Income Replacement Benefit (IRB)
What coverage limit do I need to purchase?
To help answer this question the following should be considered
q Are you employed / self employed?
q How much income do you earn / declare?
q Do you have an income continuation plan or collateral benefit sources from work?
If no income continuation plan or collateral benefit, then ask yourself the following:
q Do you earn more than $29,714.29/year or $14.28/hour? Consider optional IRB of $600/wk.
q Do you earn more than $44,571.43 /year or $21.42/hour? Consider optional IRB of $800/wk
q Do you earn more than $59,428.57 or $28.57/hour? Consider optional IRB of $1000/wk
To help understand the limit of coverage that should be considered lets look at some examples and see how the different income replacement limit would be affected.
Mr. Smith is an owner operator of a small business. He has no disability plan and has gross annual income of $29,500. His income replacement benefit would be calculated as follows:
Gross Weekly Income: $29,500 / 52 weeks = $567.30 per week
Income Benefit: 70% of $567.30 per week = $397.11 per week as an income benefit since he has no collateral benefits
Recommendation: Basic coverage of $400 per week is sufficient
Ms. Smith is a self employed professional. She has purchased a small disability package for herself totalling $250 per week should she become ill or disabled. She earns a gross annual income of $75,000. Her income replacement benefit would be calculated as follows:
Gross Weekly Income: $75,000 / 52 weeks = $1,442.30 per week
70% of $1,442.30 per week = $1,009.61 per week.
Income Benefit: $1,009.61/wk - $250/wk collateral benefit = $759.61 per week
Recommendation: Sell buy up option to $800 per week