Names and minor details in the following stories have been changed to protect privacy.
Most Canadians recognize the importance of making plans for their future, creating a nest egg through RSPs, TFSAs, real estate and other investments, but as the saying goes; Life is what happens to you while you’re busy making other plans. What would happen to your nest egg if life threw an accident or illness into your path?
Insurance is one of those topics that many people avoid talking or even thinking about. There are so many different types of policies that it can easily become overwhelming to sort out what you need and what you don’t need. But when it comes to insurance the more you know, the better you can find a product that suits your situation.
The two most common insurance products are Life Insurance (either Term Insurance or Whole Life/Universal Insurance) and Disability Insurance. A third insurance, Critical Illness, is newer in Canada and unlike disability insurance, which is linked to your ability to work and paid-out over time, Critical Illness insurance pays out in full usually 30 days after your diagnosis.
A financial settlement from insurance can take a lot of stress off a bad situation (death of a spouse, illness that keeps you from working, high medical bills from a life threating illness). When times are tough, no one needs financial stress as well. Money doesn’t take away our problems, but it can sure make things a little easier at times. Disability will cover bills if you can’t work, life insurance can pay off the mortgage or debt or cover education costs if a spouse dies, and critical illness can be used to cover medical bills or to hire some help if you are sick. (According to the Canadian Cancer Society (based on 2010 estimates) 2 out of 5 Canadians (45% of men and 42% of women) are expected to develop cancer during their lifetimes).
I recently had a discussion about insurance with Glennis Deslippe, who has been a living benefits specialist with Integral Financial Services Inc. for the last 12 years.
“If you become ill or disabled in your 40’s,” says Glennis, “at the time when you are really trying to build your nest egg, how is that illness going to impact financially into your retirement? Because with most conditions you are going to survive, but there is going to be some financial impact down-the-road, unless you have a lot of money saved or you have insurance.”
For example, Rita was only in her mid-40’s when a dental procedure resulted in permanent damage to her trigeminal nerve, leaving her with chronic pain and severe difficulty speaking. Unable to continue running her business, Rita found herself without an income.
Sam was a 58 year old business owner, divorced and working on his PHD when he suffered a stroke. He lost his business and his autonomy, needing to rely on his son to drive him places and help with many of his daily needs.
Rita had long term disability insurance in place so was able to replace a good portion of her lost income and remain independent. Sam on the other hand was able to offset some of his immediate expenses with a payout from critical illness insurance, but since he had no long term disability insurance he was forced by circumstance to begin living on his retirement savings before he intended.
As we begin a new year we find ourselves thinking of fresh goals and new accomplishments, but it’s equally important that we safeguard our financial future from the happenstance of illness, accident and death.
