badly hurt, disabled or in some way unable to continuing working as you did before.
The story begins with a past client of mine (we will call him Dr. X) who had a very successful dental practice and, after discussing his situation, agreed to purchase a guaranteed renewable disability income policy that would give him income protection for his business.
Dr. X would always call me and complain about the payments, but knew that he had to protect his business income since he was the primary breadwinner in the family. He had four girls and a wife that did not work.
Dr. X had a big Honda Goldwing motorcycle that he rode in the summers and decided to join a friend by taking a motorcycle driving course at a local college. The friend was a new driver and was not yet licensed. This course apparently had something for all — promising to provide new driving techniques for already licensed drivers, like Dr. X.
So, the two men went to the course one Saturday However, they were not allowed to use their own motorcycles.
The school provided learning bikes and Dr. X was given a dirt bike. Well, let’s just say that didn’t work out well. Dr. X flipped the bike and was badly hurt. He broke four fingers on his right hand and shattered his elbow, ulna, and wrist.
With no use of his right hand or arm, Dr. X was forced into retirement at age 51 and, thanks to his disability insurance, could expect a taxexempted monthly income of $18,600 until he turned 65.
The moral of the story is that you never know what will happen in the future and, unfortunately, no one is immune to career change or failure, personal accidents or financial ruin. Things just happen. Life has a way of taking us on a rollercoaster ride of ups and downs and insurance is there for the what-ifs that we hope never actually materialize.
Insurance is costly and I know most Canadians will often make excuses to avoid the added expenses to their already tight budgeted lifestyle. But maybe we shouldn’t be so quick to decline it. Those people that live paychequeto-paycheque nowadays are especially vulnerable and could be placed is a very comprising position if they were severely hurt and could not work again.
Planning for your future must include planning for possible unexpected events. I know that insurance is expensive. However, I have yet to come across someone who got an insurance payout, and said ‘I got too much insurance money — take some back.’
On the contrary, after something happens, they always wish they had more.
Here is an insurance stat to leave you with: one third of Canadians aged 35 or older will suffer a disability lasting at least six months before they reach 65. Of those who suffer a disability between age 35 and 65, 50 per cent of them will have the disability for five years or more and 30 per cent will be disabled for life.
If you want to consider critical illness insurance, remember 2.4 million Canadians are diagnosed with a critical illness every year. Here are the stats: cancer affects two out of every five people in Canada, 97,000 Canadians will have a heart attack or stroke every year and 58 per cent of critical illness claims come from men with a median age of 54.
Remember, it is your responsibility to protect yourself and your family.