(Note #2: I am adding this link for an article in the Globe & Mail: Protect Your Biggest Asset: Your Future Income from Nov 16, 2010. Added Nov 18, 2010 at 4:05 pm. Someone brought this to my attention- synchronisity!)
Watch this and come back to the post....Suzanne Aucoin StoryOne burning desire I have is that financial information be taught in school. It is so important in this changing world to be knowledgeable about risk management. Everything from life insurance to vehicle insurance- this MUST be taught in high school.
I think of the months I spent studying my courses- often people do not pass on the first try- it is a lot of information! Even with all my financial background, I found I was so sadly misinformed about risk management and wealth management. (I was able to pass my exams on the first go!)
The foundation of my business is education to my clients. From my reading of our professional journals, it seems the Federal Gov't is waking up to the reality as well. More on this later.
Earlier this week I invited you all to join the Canadian Health Coalition's campaign.
I know what to tell you how you can minimize your risks, protect your assets and your future in this day of raising health care costs.
Not sure- need proof- check out the documentary Poor No More. Or what about Suzanne Aucoin - she had Group Benefits. She eventually succombed to her cancer. See more on her story
LIVING BENEFITS...
Living Benefits have evolved to fill in the gaps left by our Health Care System, Employment Insurance and Workers Compensation, Canada Pension Plan Disability - name a few.
Most advisors can offer:
- Disability Insurance
- Critical Illness Insurance
- Long Term Care Insurance
Here is a quiz for you....
1. What are your chances of having your house burnt to the ground?
2. What are your chances of having your vehicle demolished in a car accident?
3. What are your chances of dying before age 65?
4. What are your chances of suffering a disability for longer than 90 days before age 65?
5. What are your changes of becoming critically ill before age 65?
Here are the #'s to choose from:
27,000 18,000 1700 18 2
Insurance is always based on gender, age and health.
It is estimated, based on 2009 stats, that the average cost of a critical illness is $100,00.
GROUP INSURANCE: check out
Many people have group insurance yet do not take the time to understand what they are covered for. I put some of the blame on the providers/companies as they do not put the information in plain language. Also, I find that many people believe that because they have Group Coverage, they do not need anything else. If you have only Group Insurance, you have an incomplete plan.
Group plans are a very important part of your financial plan. But do not be falsely seduced!
Look at them as a start; as icing on the cake.
They do not go with you if you leave. You usually have options to convert medical plans and life insurance. Depending on your age and your health, this could be a huge issue for you.
Group insurance is now including Critical illness as well as long term disability.
READ your booklet or have your personnel go through the plan.
What you need to know:
- If you become critically ill or disabled- what is the process?
- How long will it take before you get a benefit payment]
- Is the benefit payment taxable?
- What are the definitions of disability and critical illness?
- How long will those definitions last for?
**** Most plans will only cover you for 2 years at your regular occupation. After that, if you are disabled from ANY occupation, the benefit will continue.
DISABILITY INSURANCE: From the Quiz above- 1:18 chance of becoming totally disabled
Surprised?
Disability Insurance was designed to pay you a monthly benefit based on a percentage of your income so that you will be encouraged to go back to work. You can expect to find anywhere from 50% to 85%. Often times, disability products will have embedded services to assist anyone on disability. Look for products that will cover you for partial disability- this is very important!
Generally, the benefit (from individual plans) is tax free. This is because you are paying for the plans with after tax dollars.
Individual disability plans require very detailed underwriting- medical and financial. Disability products come with many riders. The riders allow clients to build their plan based on what they require. They are excellent solutions for small business owners as well.
If you have creditor Disability insurance- take the time to ask the same questions above. Buyer beware. If you are paying less than $10 a month, you can be sure that when it comes to claim time you are going to be disappointed!
As with any risk management plan, individually owned policies give you CONTROL and FLEXIBILITY.
If you do not have a group plan, and you have to make choices between life insurance- purchase the lowest amount of term insurance you can and get a disability plan.
No room in your budget? Figure out how much money you spend on coffee, meals out, entertainment...then have a real conversation with yourself- What are my priorities?
If you choose not to be protected in the event of a disability, then what is your plan???
