By: Kevin-Barry Henry, #1 Bestselling Author
I was on a zoom call recently (who hasn’t been?) with a group of professionals from different industries and the gentleman speaking was a disability lawyer. I didn’t know law was so specialized. He explained that he helps employees who have grievances with employers after injuries or illnesses to recoup the huge financial impact of the loss or reduction of earnings during their recovery periods.
As he progressed through his presentation, which included terrifying stories of people who were forced to sell their homes and other assets to cope with the losses, he said something that stuck in my mind. His statement was that disability insurance is more important than your RRSP and should be funded before you invest. I was struck by his statement, but his reasoning is sound. If you have no income, your plans change. Obviously.
Disability Insurance replaces a portion of your working income on an ongoing basis.
I decided I would have a look at the benefits of disability insurance and see for myself why a lawyer who represents employees who need the benefit would say that it is more important than your retirement plan.
Let’s look at a hypothetical scenario:
You have been offered a job and get to pick between two different compensation structures. Which one are you choosing?
Job A will pay you $80,000/year while working and $0 if you are unable to work due to an injury or illness.
Job B will pay you $78,500/year while working and $53,000 (tax-free) if you are unable to work due to an injury or illness.
With an Income Replacement Benefit (disability insurance), you create a safety net around you and your family. You own and control the policy and the rates are guaranteed until you turn 65.
For some of my readers, this may be something you could even help your adult children with, while they take care of the jiu jitsu and dance lessons.
This chart illustrates your earning potential during your working years. If you are unable to work due to an illness or injury, you still need a regular monthly income. Put the insurance company’s money to work so your family can maintain the same standard of living.
Your Earning Potential by age 65:
| Annual Income | At Age 25 | At Age 35 | At Age 45 |
| $35,000 | $2,359,089 | $1,536,595 | $894,063 |
| $50,000 | $3,370,128 | $2,195,135 | $1,277,233 |
| $65,000 | $4,381,166 | $2,853,676 | $1,660,403 |
| $90,000 | $6,066,230 | $3,951,243 | $2,299,019 |
| $120,000 | $8,088,306 | $5,268,324 | $3,065,359 |
| $150,000 | $10,110,383 | $6,585,405 | $3,831,699 |
I now realize why the gentleman on the zoom call was so emphatic with his statement. He is right of course. You need disability insurance to protect your income as much as you need life insurance to cover your family in case you are no longer here to earn. Just make sure you can still plan for your retirement as well.
This strategy works for all income levels and most occupations. If you want to learn more about protecting your or your adult child’s income in case of injury or illness, please feel free reach out to me for a free 15-minute call here: FREE 15 MINUTES WITH KB.
I look forward to hearing from you.
With Gratitude,
KB.
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