This is where your finance takes place

My manager recently had a herniated disk and missed more than 2 months of work. He will also probably miss the entire month of August which incurred not only an increase of my daily work but also raised concerns in regards to disability insurance. I am now a father of two beautiful children and I am making about 70% of our family income. I definitely can not afford becoming disabled without a good insurance plan.

 

While doing my CFP, I learnt that you have better chance of being disabled for a short term period than passing away before the age of 60. Most people think about their life insurance need and get the proper coverage. However, what about disability insurance? Are you well covered?

 

This is what I had to find out by checking at my employer’s disability plan. Knowing that my employer was entirely paying for the premium, I didn’t expect much than having a free wheelchair or a bag of peanuts. Instead, I was quite surprised by the coverage I have.

 

In fact, my employer set a disability plan separated between 3 plans. The first plan is for small disability. For the first three weeks, I am covered at a 100%. Then, the second plan comes into play. It will pay for 85% of my income for the 4^th week till the 26^th week (about 6 months). After 26 weeks, I will still get 70% of my salary till I receive my pension (I guess until the age of 65?).

 

After reading Brian Poncelet’s comment on employer’s disability plan covering only 60%, I started to freak out. Knowing that I have one of the best employer’s insurance plans makes me feel better. However, I would still have to calculate my real need to know if 70% of my salary would be enough to cover all our expenses. But worst come to worst, with 70% of my salary, we will still be able to keep our house and a big part of our lifestyle. This is great news and a great relief.

 

I really think disability insurance is being a must when you have a family to support, especially if you represent the main source of income in your house. However, before starting to panic, you might want to check your employment benefits. You might be covered for your needs already!

“Yes sir, your credit card is now activated with a limit of $5,000. But sir, have you thought about all risks involved if you lost this card? We have just created the perfect product for you…All of this offered for a very small annual fee of $25 that we can directly charge your credit card for. What is $25 a year to buy a peace of mind?” Well, the only potential thief in this situation is the customer representative offering this feature. Identity theft does not need additional protection. Here’s why:

You are already covered by law

In Canada, the consumer protection law the individual is held responsible for a maximum of $50 on their credit cards or debit cards. I would also add that most of the time, the financial institution will cover the full amount for the first time being. The process is fairly simple. The minute you notice that you might have lost your wallet or a credit card, you call your financial institution and they will freeze all access to funds. Another trick is to verify your monthly statements (I do it on a weekly basis on the internet) for any suspicious transaction.

The assistance centre provided with such insurance is superfluous

Companies that provide their clients with identity theft insurance claim they offer a 24/7 assistance centre in case of fraud. In fact this line will not get you anywhere. As previously mentioned, when you think you are victim of fraud by any means, you simply contact all financial institutions you are dealing with and advise them of the situation. They are very quick to stop and trace any transactions with your identity. It is a matter of second and everything is solved. Then, tell me what that customer representative from the assistance centre will do for me? Sell me more insurance for a future case?

Other costs related to identity theft are minimal

The amount covered by identity theft policies are in the range of 5K to 15K. It does include long distance calls, loss from days missed at worked and declaration cost. Basically, I highly doubt that you will spend 10K in long distance call to solve this problem. All institutions have toll free number. In regards to the declaration cost and days missed at worked, these cost can be avoided or, once again, minimal. This surely will not justify $25 yearly fees.

In fact, you are better off making sure that you keep your cards with you, that you do not have you PIN number in your wallet or your SIN number card number with you. Be aware of transactions in your accounts (you can use software such as Microsoft Money to help you out). With these little tricks, you should be fine and you will not require identity theft insurance.

Following to my post on my choice of a life insurance policy, I am writing today about our final choice and the reasons behind it.

 

Having a new mortgage, a car loan and one child to take care of (it will jump to 2 kids pretty soon!), time had come to revise our life insurance policy. Ouch! If I die tomorrow morning, my wife with be left with a ton of debt and nothing for our children’s education. This is definitely not the scenario I would like to see happening from my place in the sky. At that time, it will be to late to help my family.

 

What were our needs?

As we are a young family, we need a substantial amount to cover for several expenses. First, we need to be able to cover for our mortgage and other debts. I want my wife to be able to stay in our house if she wants to. Second, we need enough money to cover for future expenses such as our children’s education. I want to be able to give as many tools as possible to my kids and a good education is one of them. It is a must that they could go at any school they want. Third, as I am making a bigger salary than my wife, I want to make sure she is able to keep up with our life style and that she could take a break before going back to work.

 

What was our choice?

We decided to go for a term life insurance policy. This means that in 20 years, if we do not pass away, we would have paid this premium for nothing. Hopefully, we will still be alive in 20 years! And if so, I do not think that our financial position will request further insurance at this point. It gives me 20 years worth of rrsp, investment and Smith Manoeuvre to be in a good financial situation.

 

We selected 500K joint-first-to-die. This means that the first to die between my wife and I will trigger the payment of 500K to the surviving spouse. If we happen both to die within 45 days, our beneficiary(ies) would get 1M$.

 

The 500K would be used to first, pay off all debts, second produce income to meet financial requirements. We calculate that the surviving spouse would end up debt free left with 300K in cash. Combining this amount with the widow rent from the Government, the surviving spouse would get more than enough to continue living the way we used to.

 

We even got a bonus when we receive our confirmation. As we are non-smoker and we both have a good health condition, the insurance company bumped the policy to 568K for the same amount. It will definitely not compensate for the fact that your one and only passed away, but being insured sure relief from financial pain.