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The Difference Between Payout Annuities and RRIFs

Both options offer a way for retirees to create an income stream from their RRSPs to help meet their financial needs, but they differ in the way they operate and the financial situations they best suit.

When planning for your retirement, you’ll want to understand the differences between the two options to determine which one might be the right fit for you. You may even consider a combination of both products.

Once you have a better understanding of the options available to you, you’ll be able to make an informed choice that allows you to enjoy your retirement years to the fullest.

Key takeaways

  • There are important differences between payout annuities and RRIFs, and each one has its own set of potential pros and cons.
  • Payout annuities provide guaranteed stable income payments for a fixed term or for life.
  • RRIFs offer flexibility in terms of when and how much you withdraw (subject to annual minimum withdrawal requirements), as well as control over your investment, but they come with greater risk due to market fluctuations.
  • Your personal circumstances and financial goals in retirement are two key factors to consider before you invest in a specific product.

How do payout annuities work in retirement?

A payout annuity is an insurance product that provides guaranteed income for a set term or for life—it’s up to you to decide. When considering options for your RRSP, payout annuities may be a good choice for people who are:

  • Risk-averse when it comes to market fluctuations
  • Looking for a guaranteed stream of income for life or for a set period of time
  • Looking for fixed and regular payouts
  • Concerned about outliving their retirement savings
  • Lacking the time and skills to manage their own investments (or simply don’t want to).

There are several factors to consider when you’re selecting your payout annuity:

  • How often you’d like to receive payouts. Typical payout schedules are monthly, quarterly, semi-annually, or annually.
  • Do you want to guarantee income for yourself and your spouse/common-law partner, or just yourself?
  • Do you want added protection with a guaranteed period?

Those who choose to invest a portion of their retirement savings into a payout annuity could benefit from a guaranteed income stream with regular payments and a sense of security in knowing how long their income stream will last, whether that’s for a fixed term or for life.

What are some of the different types of payout annuities?

The type of payout annuity you choose will depend on your financial goals and your family’s needs. There are many options available, and each one deserves careful consideration. Here are three common types of payout annuities.

Single Life Annuity

This type of payout annuity provides a series of guaranteed income payments for the life of one person (known as the “annuitant”). When the annuitant dies, the payments stop.

Joint Life Annuity

A joint life payout annuity provides a series of guaranteed income payments for the lives of two annuitants (usually the individual and their spouse or common-law partner, though sometimes also a financially dependent child) during a joint lifetime. When one of the annuitants dies, the payments will continue to be made to the surviving annuitant until the end of their life. This is also sometimes called a “survivor annuity.”

Term-certain Annuity

The key difference in this type of payout annuity is right there in the name—instead of providing payments for life, a term-certain annuity ends on a specific date (at the end of the term that was agreed upon when the annuity was initially set up), or until the individual reaches a certain age.

The benefits of payout annuities

A payout annuity is an effective, easy-to-manage solution that provides you—or you and your spouse/common-law partner, if you choose—with a guaranteed level of income for the rest of your life or for a specified number of years. It can help cover your fixed expenses during your retirement years. That’s why it’s considered a foundational product for a well-balanced retirement portfolio, as it’s reliable and offers a level of predictability and stability once you retire.

Other benefits include:

  • Income security: Regular guaranteed payments are unaffected by changes in interest rates or the stock market.
  • Tax benefits: The amount directly transferred from an RRSP to buy an annuity is not considered a taxable income. Only the payouts from the annuity are considered taxable income and, as a result, they provide some degree of continued tax deferral.
  • Estate planning: A spouse/common-law partner or beneficiary can be added to receive the remaining payments should the annuitant die before the end of the guarantee period. The amount goes directly to the spouse or beneficiary and does not have to go through probate.
  • Easy management: Once you purchase your fixed payout annuity, you’re set. There are no ongoing investment decisions to make.

Considerations and potential drawbacks of annuities

As anyone who’s ever invested money knows, greater flexibility and potential for growth typically come with greater financial risk. Market volatility can affect or cause irreversible damage to your RRIF investments. It may not be a wise strategy to opt for high-risk investing in your retirement years. Careful attention needs to be paid to your investment strategies within your RRIF.

Consider consulting an investment professional for monitoring and advice on where to invest your RRIF funds. Depending on market activity, adjustments should be made to your RRIF portfolio, so your retirement savings remain as secure as possible and your financial needs can be met as they change over time.

Another potential drawback is that your RRIF might not provide a guaranteed income for life. There’s a chance you’ll outlive the savings in your RRIF.

How do RRIFs work in retirement?

If flexibility is a priority for your retirement years, then a RRIF may be an option to consider when your RRSP matures. They’re a popular choice when converting RRSPs into a retirement income plan, as they offer flexibility and allow you to continue to make and manage all your investment decisions.

You’ll need to convert your RRSP to a RRIF by the end of the year you turn 71 (or sooner, if you need income). Your investments transfer directly and don’t have to be liquidated. And similar to an RRSP, the growth earned in a RRIF is not subject to annual taxation. Only the amounts withdrawn are subject to taxation.

The benefits of RRIFs

If you’re looking for greater financial choice in your retirement years, RRIFs might be able to offer you that. In addition to flexibility, they can also provide more control if you wish to make specific choices about where and how to invest your savings. Those decisions might result in growth and a higher income within a RRIF. Smart investments within a RRIF can also lead to a greater potential to leave behind a legacy for your family and beneficiaries.

Instead of fixed and regular payments, if you invest in a RRIF, you can withdraw variable amounts from your plan (subject to minimum annual withdrawal rules) as your financial needs change.

There are many variables to consider when withdrawing money from your RRIF, so speak to your financial advisor to understand the benefits and risks.

Considerations and potential drawbacks of RRIFs

As anyone who’s ever invested money knows, greater flexibility and potential for growth typically come with greater financial risk. Market volatility can affect or cause irreversible damage to your RRIF investments. It may not be a wise strategy to opt for high-risk investing in your retirement years. Careful attention needs to be paid to your investment strategies within your RRIF.

