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More Canadians now perceive mental illness as a disability

TORONTO, Feb 1, 2022 – As attitudes around health and wellness among employees and employers continue to shift, the number of working Canadians who view mental illnesses as a disability has hit a new high. According to a recent RBC Insurance survey, more Canadians now consider depression (54 per cent) and anxiety (44 per cent) to be disabilities, the highest figures respectively since 2019. At the same time, just over half (54 per cent) rate their mental health as excellent or good, which is a significant drop of 12 percentage points over that same period in 2019.

“Over the years, we have seen more and more Canadians recognizing that disabilities can be mental, and not just physical in nature,” says Maria Winslow, Senior Director, Life & Health, RBC Insurance. “This is an important shift, particularly as people continue to deal with the ongoing stresses of the pandemic and they continue to report a decline in their mental health.”

Significantly more respondents aged 18-34 logged mental health challenges (69% anxiety, 59% depression) compared to those 55 and older (42% and 29% respectively), which Winslow adds could highlight that pandemic-related stressors have had a particularly negative impact on younger people. These findings support actual claims trends among RBC Insurance clients; over one-third (35 per cent) of new individual long-term disability claims for younger clients (18-39) are related to mental health in 2021, which is trending upward since 2019.

Canadians with poor mental health more likely to take time off due to disability

The importance of mental health to overall wellbeing is further underscored by survey results that found Canadians reporting poor mental health (32 per cent) were more likely to take time off due to disability than those who report good mental health (12 per cent). Among working Canadians, feelings of burnout were the main source of stress (42 per cent), indicating the potential impacts of the pandemic such as fear, uncertainty, and instability around work and home life. Finances, and income protection if they get sick or have COVID-19 was the second highest stressor for nearly as many (39 per cent), followed by increased work hours/workload (33 per cent).

RBC Insurance: More Canadians now consider depression and anxiety to be disabilities. (CNW Group/RBC Insurance)

However, feelings of stress or anxiety were significantly lower among those with support in place; Canadians who had a group benefits plan (60 per cent) and bought their own disability coverage (66 per cent) were more likely to rate their mental health as excellent or good. Still, those who rated their mental health as excellent or good in 2021 has dropped (-8 points) from the previous year. At the same time, fewer people report having disability coverage either through their workplace benefits (-6 points) or an individual disability plan (-9 points) – something which can help replace lost income should someone be unable to work for an extended period.

“The number of Canadians with disability coverage has declined from the peak of the pandemic to today,” adds Winslow. “But as mental health challenges continue to rise and the future remains uncertain, it’s more important than ever for all Canadians to consider their options for financial protection.”

Tips to manage stress and mental health

Canadians should consider these three tips to help manage stress and maintain good mental health:

  • Focus on healthy habits. Whether working at home, the office or a hybrid of both, it’s important to maintain healthy habits. Take frequent mini-breaks to exercise or meditate, and foster social connection with others. Establish clear boundaries between work and personal time. Along with a balanced diet and getting enough sleep, these are critical for supporting mental health and overall well-being.
  • Adjust your lifestyle and spending. With inflation on the rise, most people need to step up how much they save and prioritize what’s important to keep financial stress at bay. Cook at home to limit takeout meals, avoid impulse purchases, and look for areas where you can reduce or eliminate fees and services that you don’t absolutely need or use.
  • Ensure you’re covered before an injury or illness occurs. Being proactive and taking control helps to lower anxiety and provide a greater sense of safety. Disability insurance can not only ensure income protection should you become unable to work, but many plans can also help you return to work through benefits such as rehabilitation, job retraining and other services.

To learn more, visit www.rbcinsurance.com/disability.

About the RBC Insurance Survey

These are some of the findings of an Ipsos poll conducted between October 14 to 18, 2021. For this survey, a sample of 1,501 employed Canadians aged 18+ was interviewed. Weighting was then employed to balance demographics to ensure that the sample’s composition reflects that of the population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±3.1 percentage points, 19 times out of 20. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error.

About RBC Insurance

RBC Insurance® offers a wide range of life, health, home, auto, travel, wealth and reinsurance advice and solutions, as well as creditor and business insurance services to individual, business and group clients. RBC Insurance is the brand name for the insurance operating entities of Royal Bank of Canada, one of North America’s leading diversified financial services companies. RBC Insurance is among the largest Canadian bank-owned insurance organizations, with approximately 2,500 employees who serve more than four million clients globally. For more information, please visit www.rbcinsurance.com.

