When it comes to group benefits there’s a gap in coverage that advisors are wise to fill – for your client’s sake
While clients might think they’ve got disability coverage simply because it’s one of the benefits listed in their employer’s group plan the truth is they could and should do better by taking out an individual policy.
“To me another huge issue is people who think they’re protected with group insurance for long-term disability. With LTD terminology and definitions on group plans after two years you’re basically going to have to be totally incapacitated in order to collect,” said Montreal living benefits specialist Tim Landry. “If you can do any job that pays you 50% of what you were making prior to disability you’re not going to be considered totally disabled anymore. They won’t let you.”
How long could you live on half your income Landry asked rhetorically?
Recent BMO statistics suggest the one-quarter of Canadians are already living paycheque to paycheque and more than half of us have less than $10,000 in emergency funds to cover unexpected events. Canadians simply aren’t prepared for lengthy work stoppages.
“The problem is if after two years on disability, let’s say you broke your back, at the end of the two years the insurance carrier is going to say to you, ‘well, you had your two-year free ride watching soap operas, now you’re on an any-occupation definition and we’re going to retrain you and if we can get you a job that’s going to reduce or mitigate that loss, you’ve got to take it or we’re going to cut you off,” certified health specialist Ken MacCoy told LHP. “Now if you’re permanently disabled then it doesn’t matter, they’ll pay you through to age 65.”
So, anytime an advisor comes across a prospective client with group LTD, it’s in the client’s best interests to listen to what you have to say.
“Group LTD coverage is better than none at all,” said MacCoy. “However, an individual plan is always better. Why? Because it’s going to be tailored to your elimination period, the time you can go without getting paid.”
“To me another huge issue is people who think they’re protected with group insurance for long-term disability. With LTD terminology and definitions on group plans after two years you’re basically going to have to be totally incapacitated in order to collect,” said Montreal living benefits specialist Tim Landry. “If you can do any job that pays you 50% of what you were making prior to disability you’re not going to be considered totally disabled anymore. They won’t let you.”
How long could you live on half your income Landry asked rhetorically?
Recent BMO statistics suggest the one-quarter of Canadians are already living paycheque to paycheque and more than half of us have less than $10,000 in emergency funds to cover unexpected events. Canadians simply aren’t prepared for lengthy work stoppages.
“The problem is if after two years on disability, let’s say you broke your back, at the end of the two years the insurance carrier is going to say to you, ‘well, you had your two-year free ride watching soap operas, now you’re on an any-occupation definition and we’re going to retrain you and if we can get you a job that’s going to reduce or mitigate that loss, you’ve got to take it or we’re going to cut you off,” certified health specialist Ken MacCoy told LHP. “Now if you’re permanently disabled then it doesn’t matter, they’ll pay you through to age 65.”
So, anytime an advisor comes across a prospective client with group LTD, it’s in the client’s best interests to listen to what you have to say.
“Group LTD coverage is better than none at all,” said MacCoy. “However, an individual plan is always better. Why? Because it’s going to be tailored to your elimination period, the time you can go without getting paid.”
