Financial impact of disabilitiesWednesday January 28, 2015 Written by RBC Insurance
Most Canadian workers would suffer severe financial hardship if they were forced out of work with a disability.
According to a recent RBC Insurance survey, three in four workers (76 per cent) believe that should they become disabled and unable to work for three months, there would be serious financial implications for their family, such as significant debt or an impact on retirement plans.
But despite the concern, only about one-quarter of Canadian workers (27 per cent) have discussed how a disability would financially impact their family. This number did not increase substantially among workers who indicated they’ve taken time off in the past because of a disability (33 per cent).
“A long term disability can have serious consequences affecting one’s financial situation, including leaving insufficient funds to cover regular living expenses and/or delaying or reducing retirement savings,” said Mark Hardy, senior manager of life and living benefits with RBC Insurance.
“Industry research shows that 26 per cent of Canadians say they could not pull together $2,000 over the next month if an emergency expense arose; and more than half of Canadians believe they would find themselves in financial difficulty if their pay was delayed by even a week. These findings emphasize the need for Canadians to ensure that they have the appropriate level of coverage in case of a long term disability.”
Not taking proper precautions
Canadians are not taking the proper precautions to ensure they’re financially protected in case of disability. The survey revealed that just 16 per cent of respondents have individual disability insurance outside of any workplace coverage. Among Canadian workers who have not purchased an individual policy, one in 10 didn’t know what disability coverage was, while one-quarter (22 per cent) had not thought about their chances of becoming disabled.
Dipping into personal savings
If unable to work due to a disability, many Canadians (34 per cent) would dip into their personal savings to pay for essential living expenses. Others said they would rely on their spouse or partner’s income (29 per cent), government support (19 per cent) and cash in investments (16 per cent).
Fifteen per cent of Canadian workers don’t know how they would pay for their living expenses if they were faced with a disability.
“The average length of a disability over 90 days is between two to three years. Canadians should ask themselves ‘Do I have enough money saved to cover living expenses and health care bills throughout the entire length of my disability?’ Most people will realize that they don’t,” Hardy said.
RBC Insurance commissioned Ipsos to conduct a survey to gauge public opinion of Canadian workers regarding matters related to disability, disability in the workplace, and disability insurance coverage. The survey was conducted from July 14 to 18, 2014. In total, 1,000 employed Canadians were surveyed online using Ipsos’s I-Say online panel.