Media contact

Kiara Famularo, RBC Corporate Communications, 647-272-4077

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Socially Responsible Investing (SRI) has boomed in recent years as investors have discovered they can put their money behind investments that contribute to important social and environmental issues. According to SIMFUND Canada, Canadians invested more than $3.2 billion in Canadian-based environmental, social and governance (ESG) funds in 2020, while total net assets in these funds exceeded $22 billion – a 37% increase over the year before.

At the same time, studies have found that companies in SRI funds have better environmental, social and governance practices that may make them more sustainable long-term and therefore healthier and less volatile financially. A company’s ethical practices have also been shown to reduce exposure to scandals, disasters and lawsuits.

All of these factors can positively affect share prices and impact returns for investors.

Understanding SRI

When it comes to responsible investing, there are a number of terms and acronyms investors may come across – such as Impact Investing, ESG and SRI, which are sometimes used interchangeably. Understanding the difference between them can help new investors navigate this landscape.

For example, a company may be considered a responsible investment if it has a diverse board of directors – a company that manufactures weapons, on the other hand, would not be. ESG investing, meanwhile, considers how Environmental, Social and Governance factors affect the performance of a company, both positively and negatively (and therefore an investor’s returns).

Impact investing is a way to invest your money to create measurable positive outcomes. While SRI and impact investing both aim to bring about social change while delivering a financial return, impact investing requires that the change be more timely and impactful. Impact investing often involves private funds from institutional investors, while SRI investing involves investments available to all retail investors.

There’s more than one way to be a socially responsible investor

SRI investments aren’t simply selected by typical performance metrics such as earnings, growth and profit margins, but also by whether a company’s business practices align to the investor’s values – or not. To determine which companies to select for a fund, a fund manager has two methods to use: positive and negative screening.

Positive screening is a process that identifies companies making positive social or environmental contributions. Those with better ESG practices compared to their competitors are more likely to be included in the fund. While in many cases positive screening techniques highlight organizations that are actively furthering environmentally sustainable or positive social practices, positive screening is not limited to investing in companies within environmentally or socially focused industries. Companies with a stronger commitment to ESG practices in any industry may be considered as socially responsible investments.

Negative screening is one of the most basic methods of separating socially responsible investments from those that are likely to have a negative effect on society. It is one of the most widely used processes of weeding out companies that do not align with an investor’s values, such as those in industries like alcohol, tobacco or gambling, organizations associated with human rights violations or environmental damage or companies that do not meet diversity standards.

Both methods can lead to socially responsible investing. While negative screening prevents investors from supporting practices they find undesirable, positive screening purposefully supports those companies that are actively doing good and supporting investor values.

Investing in line with your values can pay off

For Canadians looking to invest in funds that can make a positive difference in the world, the future is bright. New funds continue to be introduced as interest grows in SRI investing. Companies with strong ethical and environmental practices may perform better in the long-term because they’re more sustainable. With a win-win situation like this, it’s no wonder Canadians are increasingly adopting socially responsible investment practices.

*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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Socially Responsible Investing (SRI) has boomed in recent years as investors have discovered they can put their money behind investments that contribute to important social and environmental issues. According to SIMFUND Canada, Canadians invested more than $3.2 billion in Canadian-based environmental, social and governance (ESG) funds in 2020, while total net assets in these funds exceeded $22 billion – a 37% increase over the year before.

At the same time, studies have found that companies in SRI funds have better environmental, social and governance practices that may make them more sustainable long-term and therefore healthier and less volatile financially. A company’s ethical practices have also been shown to reduce exposure to scandals, disasters and lawsuits.

All of these factors can positively affect share prices and impact returns for investors.

Understanding SRI

When it comes to responsible investing, there are a number of terms and acronyms investors may come across – such as Impact Investing, ESG and SRI, which are sometimes used interchangeably. Understanding the difference between them can help new investors navigate this landscape.

For example, a company may be considered a responsible investment if it has a diverse board of directors – a company that manufactures weapons, on the other hand, would not be. ESG investing, meanwhile, considers how Environmental, Social and Governance factors affect the performance of a company, both positively and negatively (and therefore an investor’s returns).

Impact investing is a way to invest your money to create measurable positive outcomes. While SRI and impact investing both aim to bring about social change while delivering a financial return, impact investing requires that the change be more timely and impactful. Impact investing often involves private funds from institutional investors, while SRI investing involves investments available to all retail investors.