Consider consulting an investment professional for monitoring and advice on where to invest your RRIF funds. Depending on market activity, adjustments should be made to your RRIF portfolio, so your retirement savings remain as secure as possible and your financial needs can be met as they change over time.

Another potential drawback is that your RRIF might not provide a guaranteed income for life. There’s a chance you’ll outlive the savings in your RRIF.

Choosing between payout annuities and RRIFs—factors to consider

Personal circumstances and financial goals

Here are some things to consider when choosing an income stream strategy for your retirement years:

  • Your (and, if applicable, your spouse or partner’s) age and health, expected longevity, and possibility of surviving beyond that age.
  • Your retirement goals, including your desired lifestyle, expenses, and what you hope to leave behind for your family and beneficiaries.
  • Your own abilities for monitoring your investments and making investment decisions on a regular basis as you age. Assess these honestly.
  • Your tolerance for risk in terms of market fluctuations. Would the negative impact of a market downturn on your investments be financially devastating?

Risk and return analysis

Finding a balance between risk and return that suits both your personal preferences and your financial position is important. Of course, higher-risk investing might be enticing with the possibility of higher potential returns. Good decisions and the right market can offer growth within your RRIF, but how much risk are you willing to tolerate?

With a payout annuity, the market can’t affect the retirement income. But you’re giving up growth potential and control over your money in exchange for stability.

Tax considerations

Withdrawals from RRIFs and payouts from registered payout annuities are considered fully taxable income for the year in which they take place.

When a RRIF annuitant passes away, the fair market value of the RRIF investments will be included as income in the final tax return of the deceased annuitant, unless it can be rolled over to the surviving spouse or common-law partner, child, or even a grandchild.

If the annuity does not have a guarantee period, or the guarantee period has ended, the payout ends when the annuitant (or the surviving annuitant, in the case of joint life annuity) dies. As a result, there’s no additional income reporting.

If the guarantee period hasn’t ended when the annuitant dies, and the surviving spouse or partner is the beneficiary, the payouts made for the remainder of the guarantee period will be taxable income to the receiving spouse.

However, when a lump sum payment of a commuted value (the present value of the future payouts for the remainder of the guaranteed period) is made to the beneficiary, it’s considered taxable income to the deceased annuitant.

The tax considerations discussed here are general in nature. It’s important to seek professional independent tax and legal advice before taking any action.

If you’re planning your estate and have a RRIF and/or a payout annuity, make sure your financial advisor knows your wishes and that you understand the tax implications of the various options available for you and your beneficiaries.

*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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Financial Planning Managing Money Retirement Wealth Management

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Planning for retirement as a couple can be a balancing act as you attempt to blend individual goals and needs into a unified financial vision. It starts with a discussion of expectations — namely, what kind of lifestyle do you hope to enjoy in retirement and how much income you’ll need to attain it. For example you may want to purchase a vacation home or start a new business in retirement. A spousal RRSP can help you and your partner even out each of your retirement savings. This way, when you retire, you’ll both be able to withdraw a similar amount of money from your RRSPs based on your needs.

What is a spousal RRSP?

A spousal RRSP is an investment account for your spouse’s or common-law partner’s retirement. If you earn more annual income than your spouse, you can contribute some or all of your individual RRSP contribution into a spousal RRSP account registered under your spouse’s name.

What are the benefits of having a spousal RRSP?

A spousal RRSP allows you to:

  • Save on taxes: A spousal RRSP allows you to “split” your retirement income and find tax efficiencies as a couple if you fall under a lower tax bracket when you withdraw from the account.
  • Invest for retirement: You can contribute money each year into a spousal RRSP, tax is deferred on that money until it is withdrawn.

A spousal RRSP with a segregated fund can help you provide protection to your loved ones. You can hold segregated funds in an RRSP account to help you protect, grow and preserve your money. It can help you reach your retirement goals and guarantee that your beneficiaries receive a certain percentage of your investments when you pass away.

Split your contribution with a spousal RRSP

If you and your spouse earn different levels of income, a spousal RRSP can help you “split income” to even out your annual income tax payments and save on taxes when you eventually withdraw from the account. Take this example:

  • Deborah earns $100,000 annually, and Jack earns $50,000.
  • As spouses, Deborah and Jack are each able to contribute up to 18% (or the CRA established limit for that year) of pre-tax earnings from the previous year into their individual RRSPs.
  • This would mean Deborah can contribute $18,000, and Jack could contribute $9,000.
  • If they open a spousal RRSP where Deborah is the contributor (because she earns more) and Jack is the recipient (because he earns less), Deborah can split her $18,000 contribution and contribute $4,500 to her own RRSP and $4,500 to Jack’s spousal RRSP.
  • Jack may still contribute $9,000 to his own RRSP and they will both have $13,500.
  • Deborah will get a tax deduction for her contributions. Jack will be able to use the funds from the spousal RRSP in retirement and he will be attributed the income (for tax purposes) for withdrawals (in retirement).

A spousal RRSP allows Deborah and Jack to equalize their retirement savings between them so that they have a pool of savings and pay less in taxes upon withdrawal each year of retirement.

This “split income” strategy can help you build a nest egg that provides each of you with a source of income in retirement and a way to manage your taxes efficiently.

What happens to a spousal RRSP if we break up?

Should you and your partner end your marriage or common-law partnership, your spousal RRSPs will be treated the same as your other assets. This means that your RRSPs will be split and can be transferred tax-free.

What happens to a spousal RRSP if one partner dies?

If one RRSP contributor dies, it’s possible to roll over the RRSP tax-free to the surviving spouse or common law partner. This means that the income from the spousal RRSP is transferred to the living spouse or partner and is reported on the beneficiary’s tax return for the year. Spousal RRSPs can be a potentially useful estate-planning tool to provide a tax-free inheritance upon your death.

How do I set up a spousal RRSP?

