By Medicine Hat News on June 9, 2018.
How do you cool down in the heat of the summer? I have three daughters who consistently plea for slushes. Occasionally we all go get them together. What happens next is funny. I seem to fall into a childhood habit of trying to top up my slush to the max. Have you ever been in this position? It is interesting how we are willing to inspect and strategize with something so trivial but when it comes to trying to top up something more impactful in our life we can be complacent. This made me think of long term disability insurance coverage.
The basic principle of disability insurance is to replace your income if you become sick or injured. You may have coverage through your employer or have arranged an individual plan as a business owner. Most people believe that if they were to get sick or injured, their income would be fully replaced by such benefits. Unfortunately, this is often not the case and there are a few things to look out for. I strongly encourage you to contact your HR department or pull out your benefits booklet. Alternatively, have a financial planner review it for you. Every week I do reviews and find people are unaware of deficiencies in the coverage they have. To me, it is like paying for a slush cup but relying on someone else to fill it up and they did not max it out. Next, I will point out areas for review.
First off, your plan may have an overall limit of coverage. If your income is higher than the coverage you will be short. You can top up the difference with a personal plan. Secondly, there is often a tiered system of coverage that declines as your income increases. For example, last week I saw a plan covering 77per cent of the first $1,250, 66per cent of the next $2,500 and then 53per cent of the balance up to $5,000 maximum. When we looked at my client’s current income to true disability coverage she had about a $1,000 gap Again a top up plan will solve this. Thirdly, you may not actually be covered for both sickness and injury. Again, you should read the disability section of your benefits booklet to confirm what triggers a claim. If for some reason you are not confident with the quality of your plan you can purchase a policy to kick in if the employer policy does not. The industry calls this an offset and will usually provide a discount since only one policy will pay in the end. Fourth, the amount of time that you will receive income while disabled may be limited or the definition of disability may change over the claim period. We have spoken about specific definitions in a past article. The solution here is called a wrap around. That is that when the time period of your group plan stops or the definition stops then your second personal policy would kick in.
There are many more nuances within disability plans which should be discussed with your HR department, financial planner and loved ones. Just like a summer time slush I encourage you to top up, offset or wrap around a personal policy which ultimately properly protects you and the ones that rely on your income.
Steve Meldrum B.Mgt. CFP CLU is the founder of Swell Private Wealth Ltd. For over a decade he has specialized in helping individuals and businesses expand protect and perpetuate their wealth. For further information or tailored advice, contact him at 403-487-0490, firstname.lastname@example.org or connect on social media.
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