Navigating the complexities of financial planning is a challenging endeavor. Amidst considerations of wealth management, estate planning, and investment strategies, one crucial aspect often overlooked is Critical Illness Insurance (CII).
This form of coverage can provide a financial lifeline during some of life's most challenging times, ensuring that your business and personal finances remain stable despite unexpected health crises.
Understanding Critical Illness Insurance
Critical Illness Insurance is designed to provide a lump sum payment upon the diagnosis of a serious illness covered by the policy, such as cancer, heart attack, or stroke. This payout can be used at the policyholder's discretion—whether to cover medical expenses, supplement lost income, or adapt one's lifestyle and home to new health conditions.
For Canadian entrepreneurs, the benefits of Critical Illness Insurance extend beyond personal health. It can ensure the continuity of business operations, providing necessary funds to hire interim management, cover business overheads, or maintain key financial commitments during recovery. For high-net-worth individuals, CII offers peace of mind, protecting personal and family wealth from the high costs associated with severe health issues.
Why CII is Essential for Your Financial Plan
- Income Protection: Severe illness can significantly disrupt your ability to work and earn. Critical Illness Insurance helps replace lost income, ensuring that you and your family can maintain your standard of living during treatment and recovery.
- Business Continuity: As an entrepreneur, your absence can impact your business’s operations. The funds from a CII policy can help hire temporary management or cover operational costs, preventing business disruption.
- Flexibility in Medical Treatment: A lump-sum payment provides the financial freedom to seek the best possible medical treatment, including options that might not be covered by provincial health plans or traditional health insurance.
- Debt Management: Illness-related expenses can lead to significant debt if not managed properly. CII can provide the necessary funds to cover medical bills, personal debts, and even mortgage payments, safeguarding your financial stability.
- Protecting Investments: Drawing on your investments or savings to cover illness-related expenses can derail your long-term financial plans. CII ensures that your investment portfolio remains intact, preserving your financial goals.
The Canadian Context and Beyond
In Canada, healthcare coverage through provincial plans is robust, but it often doesn't extend to all costs associated with critical illnesses. Out-of-pocket expenses for specialized treatments, travel for care, or home adaptations can be substantial. Critical Illness Insurance bridges this gap, providing a financial buffer that provincial health plans do not cover.
For those with cross-border considerations, especially between Canada and the USA, CII can be particularly valuable. Medical expenses in the USA are significantly higher, and having a policy that pays out a lump sum can alleviate the financial burden of seeking treatment abroad.
Personal Experience: Jeff’s Story
Jeff Dyck, VP of Insurance Advisory at WealthCo, was gracious enough to share his own personal story of how Critical Illness Insurance impacted his life this year.
As an individual with significant experience in the life insurance industry, I have been more than adequately insured for life insurance and disability insurance for years. But I hadn’t really given much though to critical illness insurance. That is, until 2009 when a former colleague of mine chastised me for not having the only type of insurance that would protect both me and my young family from a catastrophic illness.
I can still remember his reasoning for being so passionate about CI – a catastrophic illness may create an immediate and short-term need for capital, capital that, if I was fortunate enough to have at my disposal, may be tied up in investments that may be in a “loss” position. Being that it was 2008, we were right in the middle of such an event, so I acquired my first CI policy immediately and it was issued in early 2009. Over time, I purchased two additional CI policies, one through a healthcare spending account and the other through my group insurance.
There were more than a few times when I looked at the premium leaving my account each month and thought about what else I could do with that money. However, 2024 changed everything. Dramatically. In early January, I was diagnosed with Bacterial Meningitis and Myocarditis, the root of which my specialists eventually determined was due to a broken tooth back in September of 2023. After a week in hospital and lengthy course of post-hospital antibiotics, I thought I was on the road to recovery. However, that wasn’t the end of it.
The blood infection wreaked havoc on my aortic valve, requiring a valve replacement in March of 2024. Before the procedure, I thought I would check my critical illness policies. While bacterial meningitis wasn’t covered until a few years after my policy was issued, aortic valve replacement was – under all three policies.
I setup the claims process as best I could before heading in for surgery and the team at WealthCo. submitted my claim as soon as I made it out of surgery. While the claims would not be paid until I had survived 30-days post surgery, I was confident (I’m not sure why) that this wouldn’t be a problem. At that point, I was more curious about seeing the claims procedure from the inside, so we could better share and prepare our clients for what happens during the claims process.
While I would love to say the claims process was nice and smooth, it wasn’t. In retrospect, I can’t imagine how it could be. But the WealthCo. team stayed on top of it and kept me advised in recovery, letting me know if there was anything that I needed to do. In the end, all three claims paid within 40-days of my surgery – an outcome that couldn’t have been any better.
While my illness wasn’t life-changing and I didn’t need to use the newfound capital for anything specific such as ongoing care or alterations to my home, it could have easily gone that way. Instead, I was blessed with good health, a complete return to normal life and activity, and some additional liquidity to cover some debt and then allocate to investments.
All of that being said, CI is an important type of insurance coverage when considering your overall financial plan. I would have never thought that I would be claiming on my CI policy at 52, but my experience falls right in line with the statistics the industry provides – 1 out of 3 people will suffer a critical condition prior to age 65. We will continue to be passionate about the health and wellbeing of our clients – and I am happy to discuss my personal experience with anyone that asks.
Critical Illness Insurance isn’t just a policy; it's a strategic component of comprehensive financial planning. For entrepreneurs and high-net-worth individuals, it ensures that both personal and business finances are protected against the unpredictable nature of life. At WealthCo, we understand the intricacies of your financial landscape and are here to guide you in integrating Critical Illness Insurance into your broader financial strategy.
Disclaimer: The information in this newsletter is for informational and educational purposes only and is not meant to be construed as financial advise. Please consult with a qualified financial advisor before making any financial decisions.
WealthCo is a member of The Integrated Advisory Professionals Network. The Network consists of progressive CPA firms, along with best-in-class professional advisors, service, and product specialists, who work together to deliver an elevated and holistic client experience. One that optimizes both their personal and professional lives with an integrated financial strategy designed to help clients reach their goals.
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