Disability Insurance and Small Business: How a Small Business Owner Used Disability Insurance to Stay Afloat While Managing Depression

Sandra ran her own successful insurance agency company for over a decade before it hit her like a ton of bricks – she was chronically depressed and something had to change.

Triggered by a combination of constant stress leading to severe burnout and her 12-year-old son’s recent diagnosis with Type 1 diabetes, Sandra needed some time away from the office to recover and receive treatment. Her depression was absolutely debilitating and could have been devastating to her business and income.

Luckily, Sandra, whose name has been changed to protect her privacy, had purchased two disability insurance policies eight years prior that would help her through such a turbulent time. Sandra worked in the insurance industry and had seen just how important it was to protect yourself from a loss of income in case of a debilitating illness or disease.

“We would see the financial devastation that a disability or an untimely death could cause,” Sandra said. “That had a strong impact on me and I wanted my income and my business to be protected.”

Sandra purchased two disability policies: An office overhead insurance policy in the amount of $10,000 per month that protected her business and covered office expenditures for a period of 18 months. The second policy, personal disability insurance, was an income replacement policy that covered her until age 65 or the length of the disability. It protected her personally by providing her with a $10,000 tax-free, monthly income that allowed her to take the time off work that she needed to receive treatment. Sandra was also happy to learn that she could still spend a small amount of time overseeing her business while continuing to receive the benefits.

“Purchasing the policy gave me peace of mind, knowing what could have happened and ultimately what did happen,” she said.

In general, disability insurance, or commonly referred to as DI, pays a claim due to sickness or accident if the insured is unable to work beyond the normal waiting period. As opposed to critical illness insurance, which is paid out in one lump sum, disability insurance is paid out in monthly installments while the insured remains disabled. The policy that Sandra purchased paid disability benefits until she reached age 65.

After months of treatment, Sandra decided to sell her business and start a new business with her husband: one that allowed her the flexibility to spend more time working on her own needs and the needs of her family. Having disability insurance allowed her to make that transition in her own time and without harming her financially – all while working with qualified medical professionals to get help for her depression.

Sandra’s story is not unique. While most working adults like to believe that they are immune to calamity or harm, unfortunately, that is not the case. According to Statistics Canada, 33% of workers between the ages of 30 and 64 will experience a disability for longer than three months. And most disability claims will come from major illnesses, not accidents.

Which disability insurance policy is best for me?

Working with a financial advisor will help you determine what type of living benefits best fits your needs. But we can outline the basics here to get you started.

Short-term disability insurance: Short-term disability insurance will cover the loss of income due to a temporary illness or accident. The tax-free coverage typically extends between six to 26 weeks, and payments begin after your workplace sick leave expires. Usually, but not always, these plans are provided by employers and typically cover up to 70% of your income.

Long-term disability insurance: As the name implies, long-term disability will cover for a longer period of time depending on your policy. Long-term disability insurance provides monthly payments that commence following the elimination period, which is usually 30 to 90 days after the onset of disability, and can continue up to age 65.

Office Overhead Insurance: Office overhead insurance covers your office expenses if you become disabled. Eligible expenses include rent, utilities and staff salaries.

Group Disability Insurance: This type of disability insurance is typically provided through an employer. If the premiums are paid by the employee, the disability benefit is received tax free.

Questions? Reach out if you are interested in exploring which type of disability insurance would best suit your needs.

As always, please feel free to share this article with anyone you think would find it of interest.

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Highlights of the 2020 Federal Fall Economic Statement | Additional $20,000 CEBA loan available now

On November 30, Finance Minister Chrystia Freeland provided the government’s fall economic update. The fall economic update provided information on the government’s strategy both for dealing with the COVID-19 pandemic and its plan to help shape the recovery. We’ve summarized the highlights for you.

Corporate Tax Changes

Information on several subsidy programs was included in the update. These changes apply from December 20, 2020 to March 13, 2021.

  • The government has provided an increase in the Canada Emergency Wage Subsidy (CEWS) to a maximum of 75% of eligible wages.

  • If you are eligible for the Canada Emergency Rent Subsidy (eligibility is based on your revenue decline), you can claim up to 65% of qualified expenses.

  • The Lockdown Support Subsidy has also been extended – if you are eligible, you can receive a 25% subsidy on eligible expenses.

