Being Disabled means you are unable to work due to sickness or injury. There are currently 3.8M Canadians on disability claim. Whether it is a cardiac issue, nervous disorder, complication of pregnancy, a broken bone or pulled disc; anything can cause a disability. For many professionals, a disability can be devastating by taking a toll your ability to earn income and this affects you and your family.
What is Disability Insurance?
Disability can be temporary or permanent. According to the Council of Disability Awareness, the most common causes of disability include accidents, cardiovascular mishaps, pregnancies, musculoskeletal issues, nervous system malfunctions, infectious diseases, digestive system stress, respiratory disorders and mental diseases. A temporary disability is the inability to work for a period of time. A permanent disability is a disability that never goes away.
Why do Physicians Need Disability Insurance?
There are several reasons you should own disability insurance.
- Disability can happen to anyone at any time; it does not discriminate between professions (A Look at the Statistics of Disabilities in Canada: Infographic). Doctors are just as prone to diseases, accidents, and injuries as any other person.
- As the primary income earner, you are the one responsible for paying the bills, school, the nanny etc.
- Your ability to earn income is your most important asset. Your ability to earn a income over your life is by far your most important asset. More valuable than your home or your investments is you and your ability to work.
What do Physicians Need to Know About Disability Insurance?
There are several things we recommend when setting up a disability insurance plan for a physician. First, your plan should cover total, residual and partial disability. If you qualify, we recommend also adding an own occupation definition of total disability, a cost of living adjustment, a future income option, HIV and Hepatitis B&C, conversion to long term care coverage and a guaranteed 25% annual premium discount.
Own occupation is your definition for total disability. The own occupation definition of total disability states that if due to injury or sickness you are unable to perform the important duties of your own occupation and are under the care of a physician, you will receive full disability benefits. The cost of living adjustment, also referred to as a COLA option, protects you against inflation while on disability claim by ensuring that your disability benefit is adjusted annually by the change in the consumer price index. A future income option, also referred to as an FIO, allows you to boost your monthly disability benefit on the anniversary date of your policy with no medical and the full applicable discount.
Perhaps most important is the conversion to long term care option which allows you to convert your disability insurance to long term care coverage. Long term care insurance provides you with up to $6,000 per month ($200/day) of lifetime coverage for care in your own home or in a facility and benefits are paid up to age 100. Together these options protect your income throughout your Medical career.
What is the difference of an Individual vs Group disability plan?
An individual plan you own and control. A group plan such as the OMA insurance plan, is owned and controlled by the insurer, in this case Sun life. With the OMA, rates increase over time, with an individual plan your rates are locked in. Below are the quality differences.
| Individual coverage | OMA Group insurance | |
| Ownership | Individual contract.
Benefits and premiums are guaranteed |
Group insurance.
The OMA or its insurer can cancel or change the policy |
| Partial disability | Minimum payment guarantee of 50% of your monthly benefit | No minimum payment |
| Discount | 25% discount on all coverage up to $25,000 per month | Partial refund on coverage up to $10,000. After 10,000 no refund |
| Portable | YES world wide | Must be an OMA member |
| Recovery benefit | When the insured returns to work after a period of total or residual disability, the insured may receive four months recovery benefit based on the percentage of loss of income. If the insured returns to work after a period of partial disability, the insured will receive two months recovery benefit that will be the same as the partial disability payment previously received. | Not available |
| Recurrent Disability | After a period of disability ends and the insured becomes disabled again from the same or related causes within 12 months, it will be a continuation of the previous disability. | After a period of disability ends and the insured becomes disabled again from the same or related causes within 6 months, it will be a continuation of the previous disability. |
| COLA | Minimum of 2% COLA
Range: 2-10% |
No Minimum COLA
Range: 0-10% |
| Long term care Conversion | Policy funded after 20 years | Policy funded after 25 years |
IMPLICATIONS:
If you want to have the best quality coverage, an individual plan gives you ownership and control over your insurance. Think about this, you went to school for the better part of 15 years, why would you leave your insurance in the hands of someone else. We recommend you own and control your policy and an individual plan is the best route.
Elliott Levine, MBA, CFP is the President of Levine Financial Group in Toronto
416-222-1311 I info@levinefinancialgroup.com
The above is for conceptual purposes and is not to be relied upon for definitive legal, tax or financial advice. Those interested in exploring these topics should consult with the appropriate tax advisers to discuss their specific needs and circumstances. E&OE.