I am currently disabled.
I have keratoconus, a degenerative eye disorder. As disabilities go, there are a lot of people a lot worse off than I am. At least keratoconus is treatable.
But keratoconus is no joke. Twenty-five per cent of people with keratoconus require a corneal transplant. So in September I had eye surgery and, in my post-operation recuperation, I can't see very well at all.
At the moment my vision is so bad that I had to get two feet away from Emily in order to pick her out amongst a crowd of kids, and even at that distance I had to squint to recognize my own daughter. If you saw me on the street and I didn't wave to you it's not because I'm stuck up, it's because I can't see you.
Fortunately all indications are that the surgery was successful. But what if it wasn't?
You don't really appreciate your health until you lose it. This week, as I lay on the couch, wearing sunglasses in a darkened room, listening to audio recordings of John Grisham and Ken Follett novels because I really can't do much else - I can't use the computer, can't read, can't watch TV, can't drive, can't do many things with the kids - I couldn't help but think what life would be like if my vision never returned.
Do you remember the fable of the goose that laid the golden eggs? In the story a farmer had a goose that laid an egg of pure gold every day.
Pretend for a moment that you are that farmer. As long as you have the goose you will receive a golden egg every day. With this gold you can feed your family, make your mortgage payment, cover the costs of post-secondary education for your kids, maybe even retire early and comfortably. As long as you have the goose, all this is possible.
What if you were to lose the goose? Now all of those aspirations- lifestyle, kids' education, retirement- all of it is in jeopardy.
Guess what? We are all farmers, and we all have a golden goose.
Our golden goose is our ability to earn income. For many people, their ability to earn income is their greatest asset. A 35-year-old person earning $3000 per month will earn more than $1,000,000 before age 65.
Most people discount how valuable the ability to earn income is. Further, they underestimate how fragile that ability to earn income is.
Quit kidding yourself. One out of two 25-year old people will be disabled for at least 90 days before age 65. The average duration of disability is 2.6 years.
Do you think your lifestyle reduces the risk of an accident happening to you? First thing, you can't be sure of avoiding an accident. After all, that's why they are called accidents. Second thing, illness accounts for eight out of 10 disabilities. How can you be sure that you won't get sick?
What would happen to your finances if you had no paycheques for 2.6 years? Who would pay your mortgage, feed your family, pay your hospital bills?
Disability insurance is the answer. An iron-clad individual disability policy might run around 2.5 percent of your gross income.
Let's say I was going to hire you, and we are negotiating your contract. Contract A will pay you $60,000. However, if you can't work because you are hurt or sick I will not pay you.
Contract B will pay you $58,500. But if you are stricken with MS, or you lose your sight, or you have a heart attack, or if any of the other million things that affect your health happens, you still get paid. If this thing that happens to you occurs at age 40, I am going to pay you about $750,000 tax-free, over the next 25 years.
With the chance of disability roughly three times the chance of death, with disability accounting for 16 times the number of mortgage foreclosures than death, with about 40 percent of disabilities that last one year continuing for 5 or more years, the sensible option is contract B.
Many people don't hesitate to insure their stuff- their home, their car, their boat. That's like insuring the golden eggs. Just don't forget to insure the goose that provides the golden eggs. Insure yourself, and your ability to earn income.
The opinions expressed are those of Brad Brain, CFP, R.F.P. CLU, CH.F.C., FCSI. Brad Brain is the President of Brad Brain Financial Planning Inc. in Fort St John, BC. He can be reached through www.bradbrainfinancial.com. Follow Brad on Twitter @BradBrain.
