Critical Illness Coverage...Leaving the Dent Out of Your Financial Timeline

Critical illness insurance may provide you with a source of funds at a critical time in your life. Let's talk about how a critical illness or condition could affect your family, and how you can include critical illness insurance in your financial security plan.

Unfortunately the odds are stacked against us:

• 1 in 2 men and 1 in 3 women are expected to contract a heard disease at some point in their life
• 1 in 2.3 men and 1 in 2.6 women are expected to develop cancer in their lifetime
• 70,000 Canadians suffer heart attacks every year
• 40,000 to 50,000 Canadians suffer a stroke each year

However, due to medical advancements:

• 80% of hospitalized heart attack patients survive, the percentage is higher for those with their first heart attack, and lower for those with recurrent heart attacks
• 80% of stroke patients survive the initial event
• The relative cancer survival rate has almost doubled since the 1960s^*

In addition to these survival rates, individuals today are living longer!

Changes in Life Expectancy	1920	1950	2003
Men (ages)	59	66	77.4
Women (ages)	61	71	82.3

If you need immediate treatment the wait time may be long and could cause a financial drain if you need to seek treatment elsewhere. As of 2007, the median wait time for Canadians is 18.3 weeks. This doesn’t take into consideration our aging population and increased strain on our health care system.

This chart shows how much out of country treatment may cost based on treatment at the Mayo Clinic in Canadian Dollars:

Out of Country Treatment	Canadian Dollars (Assumed CAD/USD exchange rate of $1.07)
Heart Transplant (2-4 weeks in hospital)	$283,500 - 449,400
Coronary Artery Bypass (1-4 vessels, 5-7 days in hospital)	$74,900 – 90,950
Radiation Cancer Therapy (for 6 weeks)	$53,500 – 74,900

Now think, do you know someone who is suffering or has suffered a critical illness? Do you think it had an impact on his or her lifestyle? These types of illnesses can lead to loss or reduction of income, increased living expenses, lifestyle changes, loss of choice and independence, jeopardized retirement goals and dreams, and a risk to your children’s future.

Think of your current situation, if you were faced with these financial stressors, how would you pay for them? RRSP withdrawals? Borrowing? Selling personal assets? I work critical illness coverage into all of my client’s plans, that way there will not be a dent as large as this in your financial timeline.

Let’s sit down and talk about critical illness coverage. Not only will you protect you, but you will protect those around you from the financial burdens of these catastrophic events.

 Sources: Heart and Stroke Foundation, 2006
                National Cancer Institute of Canada: Canadian Cancer Statistics 2008
                Statistics Canada 2006
                Transplant Financial Services/Mayo Rochester 2008
  The statistics provided in this post have been developed by identified sources and are not based on the definitions of critical conditions contained in the Oasis policy. They are provided for general information only.
 * In the 1960s an individual with cancer was 33% as likely as an individual without cancer to survive another five years. Today an individual with cancer is 59% as likely as an individual without cancer to survive another five years.

What is Critical Illness Insurance?

Critical illness insurance basics

Critical illness insurance provides a cash payment if you are diagnosed with a major illness. This money can help pay for extra expenses during your recovery.

​Critical illness insurance can protect you financially if you suffer a serious illness. It provides a tax-free cash payment upon diagnosis of a serious medical condition.

4 key features

1. Covers major illnesses – Policies generally cover illnesses such as cancer, heart attack, coronary artery bypass surgery, stroke, blindness, deafness, paralysis, kidney failure and multiple sclerosis.
2. Short waiting period – You must survive your illness after diagnosis for a short time period – typically about 15 to 30 days – to receive the payment.
3. Paid regardless of ability to work – Unlike disability insurance, the payment is not linked to your inability to return to work.
4. Use the money for any purpose – The payment is made in a tax-free lump sum, and you can use the money any way you want.

Survival rates increasing

With improvements in medical treatments, people are recovering from serious illnesses – such as heart attacks, strokes and cancer – that would have been fatal in the past.

For example, according to the Canadian Cancer Society, in the 1940s, only about 25% of people diagnosed with cancer survived. Today, the survival rate is over 60% and higher still for many common cancers, such as thyroid cancer with a survival rate of over 90%.

While the survival statistics are encouraging, a serious illness can still lead to significant additional costs that aren’t covered by our universal healthcare system or employer health plans.

Potential costs of a major illness

• Replacing your lost income
• Moving to a new home or renovating your existing home
• Having a spouse take time off work
• Seeking medical treatment outside Canada
• Hiring a nurse or other caregiver

A living benefit

Critical illness insurance is called a “living benefit” because unlike life insurance, the payout goes to you, the policyholder, rather than a beneficiary. So you decide how the cash can best be used – whether it’s to cover additional costs or provide an extra perk after or during recovery, such as a vacation.

