The importance of critical illness insurance became very real early in my career when I dealt with my first claim.
A senior advisor we shared space with offered me some of his clients that he had “lost touch with,” and recommended that I reach out to them to see if they needed additional Life, Disability, or Critical Illness Insurance.
After reaching out to Brenda*, she called me one day while I was waiting to get a blood test done. She advised that she wanted to cancel her policies, and that she didn’t remember what they were even for. Discussing further, she explained that she had been diagnosed with breast cancer almost two years previously, she hadn’t been working, and that she needed to curtail her expenses. I asked her to hang on while I looked into what her policies were.
When I returned to the office, I was surprised to note that Brenda had purchased critical illness insurance 5 years previously. She had a $100,000 policy that would pay out in the event of diagnosis with life-threatening cancer. She forgot that she had the coverage.
After working with Brenda to complete the claim forms, she revealed how important this coverage was to her financial well-being. She had withdrawn all of her RRSPs to maintain her home and basic standard of living while recovering from her illness, but being out of the workplace for two years, still in recovery mode, she was utterly grateful to have received tax-free funds to help restore her retirement savings and be able to focus on her physical and financial recovery.
Brenda’s story should remind us that our diligent savings for retirement can be easily derailed. One of the four scenarios is guaranteed to happen within our lifetime:
We don’t have critical illness insurance coverage, and we never suffer an illness.
We have critical illness insurance, and never suffer an illness
We have critical illness insurance, and do suffer an illness.
We don’t have critical illness insurance, and do suffer an illness.
Obviously, we hope that we’ll fall into the first category, but it’s impossible to predict which scenario will befall us.
Here is a scenario of a 40-year-old male, non-smoker, who currently has $200,000 in his RRSP and is contributing $10,000 annually with a 6% rate of return. The four scenarios depict the reality of what it means if, at age 50, this person required $100,000 to cover the expenses and lost income of a critical illness:
Clearly, not having coverage and not becoming ill is the best-case scenario. But what you should also notice is the minimal difference between the best-case scenario and if you have coverage – even if you never claim on the policy.
What happens if you become ill and don’t have coverage is the outlier.
As we approach the 2023 RRSP deadline, consider Critical Illness Insurance to protect the value of your investments. Feel free to Book a Meeting with Jennifer or I to learn more and find a solution that works with your budget.