Why Do I Need Disability Insurance?

People are unaware of the startling disability statistics. Often they have purchased life insurance to protect their families in the event of death.

In fact, the odds are far greater that a person will become disabled in a given year than that he or she will die. There is at least an eight times greater chance of suffering a disability of at least 90 days as compared to the chances of death (up to age 37). While death may be inevitable, disability is more probable at any given age.

Where would you like to put your family’s financial security?

Government Run Legislative Disability Programs: – Designed and Controlled by the government.

Workers Compensation: A Provincial Government program providing tax free income for accidents that occur at work. You may receive up to 90% of your net income to the age of 65.

Unemployment Insurance:  A Federal Government program providing income for a lay-off or a disability caused by an accident or illness off the job. There is 15 day waiting period, with benefits paid for a maximum of 15 weeks. The maximum weekly benefit is $485, based upon an annual salary of $45,900.

Canada Pension Disability Benefit: A Federal Government program. In order to qualify for benefits you must have a disability considered to be “severe” and “prolonged”. It must also prevent a person from being able to do “any job” on a consistent basis. The average monthly payment for 2011 is $1,153.37. Benefits cease at age 65

Private Disability Insurance Policies: – Designed and Owned by you.

Group Disability Plans:  A percentage of an employee’s income is paid as a result of a disability caused by an accident or sickness. This benefit is paid after short term disability or EI disability benefits have been exhausted. Payment periods are determined by the employer, either a set number of years or to age 65.

Personally Owned Disability Policy: Premiums are level and guaranteed for the duration of coverage, you are the only person who can cancel the plan. Disability benefits can be paid from the 1st day of an accident and can continue to the age of 70. Sickness coverage is also available with benefits commencing from the 30-60-90-120 day of illness, you choose.

If you are taking only dividend income, you cannot COST PLUS excessive dental and medical expenses not covered by your employee benefit plan.  The CRA will not allow you to expense these items to your corporation if you do not have T4 income in proportion to the expenses you are claiming.

As Cost Plus can be a cost effective form of claiming medical expenses in addition to your group benefit plan, this is something that should be kept in mind.

Working with your group benefit coverage, Cost Plus can:

• Cover items not covered or paid for by your group plan,
• Reimburse these costs on a tax-free basis,
• Be paid with pre-tax dollars through your company, creating a business deduction like group insurance premiums.
• Cost Plus cannot be for shareholders only.

The rules are changing for this tax strategy so be aware.

Major insurance companies and National Associations  advertise how great their service is, & their  product is better than the other guys…but how do you really know? The insurance companies are hoping “ADVERTISING SELLS”.  Invest some  time, and  research the insurance broker and make sure they are knowledgeable in the products you need.

How can you investigate the firm you are planning to do business with?

Better Business Bureau

• As with any business, is the firm you are going to work with a member in good standing of the Better business Bureau?

Provincial Insurance council

• The provincial insurance councils publish disciplinary actions against advisors & their firms.

References from current clients

• It is not unreasonable to ask for references, and make sure to ask for at least two.

Community

• Is this firm known in the community, if you were to ask several colleagues, friends, or acquaintances would they know them, or have information?

Many insurance brokers are specializing in specific areas of insurance, instead of being generalists in this evolving market of complex products. If they are like us they have researched the market and analyzed the products available. We compile  research about all insurance policy details and comparables in more detail then you are able to do. Each firm is different, and brings something unique to each situation.

It is important to know  if they are bringing you the products and services you need, not just what you  want to hear.

Drug Formulary – plain and simple is the number and type  of drugs covered by your benefit plan.

You  can  provide  prescription  coverage for your employees that would cover  everything, but depending on your insurance provider you could pay a very high premium.

Conversely you could choose a formulary  that would cover only a  few  prescriptions or not cover medications for arthritis or MS, or even birth control. This type of program would control  costs but you would have very upset employees.

2 very common formularies used:

-          National formulary -  8,760 drugs

-          Provincial formulary –  varies by Province  BC covers  5,085 drugs

These formularies are used by governments, some Unions and Associations.

There are other formulary options which cover as few as  4000 drugs and as many as 13,500 drugs. We feel that a employee benefit plan should offer coverage in the 13,500 range. This will provide your employees adequate coverage.

Many agents are recommending and selling benefit plans with  a reduced drug formulary option. The  reduction in  coverage obviously will reduce your costs and claims. Is this the right advice from the agent? By changing the drug coverage which employee is affected and how?

We know  there are other forms of cost containment options that will give your employees the coverage they need without reducing the integrity of your plan design.

Such as

1. Deductibles for extended medical

• Per person or by family
• Dispensing fee deductible on prescriptions, this makes an employee shop around to buy as dispensing fees vary from $4.50 to $12.00

2. Cost sharing

• Co-insurance on drug coverage -  lowering the coinsurance so the employee is responsible for a larger portion. Example from 80% to 70%

3. Drug maximum cap

• Instead of having an unlimited allowance on drugs, set an annual maximum. (We do not like this option)

These measures are not always necessary. But  we believe  employees should be made aware and take responsibility for the rising costs associated with their benefit plan. Through  education we can show employees how to reduce some of the fees they pay for services they use. The years of unlimited corporate resources is over for awhile.

Another option available is a POOLED priced benefit plan.  Our company has been providing pooled benefits within 3 exclusive pools for the last 30 years. This type of plan allows you to purchase your benefits at wholesale pricing, and can create a cushion for high claiming years that will not drastically affect your premiums. This gives small to medium size business the protection they need with a plan design they want.