You can set up an RRSP account with a Segregated Fund and start saving by setting up automatic contributions. Add insurance as a part of you and your spouse’s retirement planning today.

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.

Share This Article

Topics:

Relationships Retirement Wealth Planning

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Planning for retirement as a couple can be a balancing act as you attempt to blend individual goals and needs into a unified financial vision. It starts with a discussion of expectations — namely, what kind of lifestyle do you hope to enjoy in retirement and how much income you’ll need to attain it. For example you may want to purchase a vacation home or start a new business in retirement. A spousal RRSP can help you and your partner even out each of your retirement savings. This way, when you retire, you’ll both be able to withdraw a similar amount of money from your RRSPs based on your needs.

What is a spousal RRSP?

A spousal RRSP is an investment account for your spouse’s or common-law partner’s retirement. If you earn more annual income than your spouse, you can contribute some or all of your individual RRSP contribution into a spousal RRSP account registered under your spouse’s name.

What are the benefits of having a spousal RRSP?

A spousal RRSP allows you to:

  • Save on taxes: A spousal RRSP allows you to “split” your retirement income and find tax efficiencies as a couple if you fall under a lower tax bracket when you withdraw from the account.
  • Invest for retirement: You can contribute money each year into a spousal RRSP, tax is deferred on that money until it is withdrawn.

A spousal RRSP with a segregated fund can help you provide protection to your loved ones. You can hold segregated funds in an RRSP account to help you protect, grow and preserve your money. It can help you reach your retirement goals and guarantee that your beneficiaries receive a certain percentage of your investments when you pass away.

Split your contribution with a spousal RRSP

If you and your spouse earn different levels of income, a spousal RRSP can help you “split income” to even out your annual income tax payments and save on taxes when you eventually withdraw from the account. Take this example:

  • Deborah earns $100,000 annually, and Jack earns $50,000.
  • As spouses, Deborah and Jack are each able to contribute up to 18% (or the CRA established limit for that year) of pre-tax earnings from the previous year into their individual RRSPs.
  • This would mean Deborah can contribute $18,000, and Jack could contribute $9,000.
  • If they open a spousal RRSP where Deborah is the contributor (because she earns more) and Jack is the recipient (because he earns less), Deborah can split her $18,000 contribution and contribute $4,500 to her own RRSP and $4,500 to Jack’s spousal RRSP.
  • Jack may still contribute $9,000 to his own RRSP and they will both have $13,500.
  • Deborah will get a tax deduction for her contributions. Jack will be able to use the funds from the spousal RRSP in retirement and he will be attributed the income (for tax purposes) for withdrawals (in retirement).

A spousal RRSP allows Deborah and Jack to equalize their retirement savings between them so that they have a pool of savings and pay less in taxes upon withdrawal each year of retirement.

This “split income” strategy can help you build a nest egg that provides each of you with a source of income in retirement and a way to manage your taxes efficiently.

What happens to a spousal RRSP if we break up?

Should you and your partner end your marriage or common-law partnership, your spousal RRSPs will be treated the same as your other assets. This means that your RRSPs will be split and can be transferred tax-free.

What happens to a spousal RRSP if one partner dies?

If one RRSP contributor dies, it’s possible to roll over the RRSP tax-free to the surviving spouse or common law partner. This means that the income from the spousal RRSP is transferred to the living spouse or partner and is reported on the beneficiary’s tax return for the year. Spousal RRSPs can be a potentially useful estate-planning tool to provide a tax-free inheritance upon your death.

How do I set up a spousal RRSP?

You can set up an RRSP account with a Segregated Fund and start saving by setting up automatic contributions. Add insurance as a part of you and your spouse’s retirement planning today.

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.

Share This Article

Topics:

Relationships Retirement Wealth Planning

Read This Next

Managing your finances in retirement may present challenges, but careful advance planning and advice from a financial advisor can set you up for success. It also might help to ease some of the current anxieties you may have about ensuring a sustainable and sufficient retirement income.

Key takeaways

  • A well-thought-out retirement income plan will take into account your future expenses and desired retirement lifestyle.
  • Factors to consider in retirement planning include your tolerance for risk and your need for flexibility versus your desire for stability.
  • Payout annuities are insurance products that can provide you with a guaranteed income stream for life.
  • A financial advisor can help support you in assessing different strategies for ensuring a retirement income stream that will suit your needs and goals.

Understanding your retirement income needs

“How much money do you need to retire?” It’s a question many of us come back to again and again. A recent Ipsos poll conducted for RBC Insurance reports that more than a third of Canadians feel anxious about saving enough money to support them in their retirement years, and this feeling of worry increases with age.

Understanding your retirement needs and goals is the first step to creating an income plan that will meet your future financial obligations and help ease the stress and anxiety about your retirement finances.

Ask yourself about the expenses you might face in retirement. Will you have mortgage payments? Do you plan to travel? It’s important to have a clear picture of the type of retirement lifestyle you’re aiming for, as well as an accurate estimate of your future living costs.

A financial advisor or retirement planning specialist can help you estimate your retirement expenses and assess your potential retirement income sources, including the Canada Pension Plan, pension plans relating to your current and past employment, and retirement savings, such as RRSPs.

Creating a retirement income plan

A comprehensive retirement plan will take into account your financial situation, your future needs and goals, and your tolerance and capacity for risk in your retirement years. A financial advisor should look at all of these factors when helping to guide you toward an income plan that’s right for you.

Some of the key factors you’ll want to discuss are:

  • Your tolerance for risk in terms of market fluctuations
  • Your investment goals when it comes to growth within your retirement fund
  • Your desire for flexibility and liquidity versus your need for stability
  • Your personal health and potential longevity; and
  • Inflation and how it can affect your purchasing power during your retirement years

A financial advisor can support you in designing a plan that suits your needs and goals, whether it’s a straightforward strategy or a diversified approach to generating your retirement income.

