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If you became ill or injured, how long could you keep paying for household costs, including your mortgage? Here’s how to protect yourself financially.
When I bought my home and car, I also bought home and car insurance—it wasn’t even a question. (Plus, car insurance is mandatory in Canada.) If you own a home or a car, you probably also have insurance to protect your valuable asset. You might also be one of the 22 million Canadians who have life insurance, to provide for your loved ones in the event of your death. What’s far less common, however, are two types of insurance that can provide a financial cushion if you become injured or ill: disability insurance and critical illness insurance.
One in five working-age Canadians (ages 25 to 64) has a disability. For one-quarter of these individuals, at least one of the underlying causes of their disability was work-related, including accidents and injuries, Statistics Canada reported in 2017. Disability and illness can happen to anyone, yet only 12.4 million Canadians have disability insurance, and far fewer—2.4 million—have critical illness insurance, according to data from the Canadian Life and Health Insurance Association.
To help you learn more about disability insurance and critical illness insurance, MoneySense has several articles that explain what they cover and what to consider when applying for a policy. We also cover mortgage life insurance, which covers your mortgage payments if you’re unable to work.
Nobody wants to spend more money on insurance, so you may be questioning the necessity of signing up for yet more policies on top of your home and auto coverage. But imagine that you’re unable to work for several months. How long would you be able to cover your bills and your rent or mortgage payments? Disability insurance and critical illness insurance can fill a critical gap in your or your family’s finances. As with any type of insurance, we hope you’ll never need to make a claim—but if you ever do, having these policies in place can provide much-needed financial support and peace of mind.
If you become unable to work due to an injury or a serious illness—such as cancer, a heart attack or Alzheimer’s disease—disability insurance replaces 60% to 85% of your regular income.
Critical illness insurance pays you a one-time lump sum if you have a life-threatening illness, such as cancer, a stroke, a heart attack or Alzheimer’s disease. The amount depends on how much coverage you decide to purchase.
If you’re self-employed, consider buying your own disability insurance and critical illness insurance. Even if you have access to health coverage through your spouse’s or common-law partner’s employee benefits program, this may not include “spousal disability.” Check the policy or ask the benefits provider.
Life insurance providers offer disability insurance and critical illness insurance, which fall under the umbrella of “living benefit products.” If you already have life insurance, ask your insurer about adding these other types of coverage. You can also consult an insurance broker, who will get quotes from multiple insurers on your behalf. If you don’t already have life insurance, shop around for a policy and ask about adding disability and critical illness.
If you want personalized, unbiased advice on insurance, consider speaking to a financial advisor or an insurance broker. They can take a holistic look at your finances and recommend how much coverage to get.
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