Group Disability Insurance for Realtors in Canada

As a realtor, your income depends on your ability to show properties, meet with clients, negotiate deals, and close sales. But what if you suffered an illness or injury that prevented you from working? Most realtors don’t have significant savings or assets to rely on during a long period of disability. That’s why having adequate disability insurance is critical.

Group disability insurance offered through your realty association or brokerage can provide an affordable way to protect your income. But it has limitations you need to understand. This guide will explain everything to know about group disability insurance for realtors, from coverage details to tips for purchasing the right policy.

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Why Do Realtors Need Group Disability Insurance?

How would disability impact a realtor’s income and lifestyle?

As a realtor, your income depends entirely on your productivity. If a disability prevented you from showing properties, meeting with clients, or attending closings, your revenue would immediately drop to zero.

Most realtors do not receive benefits like paid sick leave or short-term disability insurance. Without an alternate source of income, even a few months of disability could devastate your finances.

Group disability insurance provides income replacement so you can continue meeting living expenses and financial obligations like mortgages, loans, taxes, insurance premiums, and more. It helps prevent the liquidation of assets to pay bills.

What expenses would still need to be paid if disabled?

While disabled, realtors would still need to keep up with numerous expenses:

• Housing costs like rent, mortgage, property taxes, utilities, maintenance, and repairs.
• Transportation costs include auto loans, insurance, gas, maintenance, and repairs.
• Insurance premiums include health, disability, life, home, and auto insurance.
• Debt payments on credit cards, personal loans, student loans, and business loans.
• Food, clothing, and other daily living expenses.
• Out-of-pocket medical expenses like co-pays, deductibles, mobility devices, medications, therapies, home healthcare aides, and more.
• Business expenses like office rent, employees’ salaries, licenses, dues, fees, marketing, and utilities.

The average monthly living expenses for an individual is approximately $2,329.94. When factoring in large mortgages and luxuries, the expenses could be significantly higher for higher-income realtors. Even a few months of reduced or no income can be financially devastating.

Source: https://www.movingwaldo.com/where-to-live/cost-of-living-canada/

What is Group Disability Insurance for Realtors?

Definition of group disability insurance for realtors

Group disability insurance covers a group of people under a single policy. For realtors, it’s commonly offered through:

• Realtor associations at the local, state, or national level.
• Independent brokerages, usually for larger firms.

Premiums are cheaper due to risk pooling across large numbers of realtors. If eligible, you’re automatically covered under the group plan rather than being individually underwritten.

How is it different from individual disability insurance policies?

There are several key differences between group and individual disability insurance:

• Individual policies allow complete customization of benefits to your needs. Group plans offer standardized coverage.
• You own individual policies. Group plans are owned by the policyholder, like a realtor association. If you leave the group, you lose coverage.
• Individual policies are portable between jobs. Group coverage ends if you switch brokerages or leave the association.
• Premiums for group insurance can increase at renewal. With individual policies, they are locked in.
• Group plans need more flexibility in coverage definitions, benefit periods, amounts, and riders.
• Group insurance may not cover pre-existing conditions fully if the condition arose before you had coverage.

Pros of group disability insurance for realtors:

• Guaranteed issue: No medical underwriting is required. Those with pre-existing conditions can qualify.
• Affordable premiums: Group rates are cheaper compared to individual policies.
• Level premiums: Most group plans are grouped into age bands, so your rate stays level as you age within each band.
• Tax advantages: Premiums are paid with pre-tax dollars for employer and association plans.

Cons of group disability insurance for realtors:

• Limited customization: You can’t tailor benefits to your income and needs.
• Changing premiums: Group premiums can increase at annual renewals.
• Limited duration: Benefit periods for group LTD insurance are often shorter.
• Definition changes: In most group policies, the definition of disability transforms from “own occupation” to “any occupation” after 24 months.
• Limited coverage: Income sources like bonuses and commissions may not be covered.
• Lack of portability: If you leave the group, you lose coverage.
• Pre-existing condition exclusions: A prior disability may prevent qualifying for benefits.

To mitigate the risks of group disability insurance, realtors should consider buying supplemental individual coverage.

Source: https://hshlawyers.com/wp-content/uploads/HSH-Guide-to-LTD-Claims-in-Ontario.pdf

What Does Group Disability Insurance Cover for Realtors?

Income replacement percentage

Most group LTD insurance plans pay a benefit equal to 60% of monthly earnings in case of a qualifying disability. Some plans pay up to 66% of income.

The maximum monthly benefit is also capped at a percentage of income, typically around $5,000 to $10,000. High-income realtors earning over the maximum would not get complete income replacement.

Learn more: Long Term vs Short Term Disability Insurance in a Group Plan

Definition of disability

Group policies contain the “regular occupation” definition for the first 1-2 years, where you must be unable to work as a realtor. After that, it changes to the more restrictive “any occupation” definition if benefits extend beyond two years.

This means the insurance company could deny benefits if you can do any job, even if you can no longer work as a real estate professional. Having own-occupation coverage for the entire benefit period is optimal.

Waiting periods

Group disability insurance for realtors contains waiting periods before benefits become payable, typically:

• Short-term disability: 0 to 14 days
• Long-term disability: 90 to 180 days

The duration of the waiting period impacts premiums, with longer waits to lower the cost. Waiting periods require realtors to self-insure through emergency savings.

Source: https://briansoinsurance.com/short-term-vs-long-term-disability-insurance/

Benefit periods

The maximum length of time benefits can be paid differs between group STD and LTD policies:

• Short-term disability: Up to 30 weeks
• Long-term disability: Typically 2 to 5 years or to age 65/67.

The longer the benefit period, the better for protecting realtors against permanent disabilities. “To age 65” or “to age 67” are the most comprehensive.

Source:  https://www.ltdlawyerontario.com/blog/short-term-disability-and-long-term-disability-benefits-for-canada-post-employees/

Taxability of benefits

For association groups, premiums are paid using after-tax dollars, so benefits are tax-free. For employer groups, premiums are paid pre-tax, so benefits are taxable income when received.

How Much Group Disability Insurance Should Realtors Have?

Factors to consider in coverage amount

The ideal amount of group LTD insurance coverage depends on a realtor’s financial obligations and sources of income. Important factors include:

• The size of the mortgage is crucial to have coverage to pay at least basic housing costs.
• Other fixed debts – Auto loans, personal loans, student loans, and credit card balances must be accounted for.
• Monthly living expenses – Food, utilities, healthcare, insurance, childcare, transportation, and other variable costs.
• Emergency savings – The liquid savings set aside to cover living costs during a waiting period without going into debt.
• Spouse’s income – If reliable, it provides a buffer and lowers the needed benefit amount.
• Supplementary income – Other sources like rental property income reduce the required benefit.
• Future income loss – Calculate long-term impact on earnings due to damage to client relationships.
• Benefit taxability – If benefits are taxed, increase the monthly amount to account for the tax burden.
• Inflation protection – Cost-of-living adjustments or buying inflation-indexed benefits helps benefits retain value over decades.

Strategies for determining adequate coverage

Use these strategies to calculate an appropriate amount of group disability income protection:

• Total fixed monthly expenses include housing, loan payments, insurance premiums, taxes, etc. That’s the bare minimum needed.
• Reduce the total above by any other income sources to determine the benefit needed.
• Multiply the final benefit amount above by the policy’s income replacement percentage to get the monthly LTD benefit amount to purchase.
• Set the benefit duration to the most extended term available, typically age 65 or 67.
• Add inflation protection and future purchase options to help benefits keep pace with income growth.

What Other Insurance Can Supplement Group Disability Insurance?

Individual disability insurance for Realtors

Due to gaps in group LTD coverage, many financial advisors recommend realtors supplement with individual disability policies. These offer more comprehensive features:

• Complete the “own occupation” definition for the entire benefit period.
• Option for up to 80% of income replacement vs. 60-66% from group.
• Benefit periods continue to age 65/67 vs. the group’s 2-5 years.
• They are guaranteed renewable, so rates cannot increase due to declining health.
• It is fully customizable and can be used by riders for specific needs.
• Coverage is portable between jobs instead of tied to an association.

The premiums for supplemental individual coverage are more expensive. However, the benefits provide realtors with increased financial protection.

Business overhead expense insurance

For realtors who own their brokerage, business overhead expense (BOE) insurance is another product to consider. It reimburses ongoing business expenses like rent, utilities, payroll, taxes, loan payments, and insurance premiums so the firm can remain operational.

Combining BOE with disability income insurance allows realtors to receive benefits for personal costs while keeping their business solvent during recovery from illness or injury. This prevents business assets like the brokerage itself from being sold off to cover expenses.

Long-term care insurance

While not directly supplementing disability insurance, long-term care coverage is worth considering in order to cover assisted living and nursing home care costs. These increase substantially with age and are not usually covered by health insurance or Medicare.

How Do Realtors File a Group Disability Insurance Claim?

Understanding the claim process

The exact claim filing process depends on your group disability insurance provider but typically involves:

• Calling the insurer’s claims department to report the disability within 30 days of becoming unable to work.
• Completing the initial claim forms, which are sent after the call.
• Providing documentation from physicians confirming the disability along with treatments and restrictions.
• Letting the insurer contact doctors for additional records if needed.
• Submitting any evidence of income documentation requested, such as tax returns, 1099s, and brokerage statements.
• Continuing to provide ongoing medical updates showing your status and treatment compliance.

What documentation is required?

Examples of documentation required to initiate and support a disability claim include:

• Medical records from treating physicians, specialists, therapists, counsellors, etc. These should outline the diagnosis, prognosis, treatment plan, and functionality impacts.
• Proof of Income – Tax returns, brokerage income statements, and commission schedules.
• Claim forms – Signed Authorization for Disclosure of Health Information and signed claim form.
• Job description – Documents indicating a realtor’s essential duties and which you cannot perform.
• A voided check is used to submit direct deposit information when benefits are approved.

How long do claims take to process?

After submitting the claim forms and documentation, the insurance company typically makes a decision in 2-3 months, including time for contacting your healthcare providers for records. Claims investigation times depend on the complexity of the medical case.

For approved claims, benefits begin after the waiting period ends. Ongoing benefits are contingent on continuing to submit periodic proof of disability. The insurer may also request independent medical examinations periodically.

Source: https://www.disability.ca/how-long-will-my-disability-case-take/

Common Group Disability Insurance Claim Problems for Realtors

Denied claims

Group disability claims often get denied by insurance companies. Common reasons include:

• Failing to meet the policy’s definition of disability or being considered “able to work.”
• Having a pre-existing condition exclusion applies to the diagnosed medical cause.
• Missing filing deadlines include notice and claim filing of disability onset.
• Inadequate documentation from physicians to substantiate functionality loss.
• Enrolled in the group policy for less than a year before claiming, so coverage exclusions have stayed active.

Appealing denials requires presenting clear medical evidence that the applicant meets the disability criteria, along with documentation of timely claim initiation and thorough physician workups of the condition.

Coverage limitations

Realtors with disabilities related to mental illness face barriers due to group disability plans limiting or completely lacking coverage for psychiatric conditions. Stress, anxiety, and depression are everyday among realtors.

For realtors owning brokerages, overhead expenses may not be fully covered if they exceed monthly benefit amounts. Gaps in income replacement also arise if bonuses and commissions are not considered covered earnings under the policy.

Pre-existing condition exclusions

Finding coverage for a pre-existing illness with group insurance can be tricky, even if the condition hadn’t yet caused disability. Most group policies contain pre-existing condition exclusions barring claims for 12-24 months. Supplemental individual coverage may also decline to cover these pre-existing illnesses.

Source: https://protectyourwealth.ca/disability-insurance-with-a-pre-existing-condition/

Tips for Purchasing Group Disability Insurance as a Realtor

When looking to purchase group LTD coverage through your association or brokerage, keep the following tips in mind:

Questions to ask about your policy

• Is my total income covered, including bonuses and commissions, or is my base salary only covered?
• Does the definition of disability change from own occupation to any occupation after two years?
• Is the benefit period lifetime, to age 65/67, or limited to 2 or 5 years?
• Are there any exclusions for mental health conditions, substance abuse treatment, or pre-existing conditions?
• Can my benefit amount or duration be limited for certain illnesses?
• Will inflation lower my purchasing power while on claim? Is there a cost-of-living adjustment?

Add-on features to consider

• Residual/partial disability benefits to cover income loss if you can work part-time.
• Social insurance substitution to cover gaps if CPP/QPP disability benefits are denied.
• Future increase options to raise the benefit if income grows without new underwriting.
• Waiver of premium to avoid payment if you’re collecting disability benefits.
• Survivor benefits to pay out lump sums after death in case of permanent disabilities.

Shopping insurance carriers

Work with an insurance broker to compare multiple group disability carriers on:

• Definition of disability and any limitations or changes after set durations.
• Exclusion periods for pre-existing conditions.
• The owner-occupation period can be a lifetime for some carriers versus two years.
• Optional riders and availability of partial benefits, recurrent disabilities, and cost-of-living bumps.
• Percentage of income covered for maximum benefit amounts.

Getting quotes from multiple reputable insurance providers ensures realtors find the group LTD coverage best suited to their situation.

Conclusion – Key Takeaways

Group long-term disability insurance can provide realtors with essential income protection during illnesses or injuries. However, gaps in coverage require supplementing benefits. Key takeaways include:

• The high likelihood of disability makes coverage vital for realtors.
• Group LTD insurance has lower premiums but limited benefits compared to individual policies.
• Know the definitions, waiting periods, benefit durations, and exclusions before purchasing.
• Ensure your monthly benefit aligns with financial obligations using an income replacement calculator.
• Combine group LTD with business overhead expenses and individual disability insurance.
• Work with an insurance broker to compare multiple carriers’ group policies.
• Review group disability with a fee-only insurance advisor before making coverage decisions.

Understanding the nuances around group disability income protection lets realtors make intelligent choices when selecting policies and coverage amounts. Protecting your income through disability insurance provides invaluable peace of mind. No realtor wants to lose their business due to factors outside the housing market forces.

Where to get help evaluating coverage

For assistance identifying gaps in your group disability coverage or estimating adequate income replacement needs, contact an independent insurance brokerage or fee-only insurance advisor. They can objectively evaluate your insurance portfolio and recommend suitable group, individual, and business overhead expense disability products to safeguard your income and assets.

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Article Sources

Ebsource enables smart benefits decisions. Our unbiased insights come from financial veterans adhering to industry best practices. We source accurate data from respected agencies like Statistics Canada. Through extensive research of top providers, we offer customized recommendations matching individual needs and budgets. At Ebsource, we maintain strict editorial standards and transparent sourcing. Our aim is equipping Canadians with trusted knowledge to choose ideal benefits confidently. Our purpose is being Canada’s most dependable resource for savvy benefits guidance.

Best Disability Insurance For Real Estate Agents And Realtors [Know Your Options And Protect Your Livelihood] – myfamilylifeinsurance.com
Disability Insurance For Real Estate Agents / Realtors – briansoinsurance.com
Specializing in long term disability claim denials for real estate agents – sharelawyers.com