There’s more than one way to be a socially responsible investor

SRI investments aren’t simply selected by typical performance metrics such as earnings, growth and profit margins, but also by whether a company’s business practices align to the investor’s values – or not. To determine which companies to select for a fund, a fund manager has two methods to use: positive and negative screening.

Positive screening is a process that identifies companies making positive social or environmental contributions. Those with better ESG practices compared to their competitors are more likely to be included in the fund. While in many cases positive screening techniques highlight organizations that are actively furthering environmentally sustainable or positive social practices, positive screening is not limited to investing in companies within environmentally or socially focused industries. Companies with a stronger commitment to ESG practices in any industry may be considered as socially responsible investments.

Negative screening is one of the most basic methods of separating socially responsible investments from those that are likely to have a negative effect on society. It is one of the most widely used processes of weeding out companies that do not align with an investor’s values, such as those in industries like alcohol, tobacco or gambling, organizations associated with human rights violations or environmental damage or companies that do not meet diversity standards.

Both methods can lead to socially responsible investing. While negative screening prevents investors from supporting practices they find undesirable, positive screening purposefully supports those companies that are actively doing good and supporting investor values.

Investing in line with your values can pay off

For Canadians looking to invest in funds that can make a positive difference in the world, the future is bright. New funds continue to be introduced as interest grows in SRI investing. Companies with strong ethical and environmental practices may perform better in the long-term because they’re more sustainable. With a win-win situation like this, it’s no wonder Canadians are increasingly adopting socially responsible investment practices.

Interested in investing in an SRI fund? Speak with your RBC Insurance Advisor and learn about the new funds we’re introducing to support your goals and values.

Call us at 1-888-512-3059.

 

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*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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But when thinking about the type of funds to choose, keep in mind that as you approach retirement, your financial needs, goals, and how you invest will start to change.

While retirement may still be in the distant future, eventually you’ll need to protect the money you’ve worked hard to save, while still making it grow in order to carry you through retirement. In fact, according to an RBC Insurance survey, 87 per cent of Canadians aged 55 and over agree that they’d like an investment product that guarantees the money they invest, but that also offers opportunities for growth. Yet 60 per cent are not aware that this option is available with segregated (seg) funds.1

Growth and Guarantees for Your Investments

Segregated funds are an investment solution only available through insurance companies. They help to grow and protect your hard earned savings with the added security of principal guarantees. Think of it as a combination of a mutual fund and an insurance policy. In other words, money is invested in professionally managed and diversified assets with the growth potential similar to mutual funds. But segregated funds have additional insurance components that protect the original amount invested.

Segregated funds offer several other unique benefits that other investment products don’t have, including:

  • Protection through guarantees.2 A maturity guarantee helps to protect your initial investment (at contract maturity), while a death benefit guarantee ensures that your named beneficiaries will receive 75% or 100% of the amount that was invested (depending on the guarantee option chosen by you) on your death.
  • Reduce estate-planning costs. After a person dies, there is a legal approval process required to validate their Will. This process is called probate, and can be a lengthy administrative hassle that incurs fees. As an insurance product, segregated funds death benefits paid to specific beneficiaries are not subject to the probate process, meaning that funds go directly to the beneficiary, without any estate or probate fees3.
  • Potential protection from creditors. Segregated funds are considered an insurance contract so they may be exempt from seizure by creditors if the named beneficiaries are in the protected class under provincial law. This may be an important benefit for professionals, entrepreneurs and business owners who might be involved in an unexpected lawsuit or bankruptcy.
  • Increase your protected amount. If your investment has earned money, you may have the option to “reset” the guaranteed value of your investment, which locks in the gains you’ve earned.

These guarantees and benefits, combined with the growth potential, are what make segregated funds so appealing to those who are planning or approaching retirement.

Interested in Learning More About Segregated Funds?

Segregated funds can only be purchased through a life insurance advisor. Have an RBC Insurance advisor contact you to learn more.

1) https://www.rbc.com/newsroom/news/article.html?article=123680
2) Guarantees are proportionally reduced by withdrawals.
3) Probate fees and requirements vary by province.

