If I become disabled, I could get by on my savings, assets & government benefits.

There are people who have accumulated a considerable amount of wealth and really don’t need to work for a living. Then there are the rest of us. While a number of potential sources of funds might come to mind, all fail the long term test.


If you save 5% of your income each year, six months of being totally disabled will wipe out 10 years of savings.

Retirement Savings Plan withdrawals:

Not only are there tax consequences and penalties, your long term retirement plans will be unattainable if you withdraw money from your RSP.

Borrow from the Bank:

Banks are not interested in loaning money to people without a source of income.

Borrow from Family Members:

Your family has its own financial needs, obligations and goals. These don’t include the financial burden of loans that may never be repaid by an unlucky relative.

Working Spouse:

Can one person really be expected to be the parent, private nurse and breadwinner all at once? What if your household depends on two incomes? Is it realistic to believe your spouse can easily find a new job to make up the difference?

Liquidation of Assets:

Do you believe people will offer you a fair market price if they know you have been forced to sell your assets? What are you left with should you recover?

Government Benefits:

Canada Pension Plan pays an amount based on how long and how much you have contributed. To qualify before retirement, you must prove that you have an extremely serious disability that will likely lead to death. If you do qualify, the maximum benefit for 2012 is only $1,185.50 per month and subject to taxation. The average monthly benefit paid out as of July 2012 was only $842.33. Government benefits like CPP and welfare are intended to provide those most in need with a subsistence income.

Using your savings and assets is not a sensible long term solution to your disability protection needs. The best way to protect yourself is to obtain disability insurance.