I speak with a lot of self-employed and business owners and have noticed that while they would like to protect their income; a standard disability product doesn’t always fit their budget or provide enough income.
The reasons are:
- Standard disability premiums are based on your occupation class, your age and your income. Many self-employed people are in occupations that do not qualify for the same type of occupation class as an office worker; they are 3 or 4 steps down which drives up your premiums.
- The allowable monthly benefit for a self-employed person is based on a percentage of your net income. Most self-employed people write off as much as possible so they pay less tax this does not do them any favours when it comes to how much monthly benefit they would receive from a disability policy.
- The majority of disability policies end coverage at age 65 so if you are nearing or past 50 disability insurance does not look attractive.
But….
What is there was a plan that was only based on:
- Premiums based on your current age
- You being in reasonable health
- You choose how much monthly benefit you would receive from $1,000 to $8,500 (tax free)
- It would be in effect for the rest of your life?
Would that be attractive to you?
You are in luck as there such a plan; it is called Long Term Care Insurance. See comparison chart below for the differences.
Main differences between a standard disability policy and a long term care policy.
| Criteria | Disability* | Long Term Care* |
| Price based on your current occupation | Yes | No |
| Benefit amount based on a percentage of your income | Yes | No, you choose from $1,000 to $8,500 monthly tax free benefit |
| Benefits are tax free and you can use them for whatever you need to | Yes | Yes |
| Price based on your age | Yes | Yes |
| Option to pay up in full in 20 years | No | Yes |
| Acceptance based on your current health | Yes | Yes |
| Have to go through medical underwriting with a visit from a nurse | Yes – in most cases | No, only a 30 minute phone interview |
| Premiums are higher for smokers | Yes | No |
| Riders available to increase benefit amount in the future | Yes – based on financial evidence or cost of living depending rider chosen | Yes – based on CPI increase once every three years to a max of 15% |
| Benefit paid out | When you cannot perform the duties of your regular occupation as confirmed by your doctor | When you cannot perform 2 of the 6 activities of daily living:
Or suffer a cognitive impairment that endangers your health or safety as confirmed by your doctor |
| Benefit paid until you recover or to | To Age 65 | Paid for life |
| Partial or residual disability rider | Yes | No |
| Rider for return of premium upon death | No | Yes |
| Extend regular occupation rider | Yes | N/A |
| Rider to receive 50% of premiums back if you never claim | Yes | No |
It all comes down to what you are comfortable with and if in your individual situation what you feel it is a good choice for your needs and budget.
Both solutions are very good and have their strengths, but in some situations one can be preferred over the other. My goal is to show there are options available so you can protect your family and lifestyle.
Let’s have a coffee so we can talk about what option is best for you. I’m here to help you learn so you can make an informed decision about protecting your future.
margaret.reynolds@BCinsurancegal.com
778-986-9186