 

RBC Retirement Investment Solutions

Whether you’re building up your nest egg or ready to turn your hard-earned savings into retirement income, our solutions can help you make the most of your money. Have an RBC Insurance Advisor call you to learn more.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

Any amount that is allocated to a segregated fund is invested at the risk of the contract holder and may increase or decrease in value. RBC Guaranteed Investment Funds are individual variable annuity contracts and are referred to as segregated funds. RBC Life Insurance Company is the sole issuer and guarantor of the guarantee provisions contained in these contracts. The underlying mutual funds and portfolios available in these contracts are managed by RBC Global Asset Management Inc. When clients deposit money in an RBC Guaranteed Investment Funds contract, they are not buying units of the mutual fund or portfolio managed by RBC Global Asset Management Inc. and therefore do not possess any of the rights and privileges of the unitholders of such funds. Details of the applicable Contract are contained in the RBC GIF Information Folder and Contract at www.rbcinsurance.com/gif.

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Surprisingly, there’s an option that you may not have heard about: segregated funds. Discover the differences between segregated funds and mutual funds and why the former might make a great addition to your investment portfolio.

Key takeaways

  • Segregated funds and mutual funds both involve pooling investments with other investors to create more options and reduce risk, but they also have some key differences.
  • Segregated funds are an insurance product with unique benefits, such as guarantees on your original investment, estate-planning perks, and potential protection against creditors.
  • Before choosing your investment route, speak with a certified professional about considerations that include your retirement timeline, tax planning, and risk tolerance.

What are segregated funds?

Segregated funds, also known as guaranteed investment funds (GIFs), are similar to mutual funds in that they involve the pooling of money by multiple investors. In both cases, a professional fund manager will take that pooled money and invest it in various stocks, bonds, and/or other securities (known as a “portfolio”), based on the fund’s investment mandate. This strategy allows investors to put their eggs in a variety of different baskets, which may limit the risk of market fluctuations.

The major way that segregated funds are unique is that they include insurance guarantees, which means you may be able to protect part or all of the money you originally invested. At their most basic, segregated funds are mutual funds combined with an insurance policy.

How do segregated funds and mutual funds differ?

Mutual funds and segregated funds are similar in many ways: they have professional portfolio managers, they allow you to diversify risk, and they offer potential creditor protection on registered accounts.

But, there are some unique benefits of segregated funds.

Principal protection

When investing in mutual funds, there’s always the risk that the market could be experiencing a downturn when you’re hoping to access your savings for retirement. With segregated funds, the amount you invest (known as your “principal”) is protected by two guarantees.

  • Maturity guarantee: At the maturity date (the date the term is up for your investment—typically, 10 years or longer), you’re guaranteed to receive either the current market value of your investment or a minimum guaranteed amount, whichever is greater (the difference paid is often called a “top up”). The minimum guaranteed amount is typically 75 to 100 per cent of your principal, minus management fees and other costs.
  • Death benefit guarantee: Should you pass away, the person or people you name as your beneficiary or beneficiaries will receive either the current market value or a minimum guaranteed amount (75 to 100 per cent), whichever is greater.
Estate-planning benefits

Normally, the settlement of an estate takes time and involves a public probate process (where the courts formally recognize and review an individual’s will) with fees and taxes. With a segregated fund, the death benefit may be paid out faster to your named beneficiary or beneficiaries, bypassing a lengthy, public, and expensive estate settlement and probate.

If you have a blended family, a segregated fund may reduce potential conflict by allowing you to set aside assets from your overall estate to go directly, and privately, to a specific beneficiary.

The quicker process with the segregated fund could also help your beneficiary or beneficiaries when its proceeds are intended to provide ongoing financial support.

Resets

With segregated funds, you may be able to “reset” the guaranteed amount of your principal investment. Say you invested $10,000 in a segregated fund, and the market rises over the next year, so your investment is now worth $11,000. With a reset, you can lock in your principal guarantee at $11,000 to protect your gains. Just note that your maturity date will likely reset as well.

Potential creditor protection

Segregated funds are an insurance product. That means, unlike mutual funds, segregated funds can potentially protect both registered and non-registered assets from creditors. If you’re a business owner or are self-employed, this perk might be particularly attractive.

Liquidity

Both segregated funds and mutual funds can be cashed in at any time at their current market value. However, you’d need to hold the segregated funds until their maturity date in order to access the maturity guarantee amount.

Fees

Sometimes, the fees for segregated funds may be higher than for mutual funds, due to their additional benefits.

Factors to consider when choosing between segregated funds and mutual funds

When deciding between various mutual fund and segregated fund portfolios (or choosing a mix), you’ll want to consider several factors.