Payout annuities as a retirement income stream

A payout annuity is a type of insurance product that offers a stable retirement income. It can give you financial security and stability when you retire, offering you regularly timed guaranteed income for as long as you want…even for life! Together with your advisor, you can choose the type of annuity that best suits your needs.

RBC Insurance offers several kinds of payout annuity solutions.

  • Single life payout annuity: This payout annuity provides a guaranteed income for one person until the end of their life, with payments based on the amount of their initial investment. The payments stop when the plan holder dies.
  • Joint life payout annuity: A joint life payout annuity offers guaranteed income for the lives of two people. It allows for a second annuitant (or beneficiary) to be added to the policy—often a spouse or a partner. Payments continue to be made to this person after the annuitant dies.
  • Term-certain payout annuity: Instead of providing payments for life, a term-certain payout annuity ends on a specific date—the end of the term that was agreed upon when it was initially set up. With this type of payout annuity, a beneficiary can be chosen to receive the remaining payouts if the annuitant were to die before the end of the term.

Payout annuities are one product option that can play an important part in a retirement portfolio and can alleviate concerns about outliving your hard-earned savings.

Benefits of payout annuities in retirement income planning

Payout annuities are reliable and stable. Regular guaranteed payments offer a degree of predictability for retirees and are a hands-off option for those who may not wish to actively manage their investments. Fluctuations in the market do not alter these regular, guaranteed payments, and the money invested in them isn’t taxed until a payout is made. A financial advisor can inform you about some of the potential benefits.

The biggest advantage of purchasing a single life or joint life payout annuity is the potential to have an income stream for life.

Factors to consider when evaluating payout annuities

Not all insurance products are created equal, and this goes for payout annuities, too. If you’ve decided to invest in a payout annuity, begin by choosing a provider with a strong reputation and a trusted track record. Come equipped with questions about any attached fees or initial expenses and ask about additional options or features that can help you tailor your payout annuity to better fit your needs.

Incorporating payout annuities into retirement income planning

When planning for retirement, you can seek the assistance of a financial advisor to help decide what type of payout annuity works best to generate income during your retirement. Payments can be timed to be delivered monthly, quarterly, semi-annually, or annually, with the aim of supplementing other sources of income, such as pension plans, investments, and other savings.

Understanding the risks and limitations of payout annuities

Talk to your financial advisor about both the benefits and risks of a payout annuity plan. Purchasing an annuity means that your money is locked in. You’re trading liquidity and flexibility for stability and a guaranteed income for life. If you decide you want to invest elsewhere, according to profitable market conditions, you will not be able to transfer the money in your payout annuity to another financial product. For this reason, investing in a payout annuity should represent only a portion of your total retirement portfolio.

The risks tied to payout annuities include your purchasing power being reduced by inflation. When prices rise, your payouts stay the same. Changing interest rates present another limitation. Buying a payout annuity when interest rates are low can mean lower returns during your retirement. However, in some cases it may be smart to act immediately and not wait.

Other important things to consider

Payout annuities are a solution that you may want to consider as part of a well-diversified retirement plan. If you’re ready to begin retirement planning, consider speaking with an RBC Insurance advisor about the options available to you. They can offer reliable advice and support to help you make wise financial decisions about your future and inform you about the insurance products and investment tools that will allow you to build the kind of stable retirement income streams that suit your needs and goals.

You can look to RBC Insurance to help you create a retirement income plan that meets your financial goals as you move into your retirement years.

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.

*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.

Share This Article

Topics:

Financial Planning Managing Money Retirement Wealth Management

Read This Next

Managing your finances in retirement may present challenges, but careful advance planning and advice from a financial advisor can set you up for success. It also might help to ease some of the current anxieties you may have about ensuring a sustainable and sufficient retirement income.

Key takeaways

  • A well-thought-out retirement income plan will take into account your future expenses and desired retirement lifestyle.
  • Factors to consider in retirement planning include your tolerance for risk and your need for flexibility versus your desire for stability.
  • Payout annuities are insurance products that can provide you with a guaranteed income stream for life.
  • A financial advisor can help support you in assessing different strategies for ensuring a retirement income stream that will suit your needs and goals.

Understanding your retirement income needs

“How much money do you need to retire?” It’s a question many of us come back to again and again. A recent Ipsos poll conducted for RBC Insurance reports that more than a third of Canadians feel anxious about saving enough money to support them in their retirement years, and this feeling of worry increases with age.

Understanding your retirement needs and goals is the first step to creating an income plan that will meet your future financial obligations and help ease the stress and anxiety about your retirement finances.

Ask yourself about the expenses you might face in retirement. Will you have mortgage payments? Do you plan to travel? It’s important to have a clear picture of the type of retirement lifestyle you’re aiming for, as well as an accurate estimate of your future living costs.

A financial advisor or retirement planning specialist can help you estimate your retirement expenses and assess your potential retirement income sources, including the Canada Pension Plan, pension plans relating to your current and past employment, and retirement savings, such as RRSPs.

Creating a retirement income plan

A comprehensive retirement plan will take into account your financial situation, your future needs and goals, and your tolerance and capacity for risk in your retirement years. A financial advisor should look at all of these factors when helping to guide you toward an income plan that’s right for you.

Some of the key factors you’ll want to discuss are:

  • Your tolerance for risk in terms of market fluctuations
  • Your investment goals when it comes to growth within your retirement fund
  • Your desire for flexibility and liquidity versus your need for stability
  • Your personal health and potential longevity; and
  • Inflation and how it can affect your purchasing power during your retirement years

A financial advisor can support you in designing a plan that suits your needs and goals, whether it’s a straightforward strategy or a diversified approach to generating your retirement income.

Payout annuities as a retirement income stream

A payout annuity is a type of insurance product that offers a stable retirement income. It can give you financial security and stability when you retire, offering you regularly timed guaranteed income for as long as you want…even for life! Together with your advisor, you can choose the type of annuity that best suits your needs.

RBC Insurance offers several kinds of payout annuity solutions.

