Understanding the Future Increase Option (FIO) – Manulife Engineers Canada Disability Plan

Introduction

If you own a Manulife Engineers Canada Disability Insurance plan, this article is for you. Likewise, if you are considering purchasing a Manulife Engineers Canada Disability Insurance benefit plan, this article is also for you. This article highlights a unique and valuable feature that is integrated at no additional cost into the Manulife Engineers Canada Disability insurance offering: the Future Increase Option (FIO).

The Future Increase Option (FIO) is a feature that allows insured members to increase their disability coverage in the future without undergoing medical underwriting and is often valuable for those who have had an increase in their income or job position, as it enables insureds to maintain a coverage level that is better reflective of their income.

Here are the important details about the FIO

Key Features of the Future Increase Option (FIO):

1. Eligibility:
   • The insured member must be under the age of 55 to exercise the FIO.
   • The member must be actively at work on a full-time basis at the time of exercising the option.
   • The FIO benefit must not have been specifically excluded from the member's coverage.
     • Note: This can occur at the time of the original application for disability coverage if due to the insured’s medical history, they do not qualify for standard coverage. If the FIO benefit is excluded, it would be made clear to the insured person in writing before they accept the offer for the disability coverage.
2. Increase Amount:
   • Each year on the Option Date, the insured member can increase their coverage amount by up to 15% of their Original Coverage, with a minimum increase of $100.
   • The total of all increases cannot exceed 1.5 times the original coverage amount.
   • The total in-force coverage, including all increases, cannot exceed the overall plan maximum of $15,000 per month.
3. Application Process:
   • To exercise the FIO, the insured must submit a completed application within 30 days following the Option Date.
   • The insured will receive an offer letter and application form by physical mail in advance of the Option Date.
   • When exercising the FIO for amounts exceeding $300, the insured must establish that their current earnings justify the increased coverage by providing a copy of their most recent Personal T1 tax return. Those who are self-employed and incorporated will also be asked to provide a copy of their most recent Corporate financial statements.
4. Limitation:
   • The FIO benefit automatically expires if not exercised at least once within three consecutive Option Dates.
   • The FIO benefit also expires after it has been in force for 10 continuous years from the effective date of insurance or the first Option Date following September 1, 2005, whichever is later.
5. During Disability:
   • If the insured is disabled on an Option Date, they may increase their coverage by up to $200 on the first Option Date following their Disability Date.
   • The increased amount applies only after recovery from the disability that existed on the effective date of the increase.
6. Reinstatement:
   • The FIO benefit can be renewed if it expires due to non-exercise or the 10-year limitation, provided the insured is under 54 years of age and actively at work on a full-time basis.
   • Upon renewal, the FIO Exercise Requirement and 10-Year FIO Limitation provisions start anew.

Value of the Future Increase Option (FIO)

1. Flexibility to Adjust Coverage:
   • The FIO allows members to increase their disability insurance coverage as their income grows, ensuring that their coverage remains adequate over time.
   • This flexibility is important for young professionals whose income is expected to rise significantly over their career.
2. Avoiding Additional Medical Underwriting:
   • As the Manulife Engineers Canada Disability Plan is medically underwritten, increasing coverage typically requires medical re-evaluation, which can be cumbersome and may result in higher premiums or denial of coverage if the insured’s health has changed.
   • The FIO eliminates the need for additional medical underwriting, providing peace of mind and ease of increasing coverage.
3. Financial Security:
   • By allowing for future increases in coverage, the FIO ensures that members' disability insurance keeps pace with their financial needs and responsibilities, providing better financial security in the event of a disability.
   • It helps in maintaining an adequate income replacement ratio, which is critical for managing ongoing living expenses and financial commitments.
4. Protection Against Health Changes:
   • Health conditions can change unexpectedly, potentially affecting insurability and premium rates.
   • The FIO protects against such changes by guaranteeing the right to increase coverage without new health assessments, safeguarding the insured’s ability to enhance their protection despite any health issues that may arise.
5. Career Growth and Income Increase:
   • As members advance in their careers and their income increases, their financial obligations typically grow. The FIO enables them to align their disability insurance coverage with their current income level and lifestyle needs.
   • This is particularly valuable for professionals in high-growth fields where rapid income increases are common.
6. Mitigating Inflation Effects:
   • The FIO helps to mitigate the purchasing power erosion that results from inflation. By allowing members to increase their disability coverage at regular intervals, the FIO ensures that their coverage remains sufficient to meet their financial needs as the cost of living rises over time.
7. Simplified Process:
   • The application process for the FIO is straightforward and requires only proof of increased earnings, making it a convenient way to enhance coverage without the hassle of a full underwriting process.

Conclusion

The Future Increase Option (FIO) in the Manulife Engineers Canada Disability Plan is a highly valuable feature. It provides insured members with the flexibility to increase their coverage as their income grows, without the need for additional medical underwriting. This ensures continuous and adequate financial protection, peace of mind, and the ability to adapt to changing financial needs and health conditions. For professionals whose income and financial responsibilities are likely to increase over time, the FIO is an indispensable feature that enhances the overall value and effectiveness of their disability insurance coverage.

Garrett Agencies advisors are happy to assist you with exercising your FIO, and help to ensure a smooth and efficient process for increasing your Disability coverage.