Don't Let Critical Illness Impact Your Retirement Savings

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 age 65 is higher than your risk of dying in that time. As Joe discovered, treating and coping with illness can mean significant and often unexpected costs that may not be covered by provincial or employer health plans. Critical illness insurance can help you pay the expenses associated with getting sick by providing a cash benefit. If you’re diagnosed with one of the conditions defined in your contract and you survive the waiting period. With the cash benefit you can:

• Hire a nurse or caregiver to help you at home
• Pay off your mortgage
• Receive income when you can’t work or your partner takes a leave of absence from his or her job to assist you
• Help protect your retirement plans
• Help manage business expenses
• 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 helps you to plan for the unexpected. No one anticipates getting sick. And, if you’re fortunate enough to live a long and healthy life, many critical illness plans offer Return of Premium options that can give you some or all of 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 can you decide which one is right for you?

As you evaluate the various options, consider choosing a critical illness policy 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 a portion of your benefit up front so your recovery can begin sooner; some plans offer a recovery benefit of 10 per cent of your coverage (up to a maximum of $10,000) that helps you get some benefits faster, without having to fulfill the waiting period.

Significant impact on retirement savings
Many people who get sick have no choice but to turn to their savings to pay their medical costs. For some, this means tapping into their retirement savings to finance their recovery. As you can imagine, this can significantly impact your financial plan and retirement strategy. It may mean working longer and putting off retirement or accepting a diminished lifestyle during retirement. The point is that many people do not plan to get sick and, therefore, may not budget for it.
Joe had planned to retire comfortably at 65

The cost of Joe’s recovery exceeded $100,000. The price of new therapies and other medical costs, and Joe’s inability to work full-time for an extended period, 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 Joe’s unexpected illness took them off course.
Joe and Mary had intended to retire comfortably when Joe turned 65. They had contributed to their Registered Retirement Savings Plans (RRSPs) each year and had started accumulating money in non-registered savings accounts as well. 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.

Group Benefits are Your Way of Saying Thanks

If you own a small business, you’ve likely spent years building your company. You’ve got repeat customers and created a great reputation. Your employees are loyal and your success depends on them. However, for one reason or another you may not offer a group benefits plan.

Here’s why you may want to reconsider: maintaining a healthy workplace and a healthy workforce are two critical pieces of every business plan, and group benefits can help achieve those dual objectives.

Perhaps, as time ticks on and medical needs grow, you’re recognizing that providing health coverage and financial protection is a meaningful way to thank your employees for their hard work. After all, one of the greatest gifts you can give your team is the confidence that comes with knowing many of their own medical needs – and those of their family members – are covered and that their loved ones can be protected financially in the future.

Health insurance covers the catastrophic event of an employee dependent on expensive prescription drugs along with travel insurance, ambulance and many other necessities not necessarily covered by provincial health plans. Not to mention the most important part being long-term disability benefits.
Let’s look at a hypothetical example that might ring true for you.

Bill is the 45-year old owner of an engineering firm. Due to changing government regulations, and a recent foray into the booming energy sector, Bill’s enterprise has grown from seven to more than 20 employees, and he’s opening two small satellite offices.

Over the past year, Bill has devoted his energy to winning new customers; hiring new staff; training new, young employees; opening offices; leasing equipment and vehicles; and meeting the many other demands of a growing company. During this period of growth, Bill has had less time to devote to his long-term employees.
For the past few months, some of Bill’s employees have left including a key person he depended on. These staff departures have happened in the midst of Bill’s efforts to hire talented people who will help support the growth of his firm. With plans for the future, he is now looking for new ways to attract and keep high-performing staff. Bill realized that he has to take steps to keep his employees-

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