Judging by the real estate open houses and traffic in our local car dealerships, malls and megastores, we sure do spend a lot of time shopping!
Do you want to know the first thing we also buy before the sale is finished, or immediately afterward? Yup, we make sure our stuff gets insured! From the comprehensive umbrella policies that we take out on our homes to the car insurance and extended warranty packages on our consumer goods, we sure do like to protect ourselves from risk.
Just when you think you've done an awesome job insuring the valuables, I'm about to tell you that there may be a gaping hole in your risk management plan.
Let's start by adding up all the money you will make over the years. For example, take the case of a 35-year-old who makes $60,000 per year and increases that income by five per cent each year as a result of promotions and inflationary increases.
By retirement at age 65, he/she will have earned a total of $3,986,331.
That's a lot of money riding on the assumption that this income earner stays healthy! I would not feel comfortable with those odds, when the statistics tell us that a 35-year-old has a 50 per cent chance of being disabled for at least 90 days before age 65! Let's be clear on this - the length of a disability, on average, is at least 90 days. Some disabilities could last as long as 30 years using this example.
I asked one insurance company to provide me with examples of claims that they have been paying.
That's when I realized that the risk is very real! For instance, a salesman has received $690,000 to date from a brain injury sustained in 1988.
A dentist who has been suffering from thoracic outlet syndrome since 1998 has received a total of $1,438.544. A business owner with a herniated disc has received $189,187 since 2008.
Ironically, a financial advisor suffering from depression has received a total of $185,059 since 2009 (Hmmm, I wonder what could have triggered that).
These are real people with real disabilities and none of them saw it coming. However, all of them made a plan to deal with it.
Disability insurance is not as easy to apply for as life insurance. When the risks are so high, it is only natural that the insurance company is going to ask a lot more questions.
Underwriting a disability income policy is tricky and you really should work with an experienced and qualified financial advisor.
Your most valuable asset is looking back at yourself in the mirror every day. Please, don't play Russian roulette with your income. Take the steps right now to insure it.
The opinions expressed are those of Richard Vetter, BA, CFP, CLU, ChFC.
Vetter is a certified financial planner and owner of WealthSmart Financial Group in Richmond (www.wealthsmart.ca).
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