Cornerstone Three: Living Benefits

I have now covered liquidity and retirement and those sum up the wealth accumulation side of financial management. Now, I am going to move to the risk management side of financial management.

Now, if I asked you today what your biggest asset is what would you tell me? Your house? Your car? Your cottage? What if I told you your biggest asset is actually worth millions. You might be looking at me like I have three heads right? But let me show you your multi-million dollar asset. 

Let's say today you are 25 years old and earn approximately $50,000 per year. Now let's assume you want to retire when you are 65. So in 40 years of working if you were to earn $50,000 per year for the rest of your life you would have earned $2 million dollars. 

Now thats a big number right? But we both know you won't be making $50,000 for the rest of your life, once we account for raises and inflation, we can make an assumption that you will actually be earning approximately $3-5 Million in your lifetime! So now think about your biggest asset. I think now your biggest asset is you and your ability to earn money!

Now think about your other big assets that you had in mind before; your house, your car, your cottage. Do you have insurance on those? Well I will assume you are a law abiding citizen and you do. 

What if I told you that there was a way to insure your ability to earn an income, and that on top of it, if you don't make a claim while your insurance is in force, I will give you every penny you paid in premiums back. I think if one car insurance company offered this, everyone would jump ship! Let me show you how I can protect your ability to earn an income.

What I will first talk about is how you can protect yourself and your family if you were to become disabled and unable to work. Some of us have employee benefits through work, and in that benefit package there is typically some sort of a disability plan. I don’t know how yours works or even if you know how yours works (most people don’t) but let me show you how most disability plans work.

Most disability plans have been designed with an incentive factor built in which prevents a person on disability from collecting more than approximately 85% of their take-home pay. The 15% shortfall is intended to create the incentive for the person to want to go back to work. As a result, people on disability will be expected to take at least a 15% decrease in their take-home pay, and most commonly a one-third decrease from their existing income. Most often the plan is not indexed for inflation which means if you were to become disabled at age 30 and stay disabled, your disability income would be two-thirds of your existing income at age 30, and will stay at that amount through your lifetime. As we have learned already in retirement, inflation causes a dollar today to be 'worth less' than a dollar tomorrow, however your income will not increase so your lifestyle while disabled will drop at a rapid rate. The chart below shows the gap that happens between your disability income, and your expenses which may drop, but unfortunately do not completely disappear.

What I have explained shows you what happens if you do have a plan in place. But some of you may be self employed, if that the case, do you have anything in place? Think of how big that gap would be. 

The following chart shows some examples of active claims that Great-West Life paid. As you can see, disability can strike anyone at any age.

Now that covers if you were to need to replace an income to cover any regular expenses. What if you were to need a lump sum of money? This lump sum can cover anything from medicine to immediate care abroad. There is actually a concept out there that will pay you a lump sum of money if you were to contract cancer, have a stroke, or were to have a heart attack.

Let me first share with you some statistics:

• There are an estimated 70,000 heart attacks in Canada each year. 
• More than 50,000 strokes occur in Canada each year.

• During their lifetime:
• 1 in 2.2 men and 1 in 2.5 women living in Canada are expected to develop cancer.
• 1 in 9 women is expected to develop breast cancer.
• 1 in 11 men and 1 in 16 women are expected to develop lung cancer. • An estimated 55,000 to 75,000 Canadians have Multiple Sclerosis. 

However with this being said, more and more people people are living from these conditions!

• Although prostate cancer remains the most frequently diagnosed cancer among Canadian men, prostate cancer death rates declined significantly between 1995 and 2004.
  
• Although breast cancer is the most frequently diagnosed cancer among Canadian women, the breast cancer death rate has declined by more than 25% since 1986.
  
• Over the past 40 years the rates of heart disease and stroke have steadily declined. The rate has declined: 25% over the past 10 years, 50% over the past 20 years and 70% between 1956 and 2002. 
  

Now let's take a look at the critical illness claims by type:

I know, depressing, however the facts are there and unfortunately, we all know someone who has been affected by one of these illnesses. 

Now how can we protect this? I have concepts which I can provide with my clients which would pay you a lump sum of money if you were to have a heart attack, stroke or cancer (with the option to add 21 other illnesses and injuries). God forbid, if you were to ever have one of these life altering events happen to you and lived for 31 days, I would be able to provide you with a lump some of money to put you and your family at ease during these terrible times. 

What this means, is that your plan will not be interrupted while you are recovering.

What I have now talked about are two different ways you can ensure that your plans are not interrupted during difficult times. There are ways to insure you, and if nothing happens, which I'm hope nothing does, I will deliver every penny in premium you have paid into the plan back. 

If you would like to see how you can protect yourself and your family, please contact me. Please allow me to show you how we can make sure your plans stay on the rails.

I can be reached in the comment box to the right, or, you can call me at (905) 475-0122 ext. 411.