  • Investment goals and timelines: Segregated funds are a long-term investment and will match best with your long-term goals, such as planning for retirement or planning a financial legacy for your family.
  • Risk tolerance: Mutual funds and segregated funds have investment options for all risk tolerances, but segregated funds are generally considered safer, because of the principal guarantees.
  • Liquidity needs: Do you need to be able to liquidate your assets at a moment’s notice? Both segregated funds and mutual funds allow you to access your invested capital at any time; although, cashing in early means you lose your guarantee.
  • Estate-planning considerations: Segregated funds can be a smart idea if you’re planning a financial legacy for your beneficiary or beneficiaries or you want privacy for your estate plans.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

Any amount that is allocated to a segregated fund is invested at the risk of the contract holder and may increase or decrease in value. RBC Guaranteed Investment Funds are individual variable annuity contracts and are referred to as segregated funds. RBC Life Insurance Company is the sole issuer and guarantor of the guarantee provisions contained in these contracts. The underlying mutual funds and portfolios available in these contracts are managed by RBC Global Asset Management Inc. When clients deposit money in an RBC Guaranteed Investment Funds contract, they are not buying units of the mutual fund or portfolio managed by RBC Global Asset Management Inc. and therefore do not possess any of the rights and privileges of the unitholders of such funds. Details of the applicable Contract are contained in the RBC GIF Information Folder and Contract at www.rbcinsurance.com/gif.

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But when thinking about the type of funds to choose, keep in mind that as you approach retirement, your financial needs, goals, and how you invest will start to change.

While retirement may still be in the distant future, eventually you’ll need to protect the money you’ve worked hard to save, while still making it grow in order to carry you through retirement. In fact, according to an RBC Insurance survey, 87 per cent of Canadians aged 55 and over agree that they’d like an investment product that guarantees the money they invest, but that also offers opportunities for growth. Yet 60 per cent are not aware that this option is available with segregated (seg) funds.1

Growth and Guarantees for Your Investments

Segregated funds are an investment solution only available through insurance companies. They help to grow and protect your hard earned savings with the added security of principal guarantees. Think of it as a combination of a mutual fund and an insurance policy. In other words, money is invested in professionally managed and diversified assets with the growth potential similar to mutual funds. But segregated funds have additional insurance components that protect the original amount invested.

Segregated funds offer several other unique benefits that other investment products don’t have, including:

  • Protection through guarantees.2 A maturity guarantee helps to protect your initial investment (at contract maturity), while a death benefit guarantee ensures that your named beneficiaries will receive 75% or 100% of the amount that was invested (depending on the guarantee option chosen by you) on your death.
  • Reduce estate-planning costs. After a person dies, there is a legal approval process required to validate their Will. This process is called probate, and can be a lengthy administrative hassle that incurs fees. As an insurance product, segregated funds death benefits paid to specific beneficiaries are not subject to the probate process, meaning that funds go directly to the beneficiary, without any estate or probate fees3.
  • Potential protection from creditors. Segregated funds are considered an insurance contract so they may be exempt from seizure by creditors if the named beneficiaries are in the protected class under provincial law. This may be an important benefit for professionals, entrepreneurs and business owners who might be involved in an unexpected lawsuit or bankruptcy.
  • Increase your protected amount. If your investment has earned money, you may have the option to “reset” the guaranteed value of your investment, which locks in the gains you’ve earned.

These guarantees and benefits, combined with the growth potential, are what make segregated funds so appealing to those who are planning or approaching retirement.

1) https://www.rbc.com/newsroom/news/article.html?article=123680
2) Guarantees are proportionally reduced by withdrawals.
3) Probate fees and requirements vary by province.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

Any amount that is allocated to a segregated fund is invested at the risk of the contract holder and may increase or decrease in value. RBC Guaranteed Investment Funds are individual variable annuity contracts and are referred to as segregated funds. RBC Life Insurance Company is the sole issuer and guarantor of the guarantee provisions contained in these contracts. The underlying mutual funds and portfolios available in these contracts are managed by RBC Global Asset Management Inc. When clients deposit money in an RBC Guaranteed Investment Funds contract, they are not buying units of the mutual fund or portfolio managed by RBC Global Asset Management Inc. and therefore do not possess any of the rights and privileges of the unitholders of such funds. Details of the applicable Contract are contained in the RBC GIF Information Folder and Contract at www.rbcinsurance.com/gif.

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Nearly seven in 10 Canadians report that they have current debt – and four in 10 say they don’t know how they would pay their bills if they became critically ill or disabled and couldn’t work.

