Should You Really Put A Ring On It?

I was recently at a networking event when I was introduced to an established and experienced real estate agent.     In conversation I learned that she had just recently closed a big sale and as a reward she gave herself a brand new diamond ring worth over 15K.   Nervously she said, "I shouldn't even be wearing this now ...   I haven't put insurance on it yet!"

"That's interesting."   I commented.   "Have you put insurance on your most valuable asset yet?"

As a 40 year old, earning $100,000 a year, she will earn $2.5 Million dollars over the next 25 years!   Any asset that can earn you that kind of money is worth protecting.

Earning potential to age 65 based on current age and income. 

It strikes me as ironic that we will place more value on a $15K ring than we will on ourselves and our own ability to earn and income.

But what are the chances?

If you do have a disability lasting longer than 90 days, how long will it last on average:

Source:  RBC Insurance

And just think of the impact this earning loss will have on your ability to pay your mortgage, save for kids education, retirement savings etc

GOVERNMENT PLANS ARE JUST NOT GOOD ENOUGH

Worker's Compensation - injury or sickness that occurred on the job.   Less than 5% of disabilities occur at work.

CPP Disability Benefits - The definition is such that it must be a severe and prolonged.   Severe means that it stops you from doing any type of gainful work. Prolonged means that it is long-term and of indefinite duration or is likely to result in death.

EI - Last only 15 weeks and covers only a % of the YMPE max (Currently $53,600)

HAVE A GROUP PLAN ... CHECK THE FINE PRINT

Most group plans will have some sort of disability coverage.    But you better look at the fine print.   Here are 3 very common, yet often unknown limitations of group plans.                                                                                                                                  
 1.   Most group plans will not cover bonuses or sales commissions.    Only a % of your base salary.

2.   Many group plans have a monthly or yearly maximum eg) 60% of earnings to a max of $1,000 a month or $5,000 per year.

3.   Often group plans will have a CPP offset, meaning they reduce your payment by any amount paid by CPP... which by the way is taxable.

(I'd be happy to review your group plan for you.)

Don't get me wrong ... I think it's fantastic that this woman rewarded herself with a big rock (and honey if you are reading this, next year is our 10th Anniversary ... the Diamond Year).    

But if you like it ... if you like yourself, and the money you earn, put some disability insurance on it.