Income Replacement Strategy

The Situation

You are a business owner, executive, young professional or high-income employee and your career is progressing. It is fairly easy for you to pay bills and save a little money. You realize that if a disability was to strike and you were unable to work, the picture would suddenly turn bleak. It wouldn't be long before your savings were wiped out and there would be no income to pay bills or maintain your lifestyle.

You are also surprised to learn that a person who is currently 35 years old and earning $60,000 annually, has the potential to earn in excess of $2.5 million in their lifetime. While a car and home may certainly be valuable assets, you realize that the ability to work and earn an income is a far greater asset.

The Strategy

Purchase an Individual Disability Insurance policy. An Individual Disability policy protects your income. Individual Disability Insurance can be permanent coverage, which you own and control, with level premiums that cannot be changed until age 65. The coverage is portable, which means that the plan remains intact regardless of where you work, and Individual Disability plans often include partial disability coverage. In addition you have the option of purchasing cost-of-living coverage and future insurability coverage as part of the plan. If all the premiums are paid with after tax dollars then any benefit received will be tax-free.

Individual Disability Insurance also gives you the option of purchasing a return of premium benefit (ROP), which returns up to 70% of paid premiums after 10 years, and sometimes every eight years thereafter. ROP places you in a unique situation. If you become disabled the insurer will pay the chosen benefit, while on the other hand you can elect to receive a refund of premium if you remain healthy and have no claims.

This Income Replacement Strategy provides:

• Non-cancellable disability protection
  
• Guaranteed level premiums to age 65
  
• Partial disability benefits
  
• Portability
  
• Return of premium benefits
  

This material is for information purposes only and should not be construed as legal or tax advice. Every effort has been made to ensure its accuracy, but errors and omissions are possible. Individual circumstances may vary and specific legal and tax advice is recommended.

This strategy is based on current tax legislation. Future tax changes and market conditions may affect this program.

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