  • Single life payout annuity: This payout annuity provides a guaranteed income for one person until the end of their life, with payments based on the amount of their initial investment. The payments stop when the plan holder dies.
  • Joint life payout annuity: A joint life payout annuity offers guaranteed income for the lives of two people. It allows for a second annuitant (or beneficiary) to be added to the policy—often a spouse or a partner. Payments continue to be made to this person after the annuitant dies.
  • Term-certain payout annuity: Instead of providing payments for life, a term-certain payout annuity ends on a specific date—the end of the term that was agreed upon when it was initially set up. With this type of payout annuity, a beneficiary can be chosen to receive the remaining payouts if the annuitant were to die before the end of the term.

Payout annuities are one product option that can play an important part in a retirement portfolio and can alleviate concerns about outliving your hard-earned savings.

Benefits of payout annuities in retirement income planning

Payout annuities are reliable and stable. Regular guaranteed payments offer a degree of predictability for retirees and are a hands-off option for those who may not wish to actively manage their investments. Fluctuations in the market do not alter these regular, guaranteed payments, and the money invested in them isn’t taxed until a payout is made. A financial advisor can inform you about some of the potential benefits.

The biggest advantage of purchasing a single life or joint life payout annuity is the potential to have an income stream for life.

Factors to consider when evaluating payout annuities

Not all insurance products are created equal, and this goes for payout annuities, too. If you’ve decided to invest in a payout annuity, begin by choosing a provider with a strong reputation and a trusted track record. Come equipped with questions about any attached fees or initial expenses and ask about additional options or features that can help you tailor your payout annuity to better fit your needs.

Incorporating payout annuities into retirement income planning

When planning for retirement, you can seek the assistance of a financial advisor to help decide what type of payout annuity works best to generate income during your retirement. Payments can be timed to be delivered monthly, quarterly, semi-annually, or annually, with the aim of supplementing other sources of income, such as pension plans, investments, and other savings.

Understanding the risks and limitations of payout annuities

Talk to your financial advisor about both the benefits and risks of a payout annuity plan. Purchasing an annuity means that your money is locked in. You’re trading liquidity and flexibility for stability and a guaranteed income for life. If you decide you want to invest elsewhere, according to profitable market conditions, you will not be able to transfer the money in your payout annuity to another financial product. For this reason, investing in a payout annuity should represent only a portion of your total retirement portfolio.

The risks tied to payout annuities include your purchasing power being reduced by inflation. When prices rise, your payouts stay the same. Changing interest rates present another limitation. Buying a payout annuity when interest rates are low can mean lower returns during your retirement. However, in some cases it may be smart to act immediately and not wait.

Other important things to consider

Payout annuities are a solution that you may want to consider as part of a well-diversified retirement plan. If you’re ready to begin retirement planning, consider speaking with an RBC Insurance advisor about the options available to you. They can offer reliable advice and support to help you make wise financial decisions about your future and inform you about the insurance products and investment tools that will allow you to build the kind of stable retirement income streams that suit your needs and goals.

*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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Financial Planning Managing Money Retirement Wealth Management

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Have you ever considered what would happen if you got sick or injured and couldn’t earn an income for months—or even years? How would you manage? That’s the scenario that disability insurance helps to protect you against.

Like many other Canadians, you likely wake up and then begin your workday, so you can pay for everything you need, from shelter to clothing to food. You might get to enjoy some “extras,” too, such as a family vacation, multiple streaming services, or an occasional dinner out with pals. It would be comforting to know that if an injury or illness prevented you from working, you’d still be able to pay your bills.

Here’s what you need to know to help you decide if an individual disability insurance plan is right for you.

Key takeaways

  • Disability insurance helps protect your income if you’re unable to work for a period of time due to injury or illness.
  • There are several types of disability insurance, including group plans purchased by employers for their employees and coverage through government programs such as Employment Insurance and the Canada Pension Plan.
  • Even if you qualify for government benefits or have a group plan through work, you may still have gaps in your coverage.
  • With the right plan or combination of plans, you may be able to get up to 100 per cent coverage for your income if you become sick or injured. You may also gain access to special services that can help you return to work sooner.
  • You’ll especially want to consider an individual disability insurance plan if you’re self-employed or are a high-income earner.

What is disability insurance?

Disability insurance helps to protect your income in case you aren’t able to work because of injury or illness. If, for example, you break your arm and can’t work, it can provide financial support to help you pay your bills. Your insurance may also include special services, such as additional training and/or work-site modification, to help you transition back to work when you’re ready.

What are the different types of disability insurance?

There are a several different types of disability insurance in Canada. Some are provided by employers or the government and others are purchased by individuals.

  • Short-term disability (STD) insurance: This type of coverage typically lasts for up to six months. Sometimes, employers will have an STD plan for employees that provides some support. Chat with your employer’s human resources (HR) department if you’re curious about whether or not you have a plan and what it covers.
  • Long-term disability (LTD) insurance: Long-term disability insurance tends to kick in after STD insurance ends. Typically, these benefits last for up to two years or up to a maximum dollar amount. Your employer may have a plan for its employees. Your employer’s HR department will know the details.
  • Employment Insurance (EI): The government’s EI plan includes benefits if you can’t work for medical reasons. It’s capped at 55 per cent of your earnings to a maximum of $650 per week for up to 26 weeks.
  • Canada Pension Plan (CPP) disability benefits: If you pay into the Canada Pension Plan and are under 65 years of age, you may be able to claim benefits if you have a disability that regularly prevents you from working.
  • Individual disability insurance: You can purchase your own coverage to help fill in the gaps left by other insurance plans or to protect yourself if you’re self-employed. This is also sometimes referred to as “illness and injury insurance.”

How does disability insurance work?

At its most basic, disability insurance involves paying a fee (typically monthly) in exchange for financial support if you become sick or injured. It’s a way to ensure there’s money coming in when you’re unable to work. Here are some ways in which your income can be protected:

  • Your employer pays into a group disability insurance plan on your behalf or takes money off your paycheque to help cover the cost.
  • You pay an insurance provider for your own individual coverage.
  • You receive funds from the government through CPP or EI.
  • You receive funds from some combination of the above.

