With sound planning, a health crisis doesn’t have to mean a financial crisis
PREPARING FOR A LIFETIME OF HEALTH CARE
Critical illness and longterm care insurance aren’t just theoretically appealing to Brad Amlin, a financial advisor with Marlatt, a financial and estate planning firm in Oakville, Ontario.
When one of his clients died recently, after her third battle with leukemia, he couldn’t help but wonder if the outcome might have been different if she wasn’t forced back to work during her treatment.
“After being diagnosed and treated the first time, she went into remission. It gave her a new perspective on life, and she said, ‘You know, I don’t know how much time I have left – so I’m going to retire.’
Had she had a critical illness contract, she would have been able to do that – but she didn’t have a lot of income, and she had to go back to work.”
But it was difficult for her to keep up with the demands of her job, says Mr. Amlin, so her last years were stressful and difficult ones. “Did it jeopardize her recovery? No one will ever know the answer to that question.”
It is essential for people to ask themselves what impact a critical illness would have on their current lifestyle as well as their retirement or financial plan, he says. “Many people today don’t have any sort of group benefits. If you have to take some time off work, because you’re going through some sort of treatment, are you going to have any income at all? Even if you are fortunate enough to have a group benefits package, the most you’ll receive is about twothirds of your usual earnings.
Will you be able to make ends meet? Will you be able to cover the cost of treatment or care not covered by public health benefits?” Health care advances mean that survival rates for many critical illnesses are significantly higher than they were 20 years ago. But incidence rates are also higher for many diseases, which means that a significantly greater number of people are living with the disabling effects of illness and ongoing treatment.
“If you end up taking the time off work to recuperate, you may increase your debt load, perhaps making it necessary to extend the time at which you plan to retire,” says Mr. Amlin.
Also important to consider, particularly for people in retirement, is long-term care insurance. “People think of planning in a straight line: ‘I’m going to retire at 55 or 60; I’m going to have the same income coming in every year.’ But their costs may suddenly increase by an extraordinary amount because they end up in a long-term care facility. Long-term care costs currently range from $2,500 to $3,000 per month. Among my clients, I’ve seen situations in which one spouse needs care and the other wishes to stay at home, meaning that the equivalent of two households need to be supported. Assets can be depleted fairly rapidly.”
One of the reasons that critical illness and long-term care insurance have become such important elements of a sound financial plan, says Mr. Amlin, is that the baby boom generation has much different savings habits than those of their parents. “By and large, people who were children during the war or in the depression did a great job of saving, but later generations are less likely to have a contingency plan in place.”
The shortage of long-term care facilities should also be a concern to boomers, says Mr. Amlin. “We’re in a demographic now where a lot of the population is getting older, and there are not enough facilities to house the number of people who need them.
That means that some inhome care will be required. It’s important to think of the impact this might have on your children – in some cases, adult children end up footing the bill, and it affects their ability to save for their own retirement. As an alternative, we’re seeing children pay premiums for long-term care insurance for their parents.”
Acting early makes it more likely that insurance will be available when you need it, he says. “We’ve seen tragic cases where people try to apply for critical illness insurance after they’ve been diagnosed with an illness. It’s much too late then. Apply as early as possible.”
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