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You insure your house, your car - maybe even your gadgets with extended warranties. But have you insured your single biggest asset: your ability to earn an income?

If you haven't, it may be time to put life and disability insurance into perspective. A university graduate starting a working career with a $45,000 annual salary, assuming raises and promotions over time, may see that salary grow by 4 per cent a year, translating into more than $4.25-million of total earnings over a 40-year career. Over time, part of your take-home pay is slowly converted into tangible assets and investments, but while you are younger, your future potential income is one of the most important aspects of your financial well-being.

How well protected is that asset?

Story continues below advertisement

Life insurance can be structured to provide your family with a continuing means to sustain the lifestyle you have helped create. If you die, your income stops, but the lump sum death benefit your family receives can be invested and used as income. Most people sit down with their financial adviser or insurance agent and run through an "insurance needs analysis," which breaks down how much insurance you should purchase in order to achieve various goals. You may want to have the mortgage paid off, to have an income provided for life or for the kids' future schooling to be accounted for.

But what happens if you aren't "lucky enough to die" and simply become disabled for an extended period of time? A sad realization is that sometimes people would've been financially better off if they had indeed died, simply because they didn't take the time to ensure they had proper disability insurance coverage. It's a morbid thought, but think about it: The mortgage still needs to be paid, and you may want to pay for special devices or services to assist with coping with your disability. This could lead to downsizing your lifestyle, moving to a smaller house, cutting out some luxuries and so on.

According to Canada Life, one in three people will become disabled for longer than 90 days before age 65, and the average length of disability that lasts more than 90 days is 2.9 years.

If you have a benefits plan at work, then you'll want to check to see what your coverage is exactly. While some plans only provide a benefit for five years, some will keep paying out until you are 65. The percentage of income replaced also varies. If you've lost your employee handbook, call your human resources department and get to know your disability coverage. For some people, the coverage will be inadequate and should be topped up with a private plan, which covers the difference between what you're getting at work and what you would ideally like to have for peace of mind.

If you are self-employed or don't have a benefits plan, run, don't walk, to get a disability quote from an insurance agent. Be prepared for the sticker shock, as policies can sometimes run more than $100 a month. But before you balk at that price, remember: Disability coverage may be your most expensive insurance policy, but it's protecting the asset you need the most.

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