1 in 3 Canadians Will Become Disabled Before the Age of 65

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What you need to know about your Group Long Term Disability

Having a source to replace your earned income in the event of an illness or accident is vital considering that on average, 1 in 3 Canadians will become disabled for a period of more than 90 days at least once before the age of 65.  For those that are disabled for more than 90 days the average length of that disability is 2.9 years.

If you are one of the approximately 10 million Canadians covered under a group Long Term Disability plan (LTD) it’s important to understand what your coverage provides. Don’t wait until after you’re disabled to read the employee handbook because you could have a few surprises!

How much coverage do I really have?

  • Generally, employee benefit LTD plans are designed to replace up to 85% of your pre-disability after-tax income.

  • The amount of your benefit is determined by a formula. These formulas vary so it’s a good idea to know what yours is.

When do I start getting benefits?

  • Usually, you are eligible for benefits to commence after being disabled for a period of 90 or 120 days.

Is this benefit taxable to me?

If the LTD premium is paid by you personally then the benefit will be received tax-free.

  • In groups where the employer pays the LTD premium, then the benefit when received will be taxable. Should this be the case, make sure you discuss with your employer or insurer what your options are for having tax withheld if disabled so there won’t be any unpleasant surprises come tax time!

What else do I need to know when I enroll in an LTD plan?

  • Pay attention to the Non-Evidence Maximum (NEM).  This is the maximum amount of disability benefit you would be entitled to without providing medical evidence.  You may be eligible to receive higher coverage if you take a medical examination.

  • You should also be aware that LTD benefits are usually offset (reduced), by any disability benefits you may receive from CPP/QPP or Workmen’s Compensation.

  • Any benefits paid as a result of an accident from an automobile insurance plan could also reduce your LTD benefits.

  • Most group plans have a waiting period, usually three to six months, before a new employee is eligible to join the plan.

  • If you were formerly a member of a plan at another employer, request that your new employer waives the waiting period.

  • If you’re an employee who was actively recruited or is considered a valuable addition, you should also make this request.

Are there other options?

  • All of the above could certainly result in you receiving less disability income than you thought you were entitled to.  If this is the case, consider purchasing an individual disability policy to “top up” your coverage.

  • The good news here is that most Group LTD plans do not offset against personal disability income policies.

Please call me if you would like to discuss your own situation or feel free to share this article using the sharing buttons with a friend or family member you think might find this information of value.

Source: CLHIA

Copyright @ 2020 FSB Content Marketing – All Rights Reserved

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

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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.

Copyright © 2021 FSB Content Marketing – All Rights Reserved

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

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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:

CEBA Loan Details

Throne Speech: Recovery Plan Highlights

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On September 23rd, in a speech delivered by Governor General Julie Payette, Prime Minister Justin Trudeau outlined the Federal government’s priorities focused on four foundations:

  • Fighting the pandemic and saving lives;

  • Supporting people and businesses through the emergency “as long as it lasts, whatever it takes”; 

  • “Building back better” by creating jobs and strengthening the middle class;

  • Standing up for Canadian values, including progress on reconciliation, gender equality, and systemic racism.

Below, we highlight the support programs that help those Canadians who are struggling financially due to the pandemic.

Canada Emergency Wage Subsidy extended to next summer

The Canada Wage Subsidy (CEWS) will be extended to summer 2021. Under new program criteria, businesses with ANY revenue decline will be eligible. However, the amount of the subsidy will be based on the revenue drop rather than the original 75%.

See what the changes are at Canada.ca

Canada Recovery Benefit increased to $500/week

The day after the Throne Speech, in a bid for opposition support, the federal government announced it will increase the new Canada Recovery Benefit (CRB) to $500/week for up to 26 weeks.

In order to qualify for this program, Canadians must be looking for work and had stopped working or had their income reduced by 50 per cent or more due to COVID-19, but are still making some money on their own.

Canada Recovery Sickness Benefit

The Canada Recovery Sickness Benefit (CRSB) will provide $500/week for up to 2 weeks for workers who are unable to work because they are sick or must isolate due to COVID-19.

Canada Recovery Caregiving Benefit

The Canada Recovery Caregiver Benefit will provide $500/week for up to 26 weeks per household to eligible workers who cannot work because they must provide care to children or family members due to the closure of schools, day cares or care facilities.

Creating a new Canadian Disability Benefit

The government pledged to bring in a new Canadian Disability Benefit (CDB) that will be modelled after the guaranteed income supplement (GIS) for seniors.

The CRB, CRSB, CRCB and CDB are pending the passage of legislation in the House of Commons and Senate.

See Eligibility for CRB and more