Continuing Education for Financial Service Professionals
Disability Income: Sources and Solutions
Disability Income: Sources and Solutions Copyright 2013 CLIFE Inc. All rights reserved. Any reproduction of parts or all of this book and its contents by any means electronic or mechanical is prohibited.
ď Ť Disability Income: Sources and Solutions is relevant to all those who work in the financial services industry or in association with life insurers. The information in the course is provided for educational purposes only; it should not be construed or interpreted as providing advice. Agents and advisors should always seek guidance from their principals and compliance experts in regards to informing themselves and others about details of the products they sell and other considerations of their business.
ď Ť We welcome all feedback and suggestions for additions to the course. Please send your comments to info@clifece.ca. CLIFE INC. 1595 Sixteenth Avenue Suite 301 Richmond Hill, ON L4B 3N9 www.clifece.ca
Disability Income: Sources and Solutions provides continuing education credits for life agents, CFP s, and accident and sickness agents upon satisfactory completion of an online test. Please see the website for details or email info@clifece.ca.
Table of Contents
A Personal Story… 4 Introduction and a Picture of the Disabled in Canada… 6 Sources of Federal Government Financial Support…
12
Federal Tax Credits…
33
Sources of Provincial Government Financial Support… 37 Worker’s Financial Support: Workers’ Compensation… 62 Personally Financing Disability…
73
Special Purpose Plans for Disability Coverage..
91
Integration of Government and Personal Plans…
94
Substitute Decision-Making…
97
Disability Fraud…
117
Connecting the Dots…
122A
Personal Story On a cloudy, dry day in January 2009 I was walking to work along the sidewalk of one of Toronto’s busiest downtown streets. As I crossed a side street, I was hit by a vehicle that came up from behind and took me out sideways. I was taken by ambulance to a downtown hospital where the doctor in emergency failed to diagnose both my concussion and the ligament tear in my knee (despite the fact I couldn’t walk). It took many weeks before I was able to return to work on a full-time basis but I was lucky because my employer paid 100% of my salary while I was away. After eventual surgery I was again on the “sick list,” and again my salary was covered. Many people would not be as fortunate as I was to continue to be paid full salary even though they were unable to work. The important point to this story is that disability can happen in an instant; sometimes, there’s no warning and no possible prevention. Though disability most often results from a condition over time and is directly linked with aging, this is not always the case. What recourse does a suddenly disabled person have? Immediate income needs can’t be satisfied by insurance settlements; they take years to conclude. This is where a generous employer, government assistance, personal savings, or insurance coverage for disability comes into play whether provided by an individual plan or a group. The other factor that must be taken into consideration in any discussion about disability is the rate of disability in children and how care will be provided into adulthood; hence, the introduction of and need for the Registered Disability Savings Plan. Disability can be devastating to a family and a life-changing event. Learning about the programs and plans available means you will be ready to help those who have a disabled child or family member, those with a deteriorating condition, and those who become unexpectedly disabled. As for my story: I was able to retain a great lawyer and eventually received a settlement; such settlements are not nearly as large as people think. The settlement doesn’t change the fact that
my knee will never be the same and is a constant limitation on my day-to-day abilities. As a result, I am perpetually reminded of the accident. This is a psychological toll that often goes unrecognized among accident victims. Susan Yates July 2013
Introduction
The Financial Advisor’s Perspective: -
Millions of Canadians are disabled.
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The aging population indicates an increasing rate of disability: this makes Critical Illness Insurance and Long-term Care insurance highly relevant: LTCI is not just for Alzheimer’s patients; it’s for any person who cannot basically look after their own physical needs.
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Make sure you read the examples of situations where disability can occur in the following pages. These are everyday situations, nothing resulting from some form of catastrophe. This illustrates the need to plan for disability.
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Different financial planning approaches are needed when considering
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The UN Convention on the Rights of Persons with Disabilities uses the following definition for people with disabilities: “Persons with disabilities include those who have long-term physical, mental, intellectual or sensory impairments which in interaction with various barriers may hinder their full and effective participation in society on an equal basis with others.”
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The rate of disability in the Canadian population is directly linked to age: children younger than four have a disability rate of 1.7%; the rate of disability for those 65 and older is 43.4%.
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In 2006 the overall disability rate was 14.3%. This means approximately 4.4 million Canadians had a disability.
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Understanding the needs of the disabled and strategies available to help them is important for financial planners because of two trends: o Advances in medical care have given disabled individuals a longer lifespan and a better quality of life through the ability to be more active. o Those who have disabled children or are caregivers of disabled children have traditionally been slow to begin planning for their future.
