What is your single most valuable asset? Most Canadians respond to this question without hesitation by saying that it is their home. But the truth is that for most of us the most valuable asset is our ability to work which can be expressed as our lifetime earning potential. Let’s look at some numbers. If you are thirty years old and make $50,000 a year, by age 65 you will make $1,750,000. If you index your projected earnings at 2% which is a more likely scenario, your lifetime earning potential will be almost $2,500,000. Now compare this number to the value of your home. Even in such astronomically overpriced areas as Vancouver, an average house is only worth about $600,000 (or much less, depending on when you are reading this).

And yet, most of us insure our houses, cars, boats and even personal items, but only few insure their ability to work by purchasing disability insurance. This makes especially little sense if you think about how a potential loss of your ability to work can cause you to loose all your other assets. Imagine what happens if you can no longer make your mortgage and car payments and pay other bills. Considering the magnitude of a possible financial loss due to disability and the effect this loss can have on your overall financial life, disability insurance is something everyone should buy. And this should be much higher on our priority list than insurance on our houses, cars, etc.

Many have disability insurance as part of their employee benefits. But not many realize that most group plans will only cover you for two years should you become disabled. They also have more restrictive definitions of disability than individual plan. And if you leave your group plan, you can’t take your disability coverage with you.

Of all types of insurance, disability insurance requires the most medical screening and financial information provided. You need to prove that you are healthy and have stable employment or other reliable source of income. Applying for disability coverage is much easier when you have a job. Therefore, if you have it but think about leaving, apply for disability insurance while you are still working. Remember, it may take a couple of months and you have to be employed on the day you receive your policy.

Disability insurance is not cheap. But premiums are based on claims experience, which means that the probability of you becoming disabled and the potential amount of claim are so high that this coverage cannot be cheap. But individual policies are usually flexible and you can reduce the cost by increasing the elimination (waiting) period or reducing the benefit period. A good insurance advisor will always help you find a plan that fits your budget. Don’t wait - this is one type of insurance you can’t afford not to have.

Nikolay Sisan is a Certified Financial Planner and freelance writer in Vancouver.