Protecting Your Lifestyle with Living Benefits

by Geoff Sgarbossa, CD, CFP, RIS, Financial Planner

Introduction

What would life look like if you suddenly lost $2,700,000? 

That number is based on a simple idea. National average salary in Canada is about $67,700 a year. Over a 40-year working life, that adds up to roughly $2.7 million of income. For many families, their future earning power is one of the biggest financial assets they will ever have. Living benefits are designed to help protect that asset while you are alive if illness, disability, or care needs interrupt your income or increase your expenses. 

Why It Matters

Most people understand life insurance. It helps protect the family financially if someone dies. Got it! Living benefits focus on what happens if someone lives, but can no longer work due to injury or illness, or faces a serious diagnosis, and needs ongoing care?

That risk is often easier to ignore because it does not always arrive all at once. A disability can reduce income for months or years; A serious illness can create sudden costs and time away from work; and long-term care needs can quietly erode savings.

Main Protection Areas

As identified in the 5 -step risk management process discussed in a separate paper, the goal is to identify risks that may pose substantial or catastrophic consequences if they become reality, and remove, control, or finance those risks. This discussion is focused on risk financing, but cash flow is not finite and the option to remove or control that risk should not be overlooked. Risk financing while living generally comes in the following forms:

• Disability insurance helps replace part of your income if illness or injury prevents you from working. Without it, the loss of income can quickly jeopardize one’s ability to cover mortgage or rent payments, groceries, debt obligations, wealth accumulations and other day-to-day lifestyle expenses;

• Critical illness insurance provides a lump-sum benefit if you are diagnosed with a covered condition such as Cancer or heart-attack. Without it, a serious diagnosis can force a family to deplete savings, take on debt, or delay recovery decisions because of the financial impact of time away from work and out-of-pocket expenses- medical or otherwise;

• Long-term care insurance helps with the cost of care if you can no longer live independently. Without it, the cost of care may prematurely deplete retirement savings, force the sale of assets, or require financial and caregiving support from loved ones.

• Health and dental coverage helps with routine and recurring expenses that provincial plans may not fully cover, such as prescription drugs, dental work, vision care, and paramedical services. Without it, smaller health expenses can quietly become an ongoing drain on monthly cash flow.

• Permanent life insurance with cash value can add flexibility because some policies may build value that can be accessed during life, depending on the contract. Without that added liquidity, a family may have fewer options when trying to fund an unexpected need without disrupting other assets or long-term plans.

Each tool solves a different problem. Income loss, a major diagnosis, ongoing care costs, and recurring health expenses are not the same risk, so they should not be treated as if one product solves everything.

Workplace Benefits

Workplace benefits often create a false sense of security. Many group plans include health, dental, disability, life insurance, and sometimes critical illness coverage, but that protection is usually tied to your continued employment. That means the coverage may not follow you when you leave that employer. 

This matters because the need for coverage does not disappear when employment changes. If workplace benefits end at the wrong time, a household can lose support for prescription drugs, dental expenses, disability protection, or life insurance all at once.

Misconceptions

A few misunderstandings come up time and again in client discussions.

• All living benefits are basically the same. They are not. Disability, critical illness, long-term care, health and dental, and permanent life insurance features all address different risks and pay in different ways.

• My workplace plan should be enough. It may be enough for now, but group coverage is often not portable and may end when employment ends. To add insult to injury, it is quite common for attained age, injury or illness to make it difficult to replace the group benefits once lost.

• If something serious happens, insurance will automatically pay. Insurance pays based on policy definitions, claim rules, waiting periods, and exclusions. As the name suggests, living benefits generally require you to remain living for a specified period. If the insured does not, then there would be no living benefit paid out, and life insurance would kick in. 

• I’m young and Healthy. I don’t need living benefits. Being young and healthy does not eliminate the risk of illness or injury. In many cases, it increases the importance of living benefits because survival is more likely than death, but survival can come with months or years of income disruption, treatment, recovery, and lifestyle changes.

• I can always use savings instead. Some families can self-fund part of the risk, but many underestimate the timing and size of a long disability, major illness, or care need.

Conclusion

For many Canadians, the most valuable asset is their ability to earn an income and turn that income into a lifestyle and support for the people they care about.

Living benefits are designed to help protect that asset. They are not about expecting the worst. They are about making sure that if illness, disability, or care needs interrupt the plan, there is still a plan left to protect. Speak to one of our highly qualified Wealth Advisors at Keill & Associates to ensure your protected when life happens. 

Disclaimer and Notice to Reader: This Serious Money Paper should not be construed as financial, legal or tax advice but rather only as a general statement and explanation of the topic matter. Professional financial, tax and legal advice should be obtained for the readers’ own personal situation. For more information on this topic or how it applies to your family, please contact our Wealth Advisory team.

Posted May 2026