It might surprise you to learn that a 2006 government study showed that a third of Canadians 65 to 74 years old reported being disabled. For those 75 and over, the figure rose to more than half.
But you don't have to be older to be disabled. Statistics Canada says that across all age groups, 4.4 million Canadians were disabled. That's about one in seven – a sobering stat.
Luckily, there are lots of programs that offer financial assistance. But given that the Task Force on Financial Literacy recently found that about $1-billion of Old Age Security benefits were left unclaimed, you can bet that some of these programs (and the items listed here are only a small fraction of them) might also be left untapped.
Long-Term Savings
The registered disability savings plan (RDSP) functions as a long-term savings program for Canadians with disabilities. Contributions are not tax-deductible, but growth inside the plan is tax-sheltered and the government can also provide grants and bonds similar to those available in a registered education savings plan (RESP). The maximum amount of the CDSG (Canada disability savings grant) is currently $70,000. For very low-income households that might not be able to afford any contributions at all, an annual $1,000 Canada disability savings bond (CDSB) is available up to a lifetime maximum of $20,000.
School
For disabled students, RESP contribution timelines can be extended. You now have 35 years to make contributions and 40 years to collapse the plan from inception. The requirement that the student be enrolled in a full-time program can also be waived if the disability makes that unfeasible. The same waiver can also apply to lifelong learning plan (LLP) withdrawals from a registered retirement savings plan (RRSP).
Home buyers' plan
An HBP withdrawal from an RRSP normally requires that a person qualify as a first-time home buyer, but if the house is specially adapted or can better accommodate the care of someone with a disability, the requirement can be waived.
Income replacement
The Canada Pension Plan pays disability benefits for severe and prolonged disabilities for those 18 to 64 years old. Once you hit 65, the plan switches to a retirement benefit. If you have a dependent child under 18 (or up to 25 if attending school full-time), he or she may also receive a benefit.
But note that, according to Promod Sharma, an actuary with the insurance advisory service Taxevity in Toronto, qualifying for the CPP benefit can be more difficult than with a group or private disability insurance plan. The average monthly benefit in 2006 was less than $800. "With the statistical chance of becoming disabled before 65 being relatively high, and an income replacement benefit potentially being paid out for a long period of time, disability insurance premiums seem quite a bit higher than other types of insurance and so some people elect to forgo these policies."
So, hope for the best, but plan for the worst by getting your disability insurance coverage reviewed. The reason the cost of the insurance is so high is precisely because the risk is significant.
While most people associate life insurance with taking care of your dependents when you die, disability insurance coverage is a must with or without a spouse and kids, because if you have an accident or get sick, you could become the dependent.
Disability stats
More than 200,000 children (14 and under) and more than 1.7 million people over 65 have a disability in Canada.
On average, one in three people will be disabled for three months or more before the age of 65, with the average length of that disability being 2.9 years.
Nova Scotia had the highest rate of disability at 20 per cent. Nunavut was the lowest at 6.4 per cent. The national average was 14.3 per cent.
Source: Statistics Canada, Participation and Activity Limitation Survey 2006; Great-West Life
Preet Banerjee, BSc, FMA, DMS, FCSI is a W Network Money Expert, and blogs at wheredoesallmymoneygo.com . You can also follow him on twitter at @PreetBanerjee
Preet Banerjee