Premium decreases across the board
The three main players in disability insurance in Canada have all within the past year announced premium decreases for their products. Price reductions started with Manulife in late 2013, followed by Great-West Life and its subsidiary Canada Life in April, and now RBC Insurance. The reasons cited were to remain competitive in the individual disability insurance marketplace and changing morbidity trends. Morbidity is the rate of disabilities among the general population, similar to how mortality is the rate of death. The lowering of premiums means that morbidity is decreasing.
Morbidity has a great deal to do with occupation, with manual labour jobs having a higher morbidity rate than office and professional work. While RBC Insurance’s reductions were level across the board, Canada Life focused on the two lowest risk occupation classes. The 4A category includes professionals such as doctors, accountants and lawyers, while the 3A category is reserved for office staff and other occupations with little manual labour. Reductions in premium in Canada Life’s disability insurance product, Lifestyle Protection Plan, were in the 2-6% range for non-smokers, although the male non-smoker 4A category received a massive 10% reduction. 3A smokers only received a miniscule 1% price decrease.
RBC Insurance reduced the premium on their Professional Series disability insurance product by an average of 7% and Manulife lowered the price on their Proguard Series by 6%. RBC Insurance’s Foundation Series and Manulife’s Venture Series, which are cost-effective disability insurance products but with reduced guarantees, saw their premiums fall by 1% and 2.5% respectively.
Should you buy now?
Is this the best time to purchase disability insurance? We believe that along with life insurance, disability insurance is a must for anybody working. During working years, morbidity rate is much higher than mortality rate, so it can be argued that disability insurance is even more important than life insurance.
There are several reasons why people don’t have individual disability insurance. The first is that their employer or association already provides group benefits that include disability insurance. You want to make sure to read the fineprint of the benefits booklet to see how much qualify for. Group disability insurance usually have a limit on the monthly payment, so high income earners in particular must be attentive to this maximum and can consider topping up with an individual policy.
The second reason people don’t have individual disability insurance is due to its complexity. Compared to life insurance, where one only has to choose the amount and type (eg: term, permanent) of coverage, disability insurance has a myriad of choices. There is the waiting period, which specifies how long you must be disabled before receiving benefits, the benefit period, which indicates how long benefits will be paid for, and other options such as residual disability, partial disability, return of premium, cost of living adjustment, and more. All these options lead to analysis paralysis, where one can’t make up their mind and settle on a decision. This leads to them neglecting disability insurance, even though coverage is of utmost importance. In a future post we will discuss disability insurance and its provisions and riders in detail.
We believe that your greatest asset is not your home or investment portfolio, but your ability to earn money. You will make hundreds of thousands of dollars or even millions of dollars over your lifetime. Don’t you think your ability to earn so much money should be insured?
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