Lawyers demand precision—so we’ll be precise. Disability insurance is really income insurance. There’s no insurance plan that can prevent life from coming at you in surprising and unwelcome ways—but there is insurance that can protect your paycheque if an injury or disability keeps you from doing the job you love.
Disability insurance ensures that your career, lifestyle, and financial future are protected if life takes an unexpected turn. And for sole practitioners and small-firm partners, combining it with business expense insurance creates a shield for both your livelihood and your practice.
We spoke with Lawyers Financial’s Jean-Gaston Baudart (Financial Security Advisor and VP, Quebec) about the realities of disability insurance, the limits of group benefits, and the importance of protecting your ability to earn.
Q. WHY SHOULD I CONSIDER DISABILITY INSURANCE?
A. If you can’t work due to illness or injury, your financial security can suddenly be at risk. A tax-free monthly disability benefit will help pay everything your current income supports—mortgage payments, rent, bills, childcare, groceries. The alternative could be draining your savings or selling your RRSPs or other investments.
Q. DOESN’T A GROUP BENEFITS PLAN DO THAT?
A. Yes, but many group plans cap the payment at $4,000 - $5,000 per month. That helps—but is probably far below the financial needs of most lawyers.
Q. GROUP PLANS DON’T FACTOR IN PERSONAL FINANCIAL DETAILS?
A. No. They typically apply the same formula to everyone, regardless of your income, debts, or daily family needs. So, two lawyers—one earning $100,000 and another earning $500,000—often receive the same maximum monthly disability benefit from their group plan. And it doesn’t factor in if you’re the sole income earner in a household.
Q. SO THAT’S WHERE A PERSONAL DISABILITY POLICY COMES IN?
A. Exactly. Many lawyers think if they’re in a group plan everything’s okay. What they might not realize—or have forgotten—is how small the potential benefit is compared to their monthly cash flow needs.
Adding a personal disability policy can get you much closer to covering your actual living expenses if you’re unable to work. That’s why we focus on being as precise as possible in identifying the right amount of coverage. Everyone has unique circumstances.
“Protecting your income without protecting your practice is like insuring your car but not the engine.”
Q. WHAT ABOUT SOLE PRACTITIONERS?
A. Income protection is critical here because 1) there are no group benefits to fall back on and 2) if you can’t work, the firm itself is at risk.
When you’re self-employed you have two sets of expenses: personal and business. You need income replacement to cover your personal expenses. But you also need business expense insurance, which is a separate policy, to pay your overhead—rent, utilities, staff salaries, phone, internet. I strongly recommend both for sole practitioners and partners in small firms.
I think of it this way: protecting your income without protecting your practice is like insuring your car but not the engine.
Q. HOW COMMON IS DISABILITY AMONG LAWYERS?
A. More common than many realize. Mental health-related disabilities make up a significant share of claims in general, but lawyers face even higher risks due to chronic stress and the long hours.
In fact, researchers at Université de Sherbrooke have studied why the profession experiences disproportionately high rates of mental-health-related disabilities.1 One of their key recommendations is for provincial law societies to take action on some of the risk factors that compromise mental and physical health—including billable-hour targets.
Income insurance doesn’t solve this problem, but it does give lawyers a means of controlling what they can control.
Q. IF I HAVE GROUP BENEFITS AND MY OWN POLICY, DO BOTH PAY?
A. Yes, that’s the key point. Disability insurance is designed to replace income but not exceed it—there’s always an incentive to return to work. The combined benefits cannot be more than industry-regulated maximums.
Q. SHOULD I REVIEW MY COVERAGE OVER TIME?
A. Great question. We see this all the time. Lawyers’ incomes can increase significantly as their career progresses. And that often means taking on more financial obligations such as larger mortgages, children’s education costs, anything that significantly draws on your income. But protecting that higher income is often overlooked. So, I like to set a five-year review with clients to make sure their coverage still meets their needs.
WE CAN HELP
Lawyers are experts at managing risk for others but often overlook their own vulnerability. Connect with a Lawyers Financial insurance advisor to learn about insurance that will work for you when you can’t.
Written for Lawyers Financial by Chris Goldie, a Toronto-based writer and editor.
Source: 1. Universite de Sherbrooke, “Towards a healthy and sustainable practice of law in Canada,” Phase II, 2022-2024