With the right insurance plan or combination of insurance plans, you may be protected for up to 100 per cent of your income, even in cases of mental illness. It’s important to be familiar with your policies, so you can receive the maximum amount of benefits available to you from all your plans.

On top of a monthly payout, some types of individual disability insurance provide additional services to help you get back to work sooner.

  • Work conditioning: Rehab and occupational therapy treatments may be covered by your insurance.
  • Work-site modification: If you need special accommodations at work to be able to return (such as a different piece of equipment or a change to your desk set-up), this benefit may help pay for them.
  • Transferable skills analysis: If you can’t return to your regular job, you could receive help identifying other jobs that suit you based on your education, training, and experience.
  • Job search assistance: This can help you with resumé prep, interview practice, training courses, and more.
  • Assistive devices: Need a wheelchair, walker, prosthesis, hearing aid, or some other device? Your plan might pay for them.
  • Dependant care: If you need help caring for kids or aging parents, so you can go to a rehab program, this benefit may ease the costs.

Is disability insurance tax deductible?

Disability insurance premiums themselves are generally not tax deductible. However, in the case that you have an injury or illness and need to use your disability insurance, the benefits will often be tax free if you pay the premiums yourself.

If your employer pays all or part of your premiums, then your benefits will count as income and be taxed.

What types of illness or injury does disability insurance cover?

It depends. Some types of disability insurance cover only injury (called an “accident-only policy”) or only illness (such as critical-illness insurance), while others apply to both, but have exceptions or limitations. You may be covered in these types of instances:

  • You’re in a car accident and need months of rehab.
  • You fall off your bike and break an arm—and your job requires full use of both hands.
  • You experience mental health issues that prevent you from working.

Who should consider disability insurance?

Do you have a job? Do you have a stack of bills to pay each month? If you couldn’t work for six months, would you struggle to support your family and maintain your current lifestyle?

If you answered “yes” to all of these questions, you might want to consider disability insurance.

Here’s who else might benefit from disability insurance.

  • Self-employed people and business owners: Being your own boss can be a huge perk, but it also means you have no one to catch you if you fall. Disability insurance can offer you that protection.
  • Workers in trades, construction, and agriculture: Anyone with a job that has a high risk for injury and also requires full use of their body (from carpenters to farmers) should consider disability insurance.
  • Executives, doctors, and lawyers (and other high-income earners): If you have a high level of income and the lifestyle that goes with it, disability insurance can help protect you in cases where you can’t earn for a period of time.
  • Anyone who doesn’t have group coverage through work or who wants to top up their coverage: Some people have disability insurance through work, and others don’t. If you don’t have any kind of insurance, consider paying for it yourself. And if you do have some coverage, check to see if it’s enough, or if you should purchase a little extra.

Just about anyone who has an income (and bills to pay) should think about getting disability insurance. At the very least, you’ll have confidence that you and your family are protected if you’re unable to work for a few months—or even years.

What are the benefits of having an individual disability insurance policy?

When you purchase your own disability insurance policy, you simply have more options. Here are a few possible advantages.

  • Coverage can’t be cancelled: As long as you pay your premiums, your coverage will continue—no matter what.
  • Premiums remain stable: It’s possible to lock in your rate for non-cancellable types of individual disability insurance.
  • Wider definitions of “disability”: Individual disability insurance plans tend to cover more types of injury and illness than group plans.
  • Option for an “own occupation” rider: Some occupations make you eligible to add an “own occupation” (a.k.a. “own-occ”) rider to your plan, so you’ll receive benefits if you can’t work in your previous occupation, even if you can find work in another type of job.
  • Portability: If you change jobs, your coverage goes along with you.
  • Cost: Individual plans have more versatility than group plans, so you might find a type of disability insurance that will cost you less in the long run.
  • Option to include additional benefits: Since you’re purchasing the insurance for yourself (rather than your employer paying for it for everyone at the company), there’s more flexibility with the benefits you choose to receive.
  • Taxation: If you pay for your own insurance plan using income that’s already been taxed, any benefits you claim will be tax free.

What to look for in an insurance company offering disability insurance plans

Before purchasing any type of disability insurance, you’ll want to ask a few questions about the provider and the insurance plans it offers.

  • Terms and conditions
    • How do they define “disability”?
    • Are there any exclusions or limitations, such as pre-existing conditions?
    • What do I need to do to obtain coverage? E.g., provide medical information and/or financial information?
  • Coverage options
    • How much money will I receive each month if I’m sick or injured? (What percentage of my income will be paid? Is there a dollar limit?)
    • Can I increase my coverage after getting the policy?
    • How long will I need to wait before I receive my first payment?
    • Are the benefits taxable?
    • Will the benefits be adjusted for inflation?
    • How long am I able to receive my benefits?
    • Can I still receive benefits if I’m able to do some work, but not my usual amount?
    • Do they offer any unique options (such as an own occupation rider)?
  • Premiums
    • How much will it cost me?
    • Can I lock in my rate?
    • Will I have to pay my premiums while I’m collecting my benefits?
  • Return-to-work assistance
    • What extra services do they provide to help me return to work?
  • Access to medical professionals
    • Do they have the ability to speed up access to specialists and other health-care professionals whose expertise might help my recovery?
  • Claims process
    • How does their claims process work?
    • Who handles cases? What is their experience and knowledge level?

Application process for disability insurance

Ready to look into your options? Here’s how to apply:

  1. Book a call or an appointment with an advisor or broker. You’ll have the chance to chat about your unique needs and cover all of the insurance options that might work for your lifestyle.
  2. The advisor will ask you a few simple health-related questions. In most cases, you’ll also need to have a medical exam before you qualify for a policy, but it will depend on your age, as well as the type of plan you want.
  3. If you choose to apply for RBC Simplified® Disability Insurance, you’ll only need to answer a few pre-qualifying questions. No medical exam is necessary.