One option to help keep income flowing if an unexpected sickness or injury happens is through an insurance policy. While critical illness and disability insurance are different products, they serve a similar purpose of protecting your finances should you become unable to work and earn an income.

The lowdown on disability insurance

Disability insurance pays a monthly income, this is called the benefit, that replaces a portion of your regular pay cheque if you suddenly find yourself in a situation where you can’t work because you’re sick or injured. This includes mental illnesses such as anxiety, depression and post-traumatic stress disorder. Here are a few examples of an illness or injury, that might qualify for benefits under a disability insurance policy:

  • if you develop a mental illness, such as generalized anxiety disorder;
  • if you are injured, such as if you break your leg; or
  • if you develop a physical illness, such as multiple sclerosis.

Your specific disability insurance policy will explain the details of your coverage – such as:

  • how long you would need to be disabled before monthly payments begin,
  • the maximum amount of money you could receive each month, and
  • how long the payments might last if you continue to be disabled.

For example, your policy might say that payments would cover 60 percent of your gross salary to a maximum of $4,500 per month; it would start 60 days after you develop a condition that is covered under your policy (that 60 days is referred to as the “waiting period”), and payments will last until you’re age 65, so long as you continue to be disabled and unable to work.

Disability insurance plans will either cover you for your “own occupation” or “any occupation.” If you have “own occupation” coverage, you will continue to receive your monthly benefit if you are unable to return to your regular, pre-disability job. In contrast, if you have “any occupation” coverage and you are unable to return to your regular job but could take a less-demanding job, your benefit payments could stop.

Some Canadians may have disability insurance through work. A workplace policy is more likely to provide “any occupation” coverage, so be sure to ask your HR department what kind of coverage you have, if any.

Canadians can purchase an individual disability policy from an insurance broker or insurance company, and can select coverage that is catered to their own needs, including purchasing a policy with “own occupation” coverage.

The number of Canadians who have disability insurance through work is declining – fewer than half of Canadian employees say they have coverage through work, and out of those employees with no work coverage, more than eight in 10 say they have not purchased their own personal policy.

If you have workplace coverage, and your employer pays the cost of the insurance on your behalf, the income you’d get from the policy is taxable. If you pay the cost of your disability insurance from work yourself, the monthly benefit is not taxable.

If you have a personally owned policy, the monthly income you receive if you become ill or disabled is not taxable.

The lowdown on critical illness insurance

A critical illness policy will pay out a lump sum if you are diagnosed with one of the illnesses covered by the policy – such as cancer, Alzheimer’s disease, a heart attack or a stroke.

Unlike a disability insurance policy, critical illness provides coverage for certain illness but no injuries.

The lump sum benefit from a critical illness policy is not determined by your income prior to diagnosis, and unlike disability insurance, you don’t have to have a job to qualify.

Another difference you may have noticed between disability insurance and critical illness is that you receive one lump sum payment with critical illness, instead of the monthly payments you would receive with disability insurance.

The lump sum payment is tax-free. You receive the payment after a relatively short wait time – called the survival period, this is usually 30 days after your diagnosis – and your claim is approved by the insurance company.

Receiving a critical illness benefit doesn’t affect any disability payments you may also be receiving or are eligible for, and there are no restrictions on how you spend the money. For example, you might decide to use the lump sum payment to help with housekeeping chores you are no longer able to carry out personally, to pay for the cost of child care, or to retrofit your home to better suit your needs.

If you’re interested in critical illness insurance, you will need to carefully review and compare policies and ask lots of questions – as the coverage can vary significantly. For example, some policies may only provide a payout if you are diagnosed with one of five conditions, while others might cover as many as 30 different conditions.

While many Canadians are aware of the importance of life insurance, critical illness and disability insurance can be an equally important part of your financial plan. Critical illness and disability insurance are sometimes referred to as “living benefits” because unlike life insurance, you could receive payments from this policy while you are still alive; so it offers protection to you directly, as opposed to your beneficiary.

Have you put together a plan for how you would pay your bills or manage expenses if you suddenly become ill or injured and can’t work? Consider taking some time to calculate how much you might need should the unexpected happen, to make sure that your income is protected, and to learn what options are out there to help.

 

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*Home and auto insurance products are distributed by RBC Insurance Agency Ltd. and underwritten by Aviva General Insurance Company. In Quebec, RBC Insurance Agency Ltd. Is registered as a damage insurance agency. As a result of government-run auto insurance plans, auto insurance is not available through RBC Insurance in Manitoba, Saskatchewan and British Columbia.

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.

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