Canadian engineers have faced and completed a daunting set of education requirements and have worked tirelessly to achieve their current career.
However, many do not consider the possibility of becoming seriously ill or injured, which would prevent them from continuing to earn the income they have spent years labouring and training to acquire.
Often Canadian engineers underestimate a critical method of reducing their own personal risk: disability insurance.
Although many engineers and members of other professions are diligent in purchasing life insurance to protect their families in the event of their early death, many do not consider disability insurance.
The fact is that people under 50 are more likely to become disabled than die; in fact, almost 35% will suffer a long term illness or disability lasting longer than 3 months.
Consider the case of Sanjeev, a 32 year-old electrical engineer for an oil and gas firm. A few months after his 32nd birthday, he was severely injured in a debilitating accident.
After recuperating from operations on his back and eyes he was still left with spinal damage, partial paralysis in one leg and partial blindness in one eye. He found it difficult to walk, stand, or sit for extended periods of time.
Needless to say, this made it impossible for him to continue in his current occupation and at a time when he had a young family.
There are several options when it comes to disability insurance. It's important to become familiar with these possibilities and determine which is best for you and your family.
Group Disability Insurance
Many engineers may be registered to receive disability coverage as part of a group benefits plan from their employer. However, many employers offer minimal coverage, and numerous group policies impose strict conditions that must be met to qualify for benefits.
Even if your employer provides adequate disability coverage, remember that when your employment ends, so does your coverage. The key here is not to assume that group coverage will be sufficient; because, in most cases, it will fall significantly short.
This assertion has been confirmed by a recent study that reveals that those who understand and know that their employer offers some group long term disability coverage also overestimate the amount of group coverage that they have.*
*Yankelovich, for CIGNA. Back to basics: Choosing and using disability insurance – Understanding views of disability insurance plans. February 2009.
Don’t assume that the government will take care of you. Government plans are there such as Workers Compensation for injuries on the job, and CPP may provide minimal monthly benefits until you turn 65 (at which time regular CPP begins) or until you recover from the disability.
However, for most people, and especially those with higher-paying professions, such as engineers, the benefits are nowhere near the income they will need.
Individual Disability Insurance
Individual disability insurance plans can be tailored to your requirements, with guaranteed results. When exploring individual disability insurance it’s worthwhile to calculate the exact level of protection that you need and where you are able to cut some of the costs.
Some terms to look at are the waiting (or elimination) period before you start receiving payments, own occupation or any occupation, cost of living adjustments, benefit period (the length of time the insurer will pay you - usually to age 65.)
The Own Occupation rider is especially recommended for engineers: with this clause, if you are injured or seriously ill, you will receive disability benefits even if you are still able to work in an unrelated field.
Individual disability insurance plans vary from company to company. The amount of coverage you need will depend on:
Your monthly expenses
How long your pay cheques would continue if you became disabled
How long your savings would last if your income stopped today
How your pension would be affected by a long-term disability
Other sources of income you may have
When comparing policies, look at:
How long benefits will be paid (benefit period)
The terms of the policy
The waiting period before you receive your first benefit payment
You will save on premiums if you take a longer waiting period before receiving benefits (e.g. 90 to 120 days rather than 30 or 60). This is of course subject to your resources – how much emergency savings or other sources of income you have.
It is recommended to speak to a professional disability insurance advisor to determine the best private disability insurance policy for you and your family. There is no fee for meeting with an advisor and having them develop options for your consideration.
As an engineer, your earning potential is your most valuable asset and you need to protect it. Accidents and illness can happen at any time.
How devastating would it be for people who have worked for years to lose everything because they were not properly covered?
Engineers and other professionals need a back-up plan to protect their earnings and their families' standard of living.
Be sure to investigate all your sources of replacement income and be prepared. In general, an individual disability insurance policy is the best option for most people.