Is your Employer-Provided Insurance Coverage Enough?
It has become more and more common for employers to provide benefits to their employees.
Due to this many people wonder why they might need their own insurance, or whether their existing coverage is all they need.
Odds are your employer provided insurance coverage is not enough, and in this blog, we’re going to be discussing some of the reasons why, as well as how you can opt-out of, or add onto your existing coverage.
Many Canadians rely on their employer-provided insurance to protect themselves and their families against unforeseen circumstances such as critical illness, disability, and death.
While employer benefits plans are valuable, they may not provide enough coverage in certain situations.
The Limitations of Employer-Provided Insurance.
To begin with It’s important understand the limitations of employer-provided insurance.
First, these policies often have limits on coverage amounts and may not be sufficient to your individual needs.
For example, a critical illness insurance policy provided by an employer may cover only a limited number of illnesses, leaving employees vulnerable to illnesses not covered by the policy.
Since critical illness insurance is usually a low priority for the employer who sets it up, they often just set up a minimum amount like $25,000.
$25,000 is better than nothing but it’s not usually the correct amount of critical illness insurance to cover a working Canadian adult with a mortgage and a family.
This is concerning because according to statistics the chance of you contracting a major illness during your working years of 18 to 65 is almost 50/50.
Similarly, disability insurance on your group plan may have limited coverage, leaving employees without enough financial protection if they are unable to work due to an injury or illness.
One of the main limitations of employer provided disability insurance is that the benefit payout period is usually 2 years.
When we set these up for clients individually we normally set them up with a payout period until age 65.
Say something happens and you aren’t able to work for more than 2 years, your employer provided coverage will usually not cover you.
That means you’ll be stuck with all your bills, and expenses without any source of income.
Employer-Provided Insurance is not Portable
Another important factor to consider is that employer-provided insurance policies may not be portable.
This means that when you leave your job you may lose access to the coverage you had while employed.
Say you leave your job, and you lose those benefits, then when you get another job, you have to wait 90 days for your new benefits to kick in, which leaves you uninsured for a while.
You also don’t know if the benefits plan at your new job will be the same, worse or better than your benefits at the old employer.
Having your own disability insurance means that you aren’t tied to your employer.
Your changing needs
Finally, it's important to note that individuals' insurance needs may change over time.
As people age and their circumstances change, their insurance requirements may shift.
Employer-provided insurance policies may not offer the flexibility needed to adapt to these changing needs.
Purchasing additional insurance coverage beyond what their employer provides ensures you can customize your coverage to meet your specific needs and circumstances.
How difficult is it to opt-out or add onto your benefits through work?
If you have benefits through work you’re probably paying for benefits anyways through some sort of deduction off your paycheque, but you’re getting what they give you, instead of what you want.
The disability insurance portion of your benefits should be set up as employee-pay for tax reasons so it’s often pretty simple to opt out of because it is a separate piece that you pay for.
Sometimes with really big companies or union plans, the plans are a little more rigid and harder to opt out of.
The cost difference isn’t that much so it will probably cost you very similar to what you pay through your work plan.
You can also add private coverage on top of your existing work plan.
What we can do is set up an independent insurance plan that will kick in when you group disability plan stops.
We also recommend you set this up earlier as it’s usually more affordable the younger you are. Plus you can always add more coverage later.
Contact Us
At Safe Pacific Financial, we specialize in helping Canadian business owners, incorporated professionals, and investors structure life insurance for maximum wealth protection, tax savings, and business growth.
If you would like to discuss whole life insurance or investments, we’re happy to chat and see if we can be a good fit to work with you. Fill out our contact form and we will get back to you within 24 hours on business days.
Related Insights
Wealth and Legacy: A Deep Dive with Vince Cardella
In this episode of The Wealth Multiplier Podcast, host Laurent Munier of Safe Pacific Financial sits down with Vince Cardella, Principal of Strategic Wealth Planning...
RRSPs for Canadian Business Owners, should you invest?
You have two main options: keep the funds inside the corporation or withdraw and invest personally. Today we’re going to go through these 2 scenarios...
Leveraging Your Whole Life Insurance Policy as Collateral for Loans in Canada
When it comes to building financial security and achieving your goals, creativity and strategy are essential. Today, we’re exploring a powerful tool that can open...
The 6 Essential Principles of the Infinite Banking Concept Explained
Here’s what you aren’t understanding about Infinite Banking. Building anything of lasting value begins with a solid foundation—the basics. While Infinite Banking may seem like...
The Capital Dividend Account: A Comprehensive Guide for Business Owners
Why does it exist, and how does it work? Let’s break down the essentials of this game-changing tax provision called the CDA We at Safe...
Merry Christmas – Safe Pacific 2024 Highlights
We’ve been advising Canadians about life insurance and their personal finances for over a decade, almost 15 years now. But today’s video is a little...
Christmas Party 2024 Photo Gallery
Thanks to all who came out to celebrate the season at our annual Christmas Party. We hope you all enjoyed the festivities at The Vancouver...
Interview with the Head of Individual Insurance Business at Equitable Life: Martin Reeves
Equitable Life has long been a trusted name in the Canadian insurance landscape. Recently, we had the privilege of sitting down with Martin Reeves, Head...
The Infinite Banking Strategy for Canadian Business Owners: How It Works and Why It’s Effective
Growth has rocketed especially since the federal government has been increasing taxes on everything – especially you and me, the greedy business owners who make...
Top 5 Ways Infinite Banking Benefits Canadians
Now, this isn’t just some financial theory for us. I've been using this strategy personally and we’ve been setting it up for our clients for...
Are TFSAs good for small business owners?
One of the main tax advantaged accounts you can use in Canada is the TFSA – Tax Free Savings Account. This is one of our...
Family Office vs. Multi-Family Office: Key Differences, Benefits, and Which is Right for You
Now obviously, every family office is going to be different from family to family, however there is an important distinction between a single-family office and...
