(video version...)

Have you ever considered how you’ll support you and your family financially, possibly for the rest of your life if you’re seriously injured in a car accident?

 

This will give you a quick overview of the Income Replacement coverage on your Ontario car insurance policy – we’ll briefly look at what it’s for, what it covers and what options are available so you can decide what protection you want on your policy.

 

The income replacement benefit on your car insurance policy is designed to replace lost income while recovering from car accident injuries.  The coverage is basically provided to employed, self-employed, recently unemployed, and full time students who are 16 years or older.  If you’re retired and not doing any paid work, these benefits aren’t of any value to you.

 

The standard coverage that comes on every Ontario car Insurance policy will pay for 70% of your gross earning, up to $400 a week.  Gross earning is basically your pay before any taxes or deductions.  Now the key thing to note about the standard coverage is that it’s limited to a maximum of $400 a week.  What this translates to is that if you make less then $30,000 a year, the standard coverage is probably fine for you.

 

Keep in mind that these benefits cover all drivers listed on your policy and if the car is owned in the name of a person not a business, the benefits also cover spouses.  So if any drivers on your policy or your spouse makes more then $30,000 a year, you should consider increasing your Income Replacement benefits.

 

You have the option to increase the limit from $400 a week to either $600, $800 or $1,000 a week, subject to a maximum of 70% of your gross earnings.  To make this easy, we’ve done the math for you to help you decide which option matches your income level.  So the $400 a week limit translates to roughly a $30,000 annual salary.  $600 a week translates to about $45,000.  $800 a week translates to about $59,000.  And $1,000 a week translates to about a $74,000 annual salary.

 

Now some of you may already have income replacement coverage through work in a long-term disability group plan or because you bought your own disability insurance.  So if you already have other disability insurance, do you really need to do anything with the income replacement coverage on your car insurance?  

The answer to that is, you have much less need to rely on it, but it depends on how much protection you want.  Your own disability insurance will pay you first, but it usually has a long waiting period of about 4 months during which time employment insurance may give you some coverage.  You would only be looking to your car insurance to top up the employment insurance or to top up your own disability insurance policy so that you have adequate income to support yourself while you recover.

 

So if you already have disability insurance, you should ask yourself 2 questions.  Do feel the employment insurance benefit for the first 4 months is adequate for you?  And 2nd, will your disability policy cover 70% of your gross earnings?  If you answer no to either of these, then you should give us a call to talk about your options.

 

So how much do income replacement options cost to add to your car insurance?  We’re seeing the costs for the average driver starting at around $10 a month per car for a $600 weekly limit, and about $15 a month per car for the $800 limit, and about $20 a month per car for the $1,000 limit.

 

Now, because you could need income replacement coverage for many years if you’re seriously injuried, I’d also recommend you consider including the indexation benefit on your policy.  We’ll cover it in another video, but essentially indexation applies a cost of living increase each year to your benefits so that you don’t lose purchasing power when inflation occurs.

 

If you still have questions about these coverages or the other injury benefits on your policy, feel free to give us a call.  You can also find more information at hsfinancial.ca.