How Good is Your Safety Net?

Whether you are union hall, executive or business owner, if you get injured, become sick or die there is a need for cash.

In the event of an injury and some sicknesses, you need to replace your income while you cannot work. Employment insurance, WCB, short and long-term disability insurance will help here. Union hall and executives will probably have adequate coverage with their work, but I suspect that many of you have not actually checked out the rate or length of income support you might get if unable to work. Business owners are a different story. They are not covered by EI if they own more than a certain percentage of their business. The name "Workers Compensation Board” says something about their priorities – owners probably should not expect great service here. Purchasing personal disability insurance is the most viable option for "owners compensation” if you cannot work or have to hire someone to replace you.

It may also be an option for employees to extend the safety net, or ensure coverage independent of the job you have now. Employees should review their employee benefit plan to see if their coverage will actually replace their income, and whether it is taxed or not. Many plans have a low upper limit that will not cover the bills adequately. If the employer pays all the coverage then the benefits may be taxed at time of claim, reducing the income even further. More foreclosures on mortgages are due to disability than any other single cause.

Some sicknesses may not actually stop someone from working, but life will be dramatically negatively impacted. With the wonder of modern medicines and surgery, many people who experience a heart attack or stroke may be off work for a remarkably short time, but after that kind of experience they may not want to go back to the lifestyle and job that created the stress that caused the problem. Critical illness insurance is an option that may allow time for adjustment. It pays a lump sum of untaxed money 30 days after diagnosis of a life-threatening cancer, surviving a heart attack or stroke, or usually 15-20 other serious conditions. Some employee benefit plans now offer critical illness insurance so some union hall and executives will have coverage. Some banks are offering new and improved mortgage insurance that will pay off the mortgage if there is a death, cancer, heart attack or stroke. Again business owners probably are underinsured here.

Disability and critical insurance policies sometimes offer "return of premium” options that give you back some of the money if, as we all intend, we have not made a claim. This approach can give you the safety net while you need it, and them give you back some "savings” later – as close as we can get to a double safety net!

Premature death is not as common as injury or sickness, but if there is not adequate life insurance it can leave the dependants and business partnerships in bad financial shape. Term life insurance is very inexpensive and most families should look at getting enough coverage to pay off all debt and have enough cash to allow the surviving parent to not have to work harder – the kids come first. Union hall and executives probably have one or two times their salary with their employee benefits. The real questions are: how much is enough and do you still need this safety net after kids are gone and mortgage is paid?

As in all things financial, there is no "one size fits all” solution. Your home, car or boat are fully insured against a disaster. You owe it to yourself and those around you to tune up your financial safety net if you can.

Gill Campbell is a certified financial planner and an independent insurance broker.