Also, there were two other significant corporate tax changes:

  • Starting January 1, 2022, the government plans to tax international corporations that provide digital services in Canada if no international consensus on appropriate taxation has been reached.

  • The tax deferral on eligible shares paid by a qualifying agricultural cooperative to its members has been extended to 2026.

Personal Tax Changes

The following personal tax changes were included in the update:

  • The update confirmed the government’s plan to impose a $200,000 limit (based on fair market value) on taxing employee stock options granted after June 2021 at a preferential rate. Canadian-controlled private corporations (CCPCs) are not subject to these rules.

  • If you started working from home due to COVID-19, you could claim up to $400 in expenses.

  • The Canada Child Benefit (CCB) has temporarily been increased to include four additional payments. Depending on your income, you could receive up to $1200.

  • Additional modifications were proposed to how the “assistance holdback” amount is calculated for Registered Disability Savings Plans (RDSP). The goal of these modifications is to help RDSP beneficiaries who become ineligible for the Disability Tax Credit after 50 years of age.

Indirect Tax Changes

GST/HST changes impacting digital platforms were included in the update. They will be applicable as of July 1, 2021:

  • Foreign-based companies that sell digital products or services in Canada must collect and remit GST or HST on their taxable sales. Also, foreign vendors or digital platform operators with goods for sale via Canadian fulfillment warehouses must collect and remit GST/HST.

  • Short-term rental accommodation booked via a digital platform must charge GST/HST on their booking. The GST/HST rate will be based on the province or territory where the short-term accommodation is located.

And some good news on a GST/HST removal! As of December 6, and until further notice, the government will not charge GST/HST on eligible face masks and face shields.

The Takeaway

A lot of changes came out of the fall update – and you may be feeling overwhelmed. But help is at hand!

Contact us to learn more about how these changes could impact your personal and business finances.


Canada Emergency Business Account (CEBA) $20,000 expansion available now

The Government of Canada website has been updated with the new CEBA requirements and deadlines:

  • As of December 4, 2020, CEBA loans for eligible businesses will increase from $40,000 to $60,000.

  • Applicants who have received the $40,000 CEBA loan may apply for the $20,000 expansion, which provides eligible businesses with an additional $20,000 in financing.

  • All applicants have until March 31, 2021, to apply for $60,000 CEBA loan or the $20,000 expansion.

Apply online at the financial institution your business banks with:

To get the full details:

Canada Emergency Wage Subsidy expanded to include more businesses!

On July 17th, Finance Minister Bill Morneau announced proposed changes to the Canada Emergency Wage Subsidy (CEWS) that will expand the number of businesses that qualify for the program.

The major changes he announced were:

“First, we’re proposing to extend this program through until December 19th.”

“Secondly, we know that it’s also critical that we have the businesses able to continue to hire people even as they get into the restart and we know that the requirements in businesses have a 30% reduction in revenue is not helpful in that regard.”

“businesses will get the wage subsidy if they’ve had any reduction in revenue so it’s going to go all the way down to businesses who even have a small amount of revenue reduction they’ll get the subsidy and it will be in proportion to the amount of the revenue reduction that they will get a subsidy.”

“Third, we’ve tailored the program so that it helps those organizations that are particularly hard hit. So for organizations with over a 50% reduction of revenue over the last few months they’ll actually get a top up, they’ll get up to 25% additional subsidy so that they can deal with this really challenging time for their businesses.”

“What that means for businesses, those that were already in the program that have that 30% revenue decline that will continue to be the case for July and August. For those businesses as I said that are particularly hard hit it will be even more. It will go up to 85% wage subsidy or $960 per person.”

“For those businesses less hard hit but still hit they will be able to get into the program. The program will continue but as we restart, the program will be tailored to help businesses appropriately in that restart.”

The new rules will be retroactive to July 5th but require parliamentary approval.

Canada Emergency Wage Subsidy extended into December!

On July 13th, Prime Minister Justin Trudeau announced the extension of the Canada Emergency Wage Subsidy (CEWS) until December. The Prime Minster stated:

“You’ve seen me come out to talk with Canadians about what we’re doing to help you and your family, your employer, your local businesses deal with this Pandemic.

We’re going to continue to do that vital work.

This week we’ll be announcing an extension to the wage subsidy program until December to give greater certainty and support to businesses as we restart the economy.”

More details will be released during the week.

