This article originally appeared in Solutions Magazine from Manulife Investments.
Getting sick isn’t something most of us think much about and Joe was no exception. Until he had his stroke. Today, thanks to medical advances and healthy living, Joe is now recovering and getting on with his life. Unfortunately, his retirement plans will take longer to recover than he has. It would be a different story if Joe had included critical illness insurance in his financial plans.
Getting Better Costs Money
Getting sick isn’t something any of us like to think about. But it can happen. In fact, your risk of being diagnosed with a critical illness before the age of 75 is higher than your risk of dying in that time. The good news is that your likelihood of recovery remains strong given improvements in healthy living and medical science.
But, as Joe discovered, treating and coping with illness can mean significant and often unexpected costs — costs that may not be covered by provincial or employee health plans. This is where critical illness insurance can help. It is designed to help you with the unexpected costs of getting sick. It provides a cash benefit if you’re diagnosed with one of the conditions as defined in your contract and you survive the waiting period.
With the Money You Can:
- Find the best health care available
- Hire a nurse or caregiver to help you at home
- Pay off your mortgage
- Provide income when you can’t work or your partner can’t work because they’re accompanying you during treatment
- Protect your retirement plans
- Make sure your business survives
- Take a vacation or reduce your workload to help you recover
Planning for the Unexpected is Critical
Critical illness insurance is part of a good financial strategy as it allows you to plan for the unexpected. No one expects to get sick. And, if you’re fortunate enough to live a long and healthy life, many critical illness plans offer Return of Premium options that give you some of your money back. Some of the better plans offer all your money back.
The critical illness insurance market is growing in Canada and many companies now offer this type of “living benefit” insurance. With so many plans to choose from, how do you know which one is right for you?
If you’re considering critical illness insurance, consider choosing a plan that offers:
- Coverage for the conditions that pose the greatest threat to your health and present the most significant recovery demands and the greatest financial challenges
- A partial benefit if your condition isn’t life threatening, but is life altering. There are plans that give you 25 per cent of your coverage (up to a maximum of $50,000) for conditions not normally covered by other critical illness products
- The ability to receive your benefit up front. Part of your recovery means getting your money fast. Let’s face it, if you are diagnosed with a critical illness, you’ll probably spend a lot of time waiting — for appointments, for test results, for treatment. Some plans offer a recovery benefit (10 per cent of your coverage to a maximum of $10,000) that helps you get some money faster, without having to fulfill the waiting period. Money in your hands faster means your recovery can begin sooner.
Significant Impact on Retirement Savings
Many people who get sick have no choice but to turn to their savings to pay for unexpected medical costs. And for many, this means tapping into their retirement savings to finance recovery. As you can imagine, this can significantly impact your financial plan and retirement strategy. For most, it can result in working longer and putting off retirement, and for others, a diminished lifestyle during retirement. The point is, people do not plan to get sick and, therefore, don’t budget for it.
Joe was 45 when he had a stroke. His costs during recovery exceeded $100,000. New therapies, unexpected costs, and his inability to work full-time all contributed to his soaring expenses. Joe came up with the money to pay the bills, but only by dipping into his retirement savings. Joe and his wife, Mary, had a plan in place to retire, but, unfortunately, Joe's unexpected illness took them off course.
Joe Had Planned to Retire Comfortably at 65
Joe and Mary had planned to retire comfortably when Joe turned 65. They had contributed to their RRSPs each year and had started other non-registered savings accounts. Unfortunately, their plan is now unrealistic. With additional unexpected expenses and the RRSP withdrawals they made because of Joe’s illness, Joe and Mary won’t be able to live the lifestyle they expected in retirement.
Don’t find yourself suddenly off course as Joe and Mary did. Adding critical illness insurance to your financial plan makes sense. It is an investment that gives you the peace of mind knowing that if you get sick, you can focus on what really matters … getting better
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