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The power of protection

Understanding the need for living benefits insurance coverage.

If the unexpected were to happen, it’s not hard to conceive the serious financial impact that could follow. Consider your current situation and how much you spend each month on housing, transportation, food, utilities and child care – and then imagine that suddenly, you’re sidelined with a serious illness or injury that disrupts your ability to earn a living. 

Although Canadians are living longer than ever, it’s also estimated that one in five adults are dealing with a major chronic condition such as cancer, diabetes, heart disease and respiratory illness.[1] The good news is that advancements in medical treatment are helping more people overcome serious health challenges. All the same, it’s important to consider the impact such a challenge could have on your household. 

Cost of illness

No one likes to think about the possibility of getting sick, but out-of-pocket expenses in the case of serious illness can be staggering. A recent study on the economic burden of cancer in Canada has found that patients can expect to pay about $250 a month for out-of-pocket expenses, including medications, caregiver expenses and the cost of getting to and from appointments. Those costs can be significantly higher for those in rural or remote areas.

And then there’s the issue of employment while dealing with a major health crisis. If you are forced to move from full-time to part-time status or need to stop working altogether, your household budget will be impacted considerably. If you belong to a workplace employee benefit program, compensation may be available for a short-term or long-term leave. However, this coverage may apply only to specific circumstances. 

It’s a good idea to review the details of your company benefits program with your advisor to identify any potential gaps in coverage, and to also discuss how you can expand your safety net to include living benefits insurance. 

What is living benefits insurance?

Living benefits insurance coverage is designed to help bridge the income gap if an illness or injury interferes with a person’s ability to earn a living. Two types of coverage fall under the living benefits umbrella:

  • Critical illness insurance
  • Disability insurance

Critical illness insurance pays a tax-free lump sum if you’re diagnosed with an illness or condition that’s covered by your policy. The benefit can be used however you wish, to help finance health care treatments, cover household and family expenses, manage business expenses and protect what you have set aside for retirement so you can focus on your recovery.

Disability insurance protects your income if you’re unable to work because of physical or mental disabilities. Regular payments are based on a percentage of your income at the time a claim is made. If you’re a business owner, disability insurance can also cover business expenses and fund a buyout agreement if needed.

 This type of coverage can provide you with some valuable peace of mind. Consider these examples:  A 33-year-old woman chooses critical illness insurance with a monthly premium of $14.73 She pays just under $100 in premiums over six months She then receives a diagnosis of breast cancer Her critical illness coverage qualifies her to receive a cheque for $25,000 to help support her recovery A 50-year-old-man chooses critical illness insurance with a monthly premium of $176.82 He pays just under $4,000 in premiums over 22 months He is diagnosed with bladder cancer With his type of critical illness coverage, the man receives a cheque for $187,500 to help with his recovery

How much coverage do I need?

Figuring out insurance needs can feel overwhelming, and that’s when expert advice is strongly recommended. Talking through your situation with an advisor can help you map out comprehensive coverage that includes life, critical illness and disability insurance coverage. Don’t have an advisor? Here’s some guidance on finding someone to work with.

When you’re ready to discuss insurance needs with your advisor, a bit of preparation ahead of time can help you make the most of your conversation. 

  • Crunch the numbers on your household budget and determine how much you currently spend on a monthly and annual basis to cover your current financial obligations. This budget planner worksheet can help
  • Check whether you have any amount of critical illness or disability coverage available through your employee benefits program
  • Use this living benefits worksheet to help you determine your financial outlook if a serious illness or injury were to affect your ability to work. Be mindful that you could incur additional medical, transportation and child care expenses as part of your treatment and recovery process
  • Check out this insurance calculator to assess the type of coverage that makes sense for you

While no one likes to think of potential bad news scenarios, a bit of planning and preparation can offer peace of mind when what if? turns into what now? Your advisor is the best person to help you make the right coverage choices. 

[1] How Healthy are Canadians? - Canada.ca

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