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Can you pay your bills if disabled?

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Compliant content provided by Adviceon® Media for educational purposes only.


Disability insurance (DI) can be purchased from a life insurance company to cover up to 80% of your regular income (or more) in the event you become disabled. This coverage is referred to as “income replacement” insurance.

If you work for a corporation, your employer may offer a group plan with short-term disability (DI) coverage. Examine it to determine the coverage period and to ensure it meets at least 60% of your current income for longer than three months.

Additional DI can be purchased (and owned privately) to extend the period of income payment, and increment payments to the increasing cost of living. Some policies actually increase your paycheques according to the consumer price index (CPI).

If self-employed If you have dependents it is important to ensure that you have income replacement insurance to pay your expenses until age 65. It is also wise to take care of your own needs if you are single.

Consider the following questions as to where the money might come from if you were unable to earn a living for a month, a year or forever.

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How would withdrawing part or all of your retirement savings and/or money on deposit at the bank to use as income when convalescing, affect your retirement?

  • If you need to access the equity or your home, to create an income will this deplete your net worth?
  • Could you borrow money if your banker knew you might never work again?
  • Could you live on your spouse’s income?
  • Could you ask a parent, sibling or friend to loan you money? How would you repay it?
  • Would you rely on the government to pay a disability income that lasts until you retire?
  • Would you want to sell your house or cottage?

 


 

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