We are advising you of this because prospective clients are telling us they have renewed their plan and are committed to the insurance company until the next renewal date. Is this a misunderstanding or are agents telling employers they are committed to the plan for the full year?

Your premium rates are guaranteed until the next renewal date but a carrier cannot force you to keep a group benefits program for full twelve month period.

Why change insurance companies? If you  have poor service, your cash flow has decreased and now pricing becomes an issue, employees are spending too much of their work time dealing with claim problems, you want to add a benefit and your present carrier says it can’t be done because you do not have enough employees. The list is long!!

If you have a benefit plan you would like a review of or you know of someone who is having issues with their current plan contact us and we will help them.

When changing insurance providers it is very important that certain protocols are followed, including giving proper notice of termination and leaving on good terms. You never know what may happen in the future and you may need their product again. It is proper to give a minimum 30 days notice, some may accept as low as 21 days.

As an advisor, my clients expect me to guide them through the complexities of group insurance/employee benefits. It has come to my attention lately that advice given by other agents could affect a business’s reputation with the insurer. These agents are properly advising the insurance company that the group plan is moving to another insurance carrier within 30 days, but during that 30 day notification they advise the employees to “slam” the current insurance company with dental claims, eye exams, eye glasses, renew prescriptions at the maximum allowable under the plan, etc.

This is not unethical or against insurance rules. It is more of a nuisance to the insurance company as they have no way to recover their expenses. You may think it is a big insurance company and they can afford the loss, but insurance companies have very long memories and it is your reputation that is being tainted, not the agent’s. You should be aware that agents giving this may advice have had their marketing rights terminated, or your business may be put on a “do not quote” list for that particular insurance company.

In the employee benefit community you, as a business, should be cautious of such advice and always seek a second opinion if any advice is questionable. It is your reputation on the line.

 Top national victories

• Introducing a special federal small business corporate tax threshold and then expanding it to every province
• Increasing the Small Business Corporate Tax threshold to $500,000
• Increasing the Lifetime Capital Gains Exemption to $750,000
• Influencing the federal government to commit to the reduction of paper burden by 20 per cent
• Reducing Employment Insurance (EI) premiums since 1994
• Defeating the proposed mergers of four of Canada’s chartered banks

To learn more, Visit the CFIB Website.

To give you some back ground, renewals and marketings are calculated on several factors such as, claims from the last three years, demographics, occupations, administration costs, profit for the insurance company, etc.  The use and requirement of this information varies by insurance company and client.  Our job as your consultant; is to know what factors the insurance companies are using to calculate quoted premiums and renewal premiums.

Health and Dental premiums are calculated using the same industry formulas. When an insurance company is asked to quote, they plug in factors based on their own profit margins, market trends, and whether they are actively seeking business at this time (or as some people would call, “buying business”), etc.

For the client that went to market, a major insurance company showed a savings of 10% off their current rate.

Surprisingly, when we calculated their next renewal using current claims history for Extended health and Dental (as even though you change carriers, your spending typically stays the same), and factors provided by this insurance company  we projected a premium increase of 20%-30% at next renewal.

Although this client would save money by switching insurance companies in the first year, it was evident the insurance company will recover their money come renewal in 2013.

The renewal increase for this client was 3% because they are in a benefit pool, and they are priced properly based on their claims and demographics.  The client decided to keep their benefits with us.

It is important as a broker to educate our clients on the mistake of buying low premiums for short term gain.  Buying your employee benefit plan from a knowledgeable broker can save you time and money in the long term.

The Long Term Disability market is experiencing a significant increase in claims incidence.

The Evolution of new disabilities, advances in medical technologies and aging population have contributed to increasing risk in the LTD market.

The global economy is in recession and this typically leads to higher than expected claims incidence.

Interest rates are at their lowest level in four decades and these low interest rates reduce the reserves to pay claims, which requires additional funding.

Canada Pension Plan has “tightened” their adjudication of disability claims. This shifts liability to the private sector and Long Term Disability plans.

Original Post - December 21, 2011

When applying for a Parent and Grandparent Super Visa, applicants will be required to obtain private Canadian healthcare insurance for at least 365 days and for no less than $100,000 of coverage. As a result of this prerequisite, beginning December 19, the GMS Immigrants & Visitors to Canada plan will be ready to accommodate Super Visa requirements.

In order to satisfy the Super Visa proof of medical insurance requirement, the Immigrants & Visitors plan will be expanded to offer 365 days of coverage to applicants age 55 and over. Plus, the policy wording will be updated to allow for the requirement that healthcare insurance be continuous throughout the 365 days—regardless of the number of times a parent or grandparent returns to their home country. Other minor updates to the policy wording will also be made to accommodate Super Visa applicants. Rates will not be affected by these changes so the rates published in the existing Immigrants & Visitors to Canada brochure can be used to provide a quote.

On December 19th, the GMS online rate estimator will begin providing quotes for 365 days of Immigrants & Visitors coverage for applicants age 55 and over. In addition, the online Immigrants & Visitors application will be updated to include a “Super Visa” option under the “Visitors to Canada Plan” section. To purchase a plan, simply log into the GMS website and click on the “Immigrants & Visitors” link on the left-hand side of the screen.

Contact us at 250-861-1006 or email questions@telus.net for a free quote!

Original Post - December 13, 2011