Cashing in RRSP's or other assets? Registered plans will cost you at least half in taxes. Then you lose your growth and your retirement income. Why would you want to liquidate assets your worked so hard for?
CRITICAL ILLNESS INSURANCE: 1:2
Find it hard to believe- start thinking about your family and circle of friends...too many people!
You can purchase Critical Illness for newborns, children, teens, adults. What a gift you can give!
This has to be my favorite insurance! I can say this because this insurance was developed by Dr. Marius Bernard who was on the first heart transplant team. (If you go to the link- click on his name, you can see a video on the history- Scottish Widows website.)
He saw first hand the financial impacts of having a critical illness.
Our company offers a lump sum payment upon surviving a critical illness for 30 days. Most plans cover up to 24 illnesses. (Note for some conditions ie. coma, it is not 30 days.) You can then use the money any way you want. Often products will offer other services for the client and the client's family. I have had clients access these services and were eternally grateful to have them.
Put it this way, if there is an illness that is not covered, be very happy- you are curable!
I have had clients claim on this product and were very quickly given their funds. Some people only had their policies for 5 years or less.
With rising health costs in Canada, you can be sure if you have a critical illness, you will have expenses not covered. You will lose your ability to earn an income.
You will never pay into these plans what the company will pay you. For a reasonable monthly payment, you can have this probability covered.
What if you don't get an illness? You can build your plan to have premiums returned upon death or on termination/expiry. (as long as there is no claim.)
Right now, the payout is tax free. Again, after tax income.
The insurance premiums are higher for men than women.
LONG TERM CARE: 1:2
This is a relatively new insurance. And least understood. It pays a monthly benefit (Sun Life for sure) if you are unable to perform any 2 of the 6 daily living activities.
Many people think this is for when you are old and grey- needing a retirement home. NO. Think about it. You could have an accident that leaves you unable to take care of yourself and you could be 20 years old! Some products are built to be life time plans. You can have them paid up in 15 or 20 years. Even if you have assets, this allows you to get a monthly income without having to touch any or little of your estate.
The insurance premium for these plans are higher for women then men. (Women live longer.)
CASE STUDY: (Actual Client)
40 year old man is riding his bike while on holidays. He goes flying over his handle bars and
seriously injures the right side of his body. He is unable to feed himself, bath himself- he can't
even sign his name. He is off work for 4 months and he has a group plan.
He is able to access his group plan for disability. He was also able to access his Long Term
Care plan. He built his Long Term Care plan to equal the difference between his group disability and his net take home pay. While he was home healing, with the help of his wife, he did not suffer any huge loss in his income. While on claim he did not have to pay his premiums. Once he was back to work, his Long Term Care plan premiums continued,so does his plan.
Policy enforce for: 1.5 years!
Understandingly, there is not enough room in this blog to give you all the info. This is a start.
If you have an advisor, call them and talk to them about these products. Get rid of your old perceptions of what these products are. If your advisor starts talking quotes, it is a sales appt! Quotes should be the 2nd or third step! Change advisors.
If you do not have an advisor and you are in Ontario, contact me. If you are somewhere else, do some research and book an appt.
WHAT YOU CAN DO:
PAY YOURSELF FIRST! 10% OF YOUR GROSS INCOME- APPLY TO COVERING YOUR RISKS FIRST AND THEN SAVINGS.
- If you do not know the advisor or the company ask to see their license.
- Ask yourself how you will protect yourself in the event of a disability or illness.
- At your appt, tell your advisor that you just want information. Do not leave until you understand the concepts. Then ask about product and quotes.
- Work with your budget- sometimes you can't put everything in place at once- decide what is the biggest priority for you. With good education/information and quotes, you can then make an informed decision and an implementation plan.
- A little bit of everything is better than nothing!
- If you know someone who has a disability or a critical illness, ask them if they would mind talking to you about the financial impact.
If you travel to Florida, have your Power of Attorney's drafted in Florida- Florida will not recognise Canadian Power of Attorney. (At the time of this post.)
The rest of the story:
House: 27,000
Vehicle: 18,000
Life: 1,700
Most importantly: What is Your Plan??
Do not believe that the Government or your Group plan is going to cover you.
Love and All Good Things,
The Peaceful Matriarch
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