Circumstance Critical

The Financialist • Issue 95 • October 2007
BY CECILIA TSANG BComm CFP CIM

Wilfred felt fit, strong, young, and healthy at age 59. He was turning 60 years old in a few months and during every annual checkup, he was always told that his health was perfect – better than those ten years younger.

His financial plan was coming together nicely, and Wilfred was just starting to dream about retiring in a few years’ time and really starting to live a life of traveling and exploring the wonders of the world with his family and close friends. He had worked very hard his entire life, saving every penny possible, and although he was generous with friends, he spent very little on himself. He had immigrated to Vancouver in 1968 with only pennies to his name, studying full-time while also working full-time to support himself and to send money home to his parents and siblings.

As soon as he graduated and was offered his first real job, Wilfred paid for a ticket for his fiancée to come to Vancouver. They married immediately and rented out a tiny converted garage to live in. Over the years, they moved from this garage to a mobile home (where their two children were born) to several different brand new homes all over BC. Wilfred felt that he had done an excellent job of providing for his family and ensuring that everyone was happy and healthy. By age 50, Wilfred’s mortgage was already completely paid off and he had started to accumulate healthy sums in his and his wife’s RRSPs.

Wilfred always thought that he had adequate insurance coverage through his group insurance plan, until the day he found out the results from his colonoscopy. It was a shock to everyone – Wilfred was diagnosed with colon cancer. His doctor had recommended the test after Wilfred had felt some recurring discomfort in his stomach.

Fortunately, Wilfred was able to have surgery within a couple of weeks of diagnosis. During this surgery, it was found that the cancer had already started spreading to other areas. The next step in his treatment was chemotherapy.

At this time, Wilfred decided that his health was most important and he decided to focus on his health by minimizing his work duties. Wilfred was now the general manager of his company. Working only a few hours a week, he tried to concentrate on resting and recovering from each of his chemotherapy treatments, which caused him much physical grief. Additionally, Wilfred’s wife of 29 years decided to quit her job and care for her husband full-time. Through most of his sickness, it was deemed by the group disability insurance provider that he could still technically perform the majority of his duties and, thus, he was not considered totally ‘disabled’ for the purposes of his group disability coverage.

Wilfred battled through two long and painful years of chemotherapy without complaint before he finally succumbed to the cancer. The group disability plan eventually began to pay out a very small monthly income nearer the end of the fight, but besides this little bit of income, there was nothing else to support the family. Wilfred had to dip into his RRSPs to maintain their simple lifestyle, and they also lost out on the opportunity cost of his wife’s income as she stayed home to care for him. Wilfred’s wife’s health also suffered during this time, as she spent all of her time with her husband and did not have any opportunity to get out for exercise or to relieve her stress.

A simple critical illness insurance policy would have alleviated much of the financial and potentially even some of the physical stress that Wilfred’s family endured. This type of insurance is particularly close to my heart because Wilfred was my father. I was still living at home throughout his illness, and have experienced the stress and burden of the situation directly. I saw the financial impact on my family and felt helpless to change the situation, as the contribution of my own small income didn’t change things very much.

Looking back, I realize that it would have been nice if we could have taken one last family vacation together. If there were no financial burdens to worry about, I would have taken more time away from work to spend more time with my father before he passed away. We would have definitely been able to do all these things and more if my father had a critical illness insurance policy, which pays out a lump-sum benefit after the insured survives the illness for 30 days.

I am sure each one of us knows at least one person who has had a critical illness, especially since it is much more likely that people will develop a critical illness than that they will die at any given age before age 75. The three biggest critical illnesses are cancer, stroke, and heart attack. According to the Canadian Cancer Society, approximately one in three Canadians will develop cancer in his/her lifetime and one in four Canadians will die from cancer. Stroke is the fourth leading cause of death in Canada, but seventy-five percent of stroke survivors are left with a disability or require long-term care. Many critical illness insurance policies cover up to 20 other critical illnesses (e.g. Alzheimer's, Parkinson's, MS, etc.) in addition to the three major ones noted above.

My father was quite fortunate in that he had mostly settled all his affairs and had already saved some money to ensure that my mother would be taken care of. I often wonder about others who may not be so fortunate. What if there is a long wait for required surgery in Canada, which could potentially impact the person’s recovery? What if someone needed full-time medical care but couldn’t afford to forego the opportunity cost of a family member quitting his or her job in order to provide that care?

There are many reasons for considering securing a critical illness policy. In the case of a critical illness, someone could choose to use the proceeds to:

• bypass the Canadian medical system queue and have funds to begin treatment immediately in another country
• be able to not have to work in order to focus on health, even when technically able to work
• travel and enjoy life to the fullest without draining the financial savings for the family’s future
• pay for specialized medical treatment, private nursing, or child care (may also prevent foregoing the opportunity cost of having a family member quit work in order to provide care)
• reduce or pay off debts (this also alleviates financial stress)
• pay to modify home or car to accommodate special needs

The greatest barrier to a healthy recovery from an illness is stress. The biggest source of stress is often a lack of available finances. Critical illness insurance is one simple way that can alleviate this stress, which helps to promote a better and speedier recovery.

Your Rogers Group Financial advisor would be pleased to discuss whether critical illness insurance should be part of your overall financial plan.