What is the disability insurance claim process?

In an ideal world, you wouldn’t need disability insurance, because you’d never get sick or injured. In the real world, you never know what might happen. Here’s how you would claim your benefits with RBC Insurance if you became sick or injured.

How do I make a claim?

You’ll need to fill out a claim form.

  1. If you have a group plan: Check in with your HR department to get the form.
  2. If you have an individual plan: Speak with the advisor who helped you buy the policy.

This form has various sections for you, your doctor, and your employer (if you have one) to fill out. Submit your completed form as early as you can after you become ill or injured, so you receive the benefits you qualify for as quickly as possible.

What happens after a disability insurance claim is made?

If you’re an RBC Insurance client, your submitted claim form will be assigned to a customer care specialist who has training in your specific injury or illness and will personally handle your case. They’ll contact you within 10 business days. Here’s what to expect.

  • Claim review: Your customer care specialist will call you to learn about your situation. They’ll ask questions about your condition and the potential amount of time you’ll be away from work, as well as arrange for payment of the financial benefits that you qualify for. They may also speak with your employer and physician if they need more info.
  • Decision process: It may take some time to understand your claim. Some situations, such as recovery following a routine surgery, are straightforward, and your benefits can begin almost immediately. If your claim is more complicated, it may take longer for your customer care specialist to gather all the necessary information about your financial, medical, and employment history. You will receive a written update on the status of your claim every 30 days until a decision has been reached.
  • Asking questions: If you ever have any questions or concerns, you can speak directly with your customer care specialist using a toll-free number. This specialist is your single point of contact and is familiar with your unique situation.

RBC Disability Insurance

Help ensure your expenses are covered if you get sick or injured

Learn More

*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.

Share This Article

Topics:

Disability Insurance Health Insurance

Read This Next

Have you ever considered what would happen if you got sick or injured and couldn’t earn an income for months—or even years? How would you manage? That’s the scenario that disability insurance helps to protect you against.

Like many other Canadians, you likely wake up and then begin your workday, so you can pay for everything you need, from shelter to clothing to food. You might get to enjoy some “extras,” too, such as a family vacation, multiple streaming services, or an occasional dinner out with pals. It would be comforting to know that if an injury or illness prevented you from working, you’d still be able to pay your bills.

Here’s what you need to know to help you decide if an individual disability insurance plan is right for you.

Key takeaways

  • Disability insurance helps protect your income if you’re unable to work for a period of time due to injury or illness.
  • There are several types of disability insurance, including group plans purchased by employers for their employees and coverage through government programs such as Employment Insurance and the Canada Pension Plan.
  • Even if you qualify for government benefits or have a group plan through work, you may still have gaps in your coverage.
  • With the right plan or combination of plans, you may be able to get up to 100 per cent coverage for your income if you become sick or injured. You may also gain access to special services that can help you return to work sooner.
  • You’ll especially want to consider an individual disability insurance plan if you’re self-employed or are a high-income earner.

What is disability insurance?

Disability insurance helps to protect your income in case you aren’t able to work because of injury or illness. If, for example, you break your arm and can’t work, it can provide financial support to help you pay your bills. Your insurance may also include special services, such as additional training and/or work-site modification, to help you transition back to work when you’re ready.

What are the different types of disability insurance?

There are a several different types of disability insurance in Canada. Some are provided by employers or the government and others are purchased by individuals.

  • Short-term disability (STD) insurance: This type of coverage typically lasts for up to six months. Sometimes, employers will have an STD plan for employees that provides some support. Chat with your employer’s human resources (HR) department if you’re curious about whether or not you have a plan and what it covers.
  • Long-term disability (LTD) insurance: Long-term disability insurance tends to kick in after STD insurance ends. Typically, these benefits last for up to two years or up to a maximum dollar amount. Your employer may have a plan for its employees. Your employer’s HR department will know the details.
  • Employment Insurance (EI): The government’s EI plan includes benefits if you can’t work for medical reasons. It’s capped at 55 per cent of your earnings to a maximum of $650 per week for up to 26 weeks.
  • Canada Pension Plan (CPP) disability benefits: If you pay into the Canada Pension Plan and are under 65 years of age, you may be able to claim benefits if you have a disability that regularly prevents you from working.
  • Individual disability insurance: You can purchase your own coverage to help fill in the gaps left by other insurance plans or to protect yourself if you’re self-employed. This is also sometimes referred to as “illness and injury insurance.”

How does disability insurance work?

At its most basic, disability insurance involves paying a fee (typically monthly) in exchange for financial support if you become sick or injured. It’s a way to ensure there’s money coming in when you’re unable to work. Here are some ways in which your income can be protected:

  • Your employer pays into a group disability insurance plan on your behalf or takes money off your paycheque to help cover the cost.
  • You pay an insurance provider for your own individual coverage.
  • You receive funds from the government through CPP or EI.
  • You receive funds from some combination of the above.

With the right insurance plan or combination of insurance plans, you may be protected for up to 100 per cent of your income, even in cases of mental illness. It’s important to be familiar with your policies, so you can receive the maximum amount of benefits available to you from all your plans.

On top of a monthly payout, some types of individual disability insurance provide additional services to help you get back to work sooner.

  • Work conditioning: Rehab and occupational therapy treatments may be covered by your insurance.
  • Work-site modification: If you need special accommodations at work to be able to return (such as a different piece of equipment or a change to your desk set-up), this benefit may help pay for them.
  • Transferable skills analysis: If you can’t return to your regular job, you could receive help identifying other jobs that suit you based on your education, training, and experience.
  • Job search assistance: This can help you with resumé prep, interview practice, training courses, and more.
  • Assistive devices: Need a wheelchair, walker, prosthesis, hearing aid, or some other device? Your plan might pay for them.
  • Dependant care: If you need help caring for kids or aging parents, so you can go to a rehab program, this benefit may ease the costs.