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Among all the provinces, Nova Scotia has the highest rate of disability (20%) across all age groups and Quebec has the lowest (10.4%).
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Canadian data is based on 2006 Statistics Canada reports, which are the most recent available on this issue.
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This data is extracted from Disability in Canada: A 2006 Profile, Human Resources and Skills Development Canada; a link to the report is provided here.
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Disability insurance is a living benefit: in other words, unlike life insurance, its benefit is paid to the insured during his or her lifetime and is intended to replace income that is no longer being earned due to sickness or infirmity. The income benefit is paid monthly and the amount that is paid from a disability insurance policy is based on earned income.
•
Here are just a few examples of when disability insurance benefits and/or critical illness insurance or long-term care insurance can provide financial support: o following a car accident; o following a “lifestyle” accident: broken limbs due to skiing, snowboarding, rock climbing, hiking, snowmobiling, or other similar activity;
o following scheduled surgery; o following a medical emergency, such as a heart attack; o following medical procedures, such as radiation or chemotherapy. •
In addition, there is the disability typically associated with aging and specifically addressed by long-term care insurance. LCTI will pay any person of any age who is unable to perform two of the five activities of daily living: important to remember if a policy is taken out at a younger age, and the policy owner is debilitated by a heart attack, stroke, form of arthritis, or other condition while still relatively young.
•
Disability is a form of denial for most: “it won’t happen to me!” Statistics prove disability does happen far more often at greater personal cost than is generally believed, and is a significant societal cost.
A Picture of the Disabled in Canada
Children, aged 0-4 •
The most common types of disabilities for children are learning limitations, communication limitations and developmental or delay limitations.
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There are four specific types of disability identified in children aged 0 to 4: hearing, seeing, developmental delay, and chronic conditions. Some conditions, such as autism, result in multiple types of disability being reported.
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The most common chronic conditions that result in disability are asthma or severe allergies, autism, cerebral palsy and heart conditions or heart disease.
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Among young children with a disability, 63.4% have their disability classified as mild or moderate, while 36.6% have their disability classified as severe or very severe.
Children, aged 5-14 •
Almost 175,000 children in this age group reported a disability in Canada.
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The most common types of disability reported for children aged 5 to 14 are chronic conditions and learning and/or communication limitations.
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Boys were more likely to experience most types of disability.
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Among children aged 5 to 14 with disabilities, 57.6% have mild to moderate disabilities and 42.4% have severe to very severe disabilities.
Impact on Employment of Parents •
Almost half of parents who have chlldren with disabilities have to change their employment to accommodate care for their children (percentages rounded): o 30% worked fewer hours; o 29% changed their work hours; o 21% had not taken a job; o 17% had quit working; o 8% had worked more hours; o 5% had lost their job.
Income Factors •
Children with disabilities are more likely to live in low-income households than children without disabilities. In 2006, the average household yearly income for families with children with disabilities was $69,440; the average household income for families with children with no disabilities ($85,294).
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Over 19% of families with children with disabilities have a household income less than the after-tax low income cut-off (LICO), compared to only 13.4% of families with children without disabilities.
Youth and Young Adults •
Over 96,000 youths between the ages of 15 and 19, and over 99,000 of young adults, 2024, in Canada experienced disability in 2006. This represents 4.6% of the youth population and 4.9% of young adults.
Adults •
The disability rate progresses steadily with age: o 6.1% for those 25-34; o 9.6% for those 35-44; o 15.1% for those 45-54; o 22.8% for those 55-64; o 33% for those 65-74
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The most common types of disabilities for adults are pain-and age-related, including mobility and agility disabilities.
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Educational attainment has a large impact on labour force participation for people with disabilities. For example, 75% of younger adults with disabilities who have attained a trade certificate or diploma work. Only 43.8% of younger adults with disabilities who have not completed high school work.
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Disability negatively impacts income: o People with disabilities report income of $39,245 (men) and $25,678 (women) o People without disabilities report income of $52,865 (men) and $34,305 (women) •
Among older working-age adults with disabilities, 83.1% reported that
they have more than one type of disability. •
Adults aged 55 to 64 with disabilities are far less likely to participate in
the labour force than those without disabilities (42.5% versus 65.1%). •
77.1% of all older seniors with disabilities require help with at least some
everyday activities. This is a significant jump from the younger seniors age group. The most common activities for which older seniors with disabilities require help are heavy household chores (61.7%), attending appointments and errands (52.9%) and housework (50.3%).
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