CERB Extended | Business Owners who did not qualify previously – expanded CEBA starts June 19th

CERB Extended 2 more months

Great news for Canadians out of work and looking for work. The CERB will be extended another 8 weeks for a total of up to 24 weeks.

As the country begins to restart the economy, the Federal government will be making changes to the program to encourage Canadians receiving the benefit to get people back on the job. From Prime Minister Justin Trudeau’s website:

“The Government of Canada introduced the CERB to immediately help workers affected by the COVID-19 pandemic, so they could continue to put food on the table and pay their bills during this challenging time. As we begin to restart the economy and get people back on the job, Canadians receiving the benefit should be actively seeking work opportunities or planning to return to work, provided they are able and it is reasonable to do so.

That is why the government will also make changes to the CERB attestation, which will encourage Canadians receiving the benefit to find employment and consult Job Bank, Canada’s national employment service that offers tools to help with job searches.”

More small businesses can apply for CEBA $40,000 no-interest loans

Applications for the expanded Canada Emergency Business Account (CEBA) will be accepted as of Friday, June 19th, 2020. Small businesses that are:

“… owner-operated small businesses that had been ineligible for the program due to their lack of payroll, sole proprietors receiving business income directly, as well as family-owned corporations remunerating in the form of dividends rather than payroll will become eligible this week.”

Apply online at the financial institution your business banks with:

There are restrictions on the funds can be used. From their website https://ceba-cuec.ca/:

“The funds from this loan shall only be used by the Borrower to pay non-deferrable operating expenses of the Borrower including, without limitation, payroll, rent, utilities, insurance, property tax and regularly scheduled debt service, and may not be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.”

Insurance Planning for Business Owners

For business owners, making sure your business is financially protected can be overwhelming. Business owners face a unique set of challenges when it comes to managing risk. Insurance can play an important role when it comes to reducing the financial impact on your business in the case of uncontrollable events such as disability, critical illness or loss of a key shareholder or employee.

This infographic addresses the importance of corporate insurance.

The 4 areas of  insurance a business owner should take care of are:

  • Health

  • Disability

  • Critical Illness

  • Life

Health: We are fortunate in Canada, where the healthcare system pays for basic healthcare services for Canadian citizens and permanent residents. However, not everything healthcare related is covered, in reality, 30% of our health costs* are paid for out of pocket or through private insurance such as prescription medication, dental, prescription glasses, physiotherapy, etc.

For business owners, offering employee health benefits make smart business sense because health benefits can form part of a compensation package and can help retain key employees and attract new talent.

For business owners that are looking to provide alternative health plans in a cost effective manner, you may want to consider a health spending account.

Disability: Most people spend money on protecting their home and car, but many overlook protecting their greatest asset: their ability to earn income. Unfortunately one in three people on average will be disabled for 90 days or more at least once before the age of 65.

Consider the financial impact this would have on your business if you, a key employee or shareholder were to suffer from an injury or illness. Disability insurance can provide a monthly income to help keep your business running.

Business overhead expense insurance can provide monthly reimbursement of expenses during total disability such as rent for commercial space, utilities, employee salaries and benefits, equipment leasing costs, accounting fees, insurance premiums for property and liability, etc.

Key person disability insurance can be used to provide monthly funds for the key employee while they’re disabled and protect the business from lost revenue while your business finds and trains an appropriate replacement.

Buy sell disability insurance can provide you with a lump sum payment if your business partner were to become totally disabled. These funds can be used to purchase the shares of the disabled partner, fund a buy sell agreement and reassure creditors and suppliers.

Critical Illness: For a lot of us, the idea of experiencing a critical illness such as a heart attack, stroke or cancer can seem unlikely, but almost 3 in 4 (73%) working Canadians know someone who experience a serious illness. Sadly, this can have serious consequences on you, your family and business, with Critical Illness insurance, it provides a lump sum payment so you can focus on your recovery.

Key person critical illness insurance can be used to provide funds to the company so it can supplement income during time away, cover debt repayment, salary for key employees or fixed overhead expenses.

Buy sell critical illness insurance can provide you with a lump sum payment if your business partner or shareholder were to suffer from a critical illness. These funds can be used to purchase the shares of the partner, fund a buy sell agreement and reassure creditors and suppliers.

Life: For a business owner, not only do your employees depend on you for financial support but your loved ones do too. Life insurance is important because it can protect your business and also be another form of investment for excess company funds.

