May 27, 2015


Business

A price on well-being

Health is wealth, and coverage can prevent crisis

Kathleen Martens worried she was gambling with her financial well-being.

But she wasn't concerned about her retirement portfolio's exposure to the stock market.

In her early 50s, reliant only on herself for income, Martens feared what would happen if she got very sick.

"I figured I probably have a better chance of getting really sick than winning the lottery, and I buy lottery tickets," she said. "If I'm going to gamble, I might as well gamble on my own health and do something that will buy me some peace of mind, knowing that I'll have money when I really need it."

About a year ago, Martens purchased critical-illness insurance, which pays a lump-sum benefit of her annual, one-time salary if she falls seriously ill.

"As a single-income earner, I think it's very important to have it, but it would probably be stressful on two incomes too, because most people's budgets are based on two incomes and if you suddenly don't have that one salary, you could be in real trouble."

Martens may be on to something. A recent survey found many Canadians have experienced financial hardship as a result of a major health event.

"What came through is that in talking to people who had gone through major health events, 40 per cent of them indicated that they experienced financial hardship as a result," said Kevin Dougherty, president of Sun Life Financial, which commissioned the survey.

"They've had to go to the bank to borrow money, rely heavily on credit cards and some have even had to sell their homes."

Most Canadians -- 82 per cent in the survey -- realize the profound impact a serious illness such as cancer, multiple sclerosis or stroke could have on their finances, yet only 13 per cent of those polled have money set aside just in case.

The majority of those surveyed rely on employer-sponsored insurance plans to provide short- and long-term disability coverage, but about one in five Canadians has no coverage at all.

Employer-sponsored plan or not, everyone should take a long look at the potential impact a major illness or accident could have on their finances, says financial adviser Alain Pereux.

The problem for many folks is other concerns can push this issue aside.

 

"People are managing so many different things in their lives like saving for retirement, paying down debt and saving for their children's education," said the president of Newcombe Financial in Winnipeg.

"Getting some kind of protection against illness can get put on the back burner because the insurance premium looks like a bill."

Pereux says he often has to "paint a picture" for his clients about what could happen to retirement and other plans in the event of a major illness. The fact is a lot of people don't have enough savings to suffer a loss of one income for a few months, let alone a permanent loss of wages. For individuals without employer-sponsored coverage, he suggests they consider purchasing two kinds of insurance plans: critical-illness and long-term disability.

"They're two different animals," he says. "Disability insurance is to protect your income in a long-term scenario, whereas critical-illness is a lump-sum benefit in the event an illness."

Disability can provide a benefit up to 66 per cent of lost income usually up until age 65. It's a long-term fix, but it takes time to pay out.

"There can be a 120-day wait period for the first disability payment as opposed to critical-illness where the payment is usually made within 30 days."

Both types of coverage can be crafted to suit the needs of an individual, Pereux says. For example, some critical-illness plans only cover heart attack, stroke and life-threatening cancer, while others include several kinds of life-threatening and debilitating illnesses.

The extent of the coverage usually boils down to the premium an individual is willing or able to pay.

In some cases, people may not qualify for coverage for a variety of reasons or they simply can't afford the premium.

"If it would be a financial strain, then perhaps they're better off setting aside a smaller amount into savings for the same purpose," he said. "It's not the ideal situation, but it's better than doing nothing."

Savings and insurance coverage aside, Manitoba offers the most extensive publicly funded home-care services in Canada, says Julie Donaldson, president of the Manitoba Caregiver Coalition.

"Home care in Manitoba is very robust in terms of the amount of hours provided and services available," she said.

Unlike funding for long-term care, home care is a needs-based system rather than means-based, so just because you have more income doesn't mean you have to pay more for care.

"It's dependent on an individual's needs," she says. "The maximum amount you can receive is 55 hours per week of care, and the funding rate is $21.40 an hour."

In Winnipeg, those needing home care also can also register for the Winnipeg Regional Health Authority's Self and Family Managed Care Program that allows them or family members to manage non-professional care services on their own.

"It's created for people with disabilities who have said, 'I'm 22 and somebody is coming to put me to bed at 7 o'clock at night, and maybe I want to go out,' " Donaldson said. "This allows them to hire people and fit into a schedule that supports their life."

The province and federal government offer tax credits for caregivers and disabled individuals to pay less tax and increase their income. But many government programs involve complex application processes or individuals are unaware they even exist.

"The caregiver tax credit for example, can be cumbersome because caregivers need proper documentation to prove that they are a caregiver," she says. "Basically, you have to meet certain criteria, and not everybody is a cookie-cutter caregiver."

While there are a number of services available in Manitoba, there's room for improvement, Donaldson said, including increased financial support, better information about available programs and more flexible options.

Of course, having deeper pockets helps too. While greater financial wherewithal may not make a difference in access to care, the impact of a major illness and long-term disability inevitably has a negative and dramatic impact on family finances, she said.

Caregivers often miss significant time at work. They generally have to tap into savings to cover the bills, money that would otherwise be used for retirement. And if a breadwinner falls ill, one salary is eliminated often for a long period of time or permanently.

Martens says she realized she couldn't afford the loss of income if she fell ill. At the same time, she was concerned she'd have difficulty finding extra cash for the insurance premium. That turned out to be not as tough as she had thought.

"There are those ads that tell you for the price of a coffee, you can support this or that," she says. "I'm not a coffee drinker, but what I pay is equivalent to five or six trips to Starbucks a month."

giganticsmile@gmail.com

Republished from the Winnipeg Free Press print edition October 12, 2013 B12

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