Critical Illness
By Troy Peart The Afro News Vancouver : The risk and consequences of a critical illness like a heart attack, stroke or cancer are elements of financial planning that are often overlooked. With increasing longevity, the probability of getting seriously ill has increased and fortunately so too have the chances of surviving. Advances in medical care have given many Canadians who experience major critical illnesses a new lease on life. Unfortunately, for most of these individuals, survival means having to make costly lifestyle adjustments while still being responsible for their regular financial commitments.
These costly lifestyle adjustments range from special convalescent care to making one’s home and car wheelchair accessible. In addition to these costly expenses, individuals often incur expensive drug expenditures or even alternative medicine costs that are not covered by BC PharmaCare or extended medical plans. Even if an individual has extended medical benefits to pay for a portion of these costs, there are often limitations on how much will be covered. Due to the current state of our medical system, another issue which is becoming increasingly prominent is the cost of treatment south of the border or elsewhere. This often becomes applicable if there are either insufficient facilities in Canada or too long of a waiting list. If one’s spouse is forced to quit work in order to take care of them then these financial consequences are often much more significant.
Prior to the early 1990’s, the only options available to Canadians to cope with the financial consequences of surviving a critical illness were to either access their personal assets or to utilize the proceeds from a disability insurance policy. Both options have significant shortcomings. Personal assets like savings are often quickly exhausted and doing this could jeopardize one’s entire financial plann. Disability insurance is usually calculated as a percentage of an individual’s income before their critical illness and this may not be enough to pay for all of the new expenses in addition to their previous ones. Another option that I failed to mention was relying on government assistance but this is usually only available once the first two options have been fully exhausted. In addition, the types of treatments available are often restricted with government assistance.
Since the early 1990’s, the option of critical illness insurance has become available to Canadians. Critical illness insurance is basically an insurance policy which pays out a lump sum if someone succumbs to a critical illness and also survives. This lump sum can be used for any purpose. Like other types of insurance, one’s eligibility for this product is dependent upon their current health as well as their family history. In terms of the types of policies available, there is a myriad of different options for: coverage amount, duration, illnesses covered , as well as secondary options. As a result, professional advice is strongly recommended when considering these issues.
Virtually everyone knows of someone that has suffered a heart attack, stroke or cancer and if one tried, they could probably list several such individuals in each category. Surprisingly, these ailments are not even exclusive to the elderly. People of all age segments are experiencing critical illnesses and the financial implications are often even greater if one has not had the opportunity to work long enough to amass a significant asset base. As a result, this is a risk that should not be ignored and instead should be accounted for in one’s financial planning.
Troy Peart B.B.A., CFP, CFA can be emailed at troypeart@shaw.ca. Your questions, comments or suggestions for future articles are encouraged.
