Preparing in case you suddenly become unemployed

Brett Millard - Sep 7, 2026 / 4:00 am | Story: 630461 Photo: Unsplash Preparing for the possibility of losing your paycheque is It's simply good financial planning, says Brett Millard.. When people think about financial risk, they often think about the stock market—'What happens if my investments fall 20 per cent?' 'Should I be worried about a recession?' 'Is my portfolio diversified enough?' Those are reasonable questions but for most Canadians, there is another financial risk that is considerably more important. What happens if your paycheque suddenly stops? For someone earning $100,000 a year, their future income represents millions of dollars over the course of a career. Yet, we often spend far more time protecting our investment portfolios than protecting the income that makes everything else possible. Losing that income doesn't necessarily require a layoff. An illness or injury that prevents you from working can create an even bigger financial problem because the expenses don't stop when the paycheque does. This is where disability insurance becomes an important part of financial planning. If you become unable to work because of an illness or injury, disability insurance can replace a portion of your income for a period of time. Employer-sponsored plans may provide some coverage but it's important to understand exactly what you have, how much it would pay and how long benefits would continue. Don't assume that your employer's coverage is enough. The same applies to critical illness insurance. Unlike disability insurance, which is designed to replace income when you're unable to work, critical illness insurance generally provides a lump-sum payment if you're diagnosed with a covered serious illness and meet the policy's conditions. That money can provide flexibility when life suddenly becomes complicated. You might use it to cover mortgage payments, pay for expenses that aren't covered by a health plan, make necessary modifications to your home, or simply give yourself some financial breathing room while you concentrate on getting better. Insurance isn't the only line of defence from being off work. Another critical one is an emergency fund. Having several months of essential expenses sitting in an accessible savings account can make an enormous difference if you're laid off. It gives you time, time to look for another job rather than taking the first position you're offered, time to deal with an unexpected expense without immediately reaching for a credit card and time to make rational decisions instead of financial decisions made under panic. Government benefits can help, but they shouldn't be confused with a replacement for your regular income. In 2026, regular employment insurance generally replaces 55 per cent of insurable earnings, up to a maximum of $729 per week. Depending on the region and circumstances, regular benefits can last from 14 to as many as 45 weeks. Illness creates another potential gap. EI sickness benefits can provide up to 26 weeks, also at 55 per cent of insurable earnings, to a maximum of $729 per week. But for someone earning substantially more than the maximum insurable amount, that's a significant reduction in income. There are other ways to make your finances more resilient. Avoid allowing your fixed expenses to consume every dollar of your income. A household with a large mortgage, expensive vehicles and substantial monthly debt payments has far less flexibility when income disappears. Keep your résumé and professional network current, even when you're happily employed. Your network isn't just useful when you're looking for a job — it's financial insurance. If you have a partner, make sure you understand what would happen to the household if either person's income disappeared. If you're self-employed or have a highly variable income, consider building an even larger cash reserve because traditional employment benefits may not provide the same safety net. Finally, don't overlook your benefits package. Know what your employer actually provides for disability coverage, life insurance and extended health benefits, and understand what happens to those benefits if your employment ends. The stock market will always go up and down. That's why we diversify our investments and accept that market volatility is part of investing.Your income deserves the same kind of attention. For most working Canadians, the ability to earn a paycheque is their single most valuable financial asset. Protecting it with appropriate insurance, maintaining an emergency fund, keeping debt manageable and developing a backup plan isn't being pessimistic. It's simply good financial planning. This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.