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Life's a Risky Business: Determining How Much Insurance You Need

By Elaine Sambugaro |

Shop around to get the right fit

Buying disability coverage is a complicated process. With so many sizes and styles out there, it's easy to buy one that looks good, but won't protect you or your family in the event of serious injury or illness. There are several insurance companies in Canada that carry disability insurance. Each policy is unique and complex. Coverage prices for disability insurance either on a long-term basis to age 65 or a short-term basis vary with age, income and health status.

Because individual disability insurance benefits hinge on a person's individual income and other calculations such as CPP and PPSA, it is difficult to calculate – on a general basis – how much a person will get if they become unable to work. What follows, though is a helpful chart that gives a general breakdown of how an insurer might calculate the amount of benefits a person can collect, in the event that their claim is accepted. (Click here to see the chart.)

Ask the right questions
When shopping for DI you should prepare a checklist before you approach an insurance broker and start shopping for a policy. Tanti says that if there were only two questions that a potential buyer should get an answer to before purchasing a policy, they would be: 1. When do I get paid? 2. How much do I get paid?

"Those are the most important things a purchaser should know," Tanti said. "You d be surprised how many people don t know these fundamental things," he said.

Here are a few more questions that you should get clear answers to before signing on the dotted line:

  • How long will benefits be paid?
  • What are the exclusions on the policy? These are the things for which you will not be covered such as travel outside Canada, alcoholism, mental or nervous disorders.
  • Are my benefits affected by changes in the cost of living? Will they be increased? Are there extra costs associated with the increase?
  • What about partial benefits if I'm only able to work a few hours a day?

(For a comprehensive checklist of the critical questions to ask your broker, see the Policy Prep Sheet at the end of the article.)

One last reminder: Never rush into purchasing a policy – no matter what type of lucrative deal offered to you by an insurance broker. Take time to compare policies and ask questions. Ask insurance companies to mail or fax you their entire disability policy and brochures that might be available to explain what the fine print means. Most importantly, get the help of a qualified insurance advisor or lawyer when you decide to go shopping for disability insurance who will customize a disability plan that meets your needs - and your budget.

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