Key person life insurance can be used to provide a lump sum payment to the company on death of the insured so it can keep the business going until you an appropriate replacement is found. It can also be used to retain loyal employees by supplying a retirement fund inside the insurance policy.

Buy sell life insurance can provide you with a lump sum payment if your business partner or shareholder were to pass away. These funds can be used to purchase the shares of the deceased partner, fund a buy sell agreement and reassure creditors and suppliers.

Loan coverage life insurance can help cover off any outstanding business loans and debts.

Reduce taxes & diversify your portfolio, often life insurance is viewed only as protection, however with permanent life insurance, there is an option to deposit excess company funds not needed for operations to provide for tax-free growth (within government limits)  to diversify your portfolio and reduce taxes on passive investments.

Talk to us about helping making sure you and your business are protected.

Small Businesses! Applications for Canada Emergency Commercial Rent Assistance starts May 25th

Lower rent by 75% for small businesses that have been affected by COVID-19

The Application portal for the Canada Emergency Commercial Rent Assistance (CECRA) opens at 8:00am EST on May 25th. The description from the CMHC website:

“Canada Emergency Commercial Rent Assistance (CECRA) for small businesses provides relief for small businesses experiencing financial hardship due to COVID-19. It offers unsecured, forgivable loans to eligible commercial property owners to:

  • reduce the rent owed by their impacted small business tenants

  • meet operating expenses on commercial properties

Property owners must offer a minimum of a 75% rent reduction for the months of April, May and June 2020.”

Application Dates

Due to expected high volumes of applications, the application dates will be as follows:

  • Monday – Property owners who are located in Atlantic Canada, BC, Alberta and Quebec, with up to 10 tenants who are eligible for the program

  • Tuesday – Property owners who are located in Manitoba, Saskatchewan, Ontario and the Territories, with up to 10 tenants who are eligible for the program

  • Wednesday – All other property owners in Manitoba, Saskatchewan, Ontario and the Territories

  • Thursday – All other property owners in Atlantic Canada, BC, Alberta and Quebec

  • Friday – All

Eligibility

From the CMHC website:

“To qualify for CECRA for small businesses, the commercial property owner must:

  • own commercial real property* which is occupied by one or more impacted small business tenants

  • enter (or have already entered) into a legally binding rent reduction agreement for the period of April, May and June 2020, reducing an impacted small business tenant’s rent by at least 75%

  • ensure the rent reduction agreement with each impacted tenant includes:

    • a moratorium on eviction for the period during which the property owner agrees to apply the loan proceeds, and  

    • a declaration of rental revenue included in the attestation

The commercial property owner is not and is not controlled by an individual holding federal or provincial political office.

CECRA will not apply to any federal-, provincial-, or municipal-owned properties, where the government is the landlord of the small business tenant.

Exceptions

  • Where there is a long-term lease to a First Nation, or Indigenous organization or government, the First Nation or Indigenous organization or government is eligible for CECRA for small businesses as a property owner.

  • Where there are long-term commercial leases with third parties to operate the property (for example, airports), the third party is eligible as the property owner.

  • Also eligible are post-secondary institutions, hospitals, and pension funds, as well as crown corporations with limited appropriations designated as eligible under CECRA for small businesses.

NOTE: Small businesses that opened on or after March 1, 2020 are not eligible.

* We define commercial Real Property as a commercial property with small business tenants. Commercial properties with a residential component and multi-unit residential mixed-use properties would equally be eligible with respect to their small business tenants.

NOTE: Properties with or without a mortgage are eligible under CECRA for small businesses.

What is an impacted small business tenant?

Impacted small business tenants are businesses — including non-profit and charitable organizations — that:

  • pay no more than $50,000 in monthly gross rent per location (as defined by a valid and enforceable lease agreement)

  • generate no more than $20 million in gross annual revenues, calculated on a consolidated basis (at the ultimate parent level)

  • have experienced at least a 70% decline in pre-COVID-19 revenues **

NOTE: Eligible small business tenants who are in sub-tenancy arrangements are also eligible, if these lease structures meet program criteria.

** Small businesses can compare revenues in April, May and June of 2020 to that of the same period in 2019 to measure revenue losses. They can also use an average of their revenues earned in January and February of 2020.

For Full Details and to apply: