Recommending disability coverage requires a structured comparison of the client's income-replacement need against their existing resources.
Steps in a disability needs analysis:
- Determine monthly income required to meet obligations and maintain lifestyle.
- Identify existing income-replacement resources: Employment Insurance sickness (15 weeks), any employer short-term or long-term disability plan, CPP/QPP disability benefit (if likely to qualify), personal savings and investments.
- Calculate the gap: monthly need minus existing monthly resources.
- Consider the elimination period the client can sustain with savings.
- Consider the benefit period needed: to age 65 if the client has no other long-term income source.
- Select the contract category (non-cancellable vs. guaranteed renewable) based on the client's occupation, income stability, and budget.
- Document the analysis and recommendation.
Common exam trap: a scenario where a group plan provides 66.7 percent of salary to age 65, and the question asks whether the client needs individual coverage. If the group plan fully covers the gap, additional individual coverage may not be justified. However, the group plan is not portable (it ends when employment ends), so a client planning to become self-employed should consider an individual policy even if currently covered by the group plan.