Is disability insurance tax deductible?

Disability insurance premiums themselves are generally not tax deductible. However, in the case that you have an injury or illness and need to use your disability insurance, the benefits will often be tax free if you pay the premiums yourself.

If your employer pays all or part of your premiums, then your benefits will count as income and be taxed.

What types of illness or injury does disability insurance cover?

It depends. Some types of disability insurance cover only injury (called an “accident-only policy”) or only illness (such as critical-illness insurance), while others apply to both, but have exceptions or limitations. You may be covered in these types of instances:

  • You’re in a car accident and need months of rehab.
  • You fall off your bike and break an arm—and your job requires full use of both hands.
  • You experience mental health issues that prevent you from working.

Who should consider disability insurance?

Do you have a job? Do you have a stack of bills to pay each month? If you couldn’t work for six months, would you struggle to support your family and maintain your current lifestyle?

If you answered “yes” to all of these questions, you might want to consider disability insurance.

Here’s who else might benefit from disability insurance.

  • Self-employed people and business owners: Being your own boss can be a huge perk, but it also means you have no one to catch you if you fall. Disability insurance can offer you that protection.
  • Workers in trades, construction, and agriculture: Anyone with a job that has a high risk for injury and also requires full use of their body (from carpenters to farmers) should consider disability insurance.
  • Executives, doctors, and lawyers (and other high-income earners): If you have a high level of income and the lifestyle that goes with it, disability insurance can help protect you in cases where you can’t earn for a period of time.
  • Anyone who doesn’t have group coverage through work or who wants to top up their coverage: Some people have disability insurance through work, and others don’t. If you don’t have any kind of insurance, consider paying for it yourself. And if you do have some coverage, check to see if it’s enough, or if you should purchase a little extra.

Just about anyone who has an income (and bills to pay) should think about getting disability insurance. At the very least, you’ll have confidence that you and your family are protected if you’re unable to work for a few months—or even years.

What are the benefits of having an individual disability insurance policy?

When you purchase your own disability insurance policy, you simply have more options. Here are a few possible advantages.

  • Coverage can’t be cancelled: As long as you pay your premiums, your coverage will continue—no matter what.
  • Premiums remain stable: It’s possible to lock in your rate for non-cancellable types of individual disability insurance.
  • Wider definitions of “disability”: Individual disability insurance plans tend to cover more types of injury and illness than group plans.
  • Option for an “own occupation” rider: Some occupations make you eligible to add an “own occupation” (a.k.a. “own-occ”) rider to your plan, so you’ll receive benefits if you can’t work in your previous occupation, even if you can find work in another type of job.
  • Portability: If you change jobs, your coverage goes along with you.
  • Cost: Individual plans have more versatility than group plans, so you might find a type of disability insurance that will cost you less in the long run.
  • Option to include additional benefits: Since you’re purchasing the insurance for yourself (rather than your employer paying for it for everyone at the company), there’s more flexibility with the benefits you choose to receive.
  • Taxation: If you pay for your own insurance plan using income that’s already been taxed, any benefits you claim will be tax free.

What to look for in an insurance company offering disability insurance plans

Before purchasing any type of disability insurance, you’ll want to ask a few questions about the provider and the insurance plans it offers.

  • Terms and conditions
    • How do they define “disability”?
    • Are there any exclusions or limitations, such as pre-existing conditions?
    • What do I need to do to obtain coverage? E.g., provide medical information and/or financial information?
  • Coverage options
    • How much money will I receive each month if I’m sick or injured? (What percentage of my income will be paid? Is there a dollar limit?)
    • Can I increase my coverage after getting the policy?
    • How long will I need to wait before I receive my first payment?
    • Are the benefits taxable?
    • Will the benefits be adjusted for inflation?
    • How long am I able to receive my benefits?
    • Can I still receive benefits if I’m able to do some work, but not my usual amount?
    • Do they offer any unique options (such as an own occupation rider)?
  • Premiums
    • How much will it cost me?
    • Can I lock in my rate?
    • Will I have to pay my premiums while I’m collecting my benefits?
  • Return-to-work assistance
    • What extra services do they provide to help me return to work?
  • Access to medical professionals
    • Do they have the ability to speed up access to specialists and other health-care professionals whose expertise might help my recovery?
  • Claims process
    • How does their claims process work?
    • Who handles cases? What is their experience and knowledge level?

What is the disability insurance claim process?

In an ideal world, you wouldn’t need disability insurance, because you’d never get sick or injured. In the real world, you never know what might happen. Here’s how you would claim your benefits with RBC Insurance if you became sick or injured.

How do I make a claim?

You’ll need to fill out a claim form.

  1. If you have a group plan: Check in with your HR department to get the form.
  2. If you have an individual plan: Speak with the advisor who helped you buy the policy.

This form has various sections for you, your doctor, and your employer (if you have one) to fill out. Submit your completed form as early as you can after you become ill or injured, so you receive the benefits you qualify for as quickly as possible.

What happens after a disability insurance claim is made?

If you’re an RBC Insurance client, your submitted claim form will be assigned to a customer care specialist who has training in your specific injury or illness and will personally handle your case. They’ll contact you within 10 business days. Here’s what to expect.

  • Claim review: Your customer care specialist will call you to learn about your situation. They’ll ask questions about your condition and the potential amount of time you’ll be away from work, as well as arrange for payment of the financial benefits that you qualify for. They may also speak with your employer and physician if they need more info.
  • Decision process: It may take some time to understand your claim. Some situations, such as recovery following a routine surgery, are straightforward, and your benefits can begin almost immediately. If your claim is more complicated, it may take longer for your customer care specialist to gather all the necessary information about your financial, medical, and employment history. You will receive a written update on the status of your claim every 30 days until a decision has been reached.
  • Asking questions: If you ever have any questions or concerns, you can speak directly with your customer care specialist using a toll-free number. This specialist is your single point of contact and is familiar with your unique situation.

*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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Topics:

Disability Insurance Health Insurance

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