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Beware The Fine Print – Not All Disability Contracts Are Created Equal

You need to read the fine print!  We have all heard that phrase before. Typically, we hear this phrase due to something not living up to its intended purpose. The buyer wants to use or collect on something they purchased and the seller or company behind what was purchased says, “Sorry, that is not what we agreed to.” We start to question our decision and pull out the contract. The contract will tell us the letter of the law and what both parties agreed to. The problem is contracts are long, hard to read and are often only read after the fact. Who has time to read through the contract? 

Insurance is no different. Essentially, the insured is agreeing to the terms and conditions of their insurance policy contract. Over the last two years, we have helped a number of our clients submit and receive disability claims. It is the phone call no client wants to make and no advisor wants to receive. The client and their family are going through one of the toughest times of their lives. With these claims, every client had similar questions:

  • “We have coverage for this, right?”
  • “What do I need to do to claim?”
  • “This is my situation; my insurance is going to pay, right”?

In each scenario above, the claim paid out, the insurance did its purpose. The contract came through. That is because, upon application, we took the time to understand the contract and made sure everything the client wanted was in that contract. 

But not every contract is created equally. This becomes very clear when we compare contracts for our clients offered through associations and top-tier products offered by individual insurers we recommend.

 Here are the most important factors when considering which disability contract is right for you:

  1. Definitions of the contract – Imagine signing a contract with someone, agreeing to their terms at the time you pressed pen to paper, but that person had the right to change one or all of the conditions of your agreement at any point. Would you sign that?  Many association plans reserve the right to do this; whereas, individual contracts cannot change the terms on you.
  2. Premiums of the contract – At first glance, an association contract may look attractive due to the lower price tag. But inside that contract the right is reserved to increase premiums at any point.  The top disability policies offered through individual insurers guarantee your premiums, so long term, you will always know what you are paying.
  3. Benefit at Claim – Most would assume that the monthly benefit of their policy is what they will receive at claim time. Association contracts may ask you to prove your income at claim.  With maternity leave and the ebbs and flows of billing, the insurable benefit you have may not be what you can prove when you need it most.  Individual contracts lock in that amount and often offer some extra added benefits such as “Presumptive Increase” or “Transition to work” which may pay you up to 25% more in the event you need to claim. These benefits are built into many individual contracts and one of many reasons we are so adamant about having them.
  4. Advocate at Claim – I cannot stress enough the importance of having an expert in your corner in the event you have to make a claim. When you are going through a disability the last thing you want to do is increase your stress.  The right advice at claim time can make a world of difference not only financially but emotionally as well.

When we meet with a client for the overall planning, two main focuses are:

Offence: How do I pay down my debt? How much should I put into my RRSP? What does my wealth plan look like over the next 20 years?

Defense: What happens if I can’t work? What happens if I die prematurely? What happens if I live longer than expected?

The right defense starts with a custom-built disability contract made for you and your plan. As your income is the driving force that keeps everything in motion, this is the first insurance we focus on as part of the plan.

The best offence cannot score enough points to make up for a poor defense. With years of experience in the disability insurance market, we invite you to reach out to us to look at your contracts and make sure you have the right protection to keep you protected. At the end of the day, peace of mind is worth a quick phone call or email.

The views expressed in this commentary are those of Tall Oak Capital Advisors as at the date of publication and are subject to change without notice. This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice. Statistics, factual data and other information are from sources Tall Oak believes to be reliable but their accuracy cannot be guaranteed. This commentary is intended for distribution only in those jurisdictions where Tall Oak Capital Advisors are registered. Securities-related products and services are offered through Raymond James Correspondent Services Ltd., member Canadian Investor Protection Fund. Insurance products and services are offered through Gryphin Advantage Inc., which is not a member-Canadian Investor Protection Fund. This commentary may provide links to other Internet sites for the convenience of users. Tall Oak Capital Advisors is not responsible for the availability or content of these external sites, nor does Tall Oak Capital Advisors endorse, warrant or guarantee the products, services or information described or offered at these other Internet sites. Users cannot assume that the external sites will abide by the same Privacy Policy which Tall Oak Capital Advisors adheres to.