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THE DANGERS OF MORTGAGE LIFE INSURANCE!!!
Signing up for the Mortgage Insurance offered by your bank or mortgage broker may be the worst financial decision you ever make!
SAY NO TO YOUR BANKS MORTGAGE INSURANCE!.. Make sure you watch the disturbing investigation on CBC'S MARKETPLACE to find out why!
Disability definitions & Group disability plans
COMPARING THE DEFINITIONS OF DISABILITY: When analyzing your disability insurance needs it’s very important to understand the fine print of your contract. Unlike life insurance there is much more grey area surrounding what qualifies for a claim.
The definition of disability used in a disability contract can have a direct impact on the insureds ability to collect when he/she needs the money most. Below are three definitions of disabilities used in most injury and illness insurance contracts.
Any Occupation: Under this definition, total disability means the inability to work at any occupation. Therefore if you are computer consultant and your disability prevents you from performing your regular occupation duties but you can still gainfully work as checkout clerk you will not receive a cent.
Regular Occupation: Under this definition, total disability means the inability to work at your regular occupation do to an injury or an illness.
Own Occupation: Is the gold standard definition – Under this definition, total disability is also defined as the inability to work at your regular occupation regardless of whether you work in another gainful occupation?
All the things being equal the better the definition of disability the higher the monthly premium. This makes sense because the insurance company has an increased likelihood of paying out a claim. The problem with the Any Occupation definition found in many group disability plans is it leaves a tremendous amount of grey area surrounding the insured’s ability to find employment at another occupation at the time of claim.
The upgrade from Any Occupation to Regular Occupation provides significant value. However, the upgrade from Regular Occupation to Own Occupation can be questionable in certain instances. An Own Occupation definition provides the most value in a highly skilled occupation such as a surgeon but less value for occupations such as an office manager.
The “own occupation” definition is not cheap usually ranging in an extra cost of 20% to 30% of the base premium. e.g. On a policy with $1,500 a year premium the own occupation can cost an additional $300 to $450 a year.
GROUP DISABILITY PLANS: According to Advocis, the Financial Advisors Association of Canada, over eight million Canadians have group disability insurance. With this type of disability policy, a whole group of people are covered, rather than just an individual – the bigger the group, the greater the sharing of risk.
There are no added features to group disability insurance and no individual assessment. The insurer will determine the premium rates based on the type of work the group does. They will also evaluate the claims, experience and age of those applying for coverage under the plan. The exact type of coverage is negotiated between the insurance carrier and the employer. Depending on the employer, they may offer short-term and long-term plans, but the majority just offer long-term plans. Group rates are typically negotiated on an annual basis and usually increase depending on the number of claims in the previous year.
In group disability plans, there is usually a clause that will cover the insured for the first two years they are unable to work in their chosen occupation classification. This is called a “regular” occupation. However, after the first two years, the definition of disability often changes to mean that the insured cannot work in “any” occupation. Therefore, if you are a computer consultant and your disability prevents you from working your regular occupation, but you can still work as a checkout clerk at a grocery store, you will not receive a cent.
One major drawback of group disability insurance is when the coverage ends. Your coverage will expire under the following conditions: If your employment is terminated, if you retire or if your employer discontinues your employee benefit plan.
Employees may be able to top up their group disability coverage with an individual plan. Individual disability plans also allow applicants to add riders like cost of living adjustment, or a future insurable rider, which allows the benefit to keep in line with inflation and increase the disability policy without a medical.
However, there is one caveat. Most insurance carriers will only cover up to 50-60% of the insured’s net income and the percentage lowers depending on how high their income actually is, e.g. If the insured makes $200,000/year, they may only be covered for 40% of their net income.
At F1RST CHO1CE Insurance Solutions were passionate about sharing our knowledge, experience and unbiased opinions with families and individuals that are looking for a trusted advisor to help them with their Disability Insurance options.
ANY QUESTIONS?…Contact a Licensed Insurance Advisor today!