Monday Morning, 7:00AM

It’s 7:00 a.m. on a crisp, cloudless Monday in early March. The sun is just coming up, and it’s going to be a beautiful day. It’s that wonderful time of the morning when you have the whole day ahead of you, at that wonderful time of the year when spring is right around the corner.

My associate Meagan is walking to work, as she likes to do, and she is crossing the intersection at 100th Ave and 96th Street. The red light turns green, and the walk signal is on. She’s halfway through the crosswalk.

That’s when the car hits her.

Meagan goes up onto the hood of the car, smacking into the windshield. She’s in a daze, not understanding what just happened to her. She doesn’t recall the actual moment of impact. It’s not until later that the pain comes.

She’s back at work now, but she needs physiotherapy three times a week. The concussion and her other injuries limit what she can do. Fortunately her work allows her to remain at her desk through the day. If she had a different profession she might still be off work. Still, her productivity (and thus, her paycheque) has been affected.

And all she was doing when this happened was walking to work. On a beautiful spring morning.

That’s the thing about your health. You have it. Right up to the point when you don’t.

Just about everyone takes their health for granted. But your health is fragile. Even for a 20-something vegetarian who looks after herself.

You have things you want to do in life. Retire some day. Educate your kids. Take a vacation. Maybe buy a new house. All of this depends on your ability to earn income, and your ability to earn income depends on your health.

From a purely mathematical perspective your ability to earn income is very likely the most valuable asset that you have. A 40-year-old person earning $60,000 per year will make $1,500,000 between now and age 65.

Most people discount how valuable the ability to earn income is. Further, they underestimate how fragile that ability to earn income is. After all, are we not invulnerable? Accidents? They happen to other people. Heart disease, stroke, cancer? Hey, I only smoke a pack a day, and besides, I am quitting.

Quit kidding yourself. One out of two 25-year old people will be disabled for at least 90 days before age 65. The average duration of disability is 2.6 years. Do you think your lifestyle reduces the risk of an accident happening to you? First thing, you can’t be sure of avoiding an accident. After all, that’s why they are called accidents. Second thing, illness accounts for 8 out of 10 disabilities. How can you be sure that you won’t get sick?

What would happen to your finances if you had no paycheques for 2.6 years? Who would pay your mortgage, feed your family, pay your hospital bills?

Many people don’t hesitate to insure their stuff- their home, their car, their boat. But most people do not spend a lot of time worrying about bad things happening to them. If I were to tell you that one in three people will get cancer you might be inclined to think, “Wow, that’s quite a number. I feel sorry for those people. Cancer is a terrible thing.” In other words, your first thought may not be that you might actually be the one person in three.

In my line of work, I see this happen all the time. People are in the prime of their lives, and all of a sudden their health takes a dramatic turn for the worse. You need to take care of yourself, but sometimes even that is not enough.

Every year I have clients get hurt, or get sick, or pass away. These people are not merely statistics; they are your friends and neighbours.

We can do things to lessen the chances of something bad happening to us. We can (and should) eat right, exercise more, drink less and quit smoking. But that doesn’t eliminate the chances of something bad happening.

So what would happen if you did get hurt or sick? Would you have enough income coming in to cover your current obligations, never mind increased medical expenses? Can you afford for your spouse to take time off work? Could you make your mortgage payment? What happens to your retirement savings? What happens to Junior’s college fund?

Disability insurance is the answer. An iron-clad individual disability policy might run around 2.5 percent of your gross income.

Let’s say I was going to hire you, and we are negotiating your contract. Contract A will pay you $60,000. However, if you can’t work because you are hurt or sick I will not pay you. Contract B will pay you $58,500. But if you are stricken with MS, or you lose your sight, or you have a heart attack, or if any of the other million things that affect your health happens, you still get paid. If this thing that happens to you is a permanent condition that occurs at age 40, I am going to pay you about $900,000 tax-free, over the next 25 years.

With the chance of disability roughly 3 times the chance of death, with disability accounting for 16 times the number of mortgage foreclosures than death, with about 40 percent of disabilities that last one year continuing for 5 or more years, the sensible option is contract B.

You may have some coverage already, and believe that means that you are “covered.” Do you know how much coverage you actually have, and under what circumstances the policy will pay out? You may be under the impression that government benefits will kick in. Do you know what government benefits are available, and under what circumstances? These are mighty important questions to leave to chance.

Many people think that they have adequate coverage because they have something through work, or because they signed up for disability coverage when they took out a loan. Tragically, later on some of them find out just what is (and what isn’t) covered by these type of polices. It’s not at all unusual for group policies to be inadequate, and it’s not at all unusual for insurance policies connected to a loan to pay limited, if any, benefits.

Unfortunately, I know this because I have clients in these situations.

Many of my columns come from real life experiences. This is one of them.

This article was posted in All Columns, Insurance Columns.
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