Is your Employer-Provided Insurance Coverage Enough or Should You Get Your Own Disability Insurance?
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.
Today's video answers the question "Should I get my own Disability Insurance or is my work plan good enough?"
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.
Next Steps:
Since 2011 we have helped 100s of Canadian professionals protect their income, their family and their lifestyle with Disability Insurance.
For a complimentary, no-pressure call to see if your employer plan is enough or if you'd like to look at supplementing & taking control of your Disability Insurance, schedule a Discovery call with one of our advisors here.
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