We all hope to make it to retirement without suffering a major or severe illness. Unfortunately, two in five Canadians (44% of men and 43% of women) are expected to develop cancer in their lifetime[1]. The good news is that things like heart attacks and cancer are not as fatal as they once were. The likelihood, in Canada, of surviving at least five years after a cancer diagnosis is 63%. In the 1940’s that rate was 25%. Have you ever considered what would happen to your retirement plan if you were one of the unlucky ones that did experience a critical illness like cancer? Many people do not have an adequate plan for the unexpected.
As Canadians, we are proud of our healthcare system. However, even if treatment of an illness is covered, other peripheral costs (including some medications and treatments) are not. This coupled with the loss of wages can severely impact saving goals. These costs can quickly deplete an emergency fund and possibly force you to dip into your retirement savings to pay your bills. You would then have to deal with recovering both physically and financially.
Owning a critical illness insurance policy passes the financial risks involved with suffering a severe illness on to an insurance company. If you were to endure a critical illness such as a heart attack, stroke, life-threatening cancer or other condition, the insurance company will provide you with a tax-free lump sum benefit to help you cover the cost of unforeseen expenses, making you less likely for you to dip into your RRSPs to cover costs. This may enable you to continue to save and stay on track with your retirement plan, allowing you to focus on your physical recovery.
Consider this example:
| Jeff is a 40-Year-old male, on track, saving for retirement. If he remains healthy, he could retire with a million dollars in RRSPs, giving him a monthly retirement income of approximately $6956. Unfortunately, after a life-threatening cancer diagnosis at age 55, he needs to access 100k to cover daily living expenses and additional medical costs. If Jeff does not have critical illness protection and has to access that $100,000 by withdrawing money from his RRSPs, he would need to take out $191,205 in order to receive the $100K after taxes. As well, he is now likely in a position where he is not going to contribute as much or at all to his savings. The cumulative financial impact of this is significant, reducing the amount in his RRSPs at retirement to approximately, $579,000 or $4000 per month. But consider if Jeff used a very small portion of the money he would have invested in his registered saving to fund a critical illness insurance policy with a return-of-premium rider with a $100,000 insurance benefit. In this case, if Jeff has a life-threatening cancer diagnosis at 55 years old and needs $100,000 to cover daily living expenses and his additional medical costs, the tax-free lump sum insurance benefit will cover that need. In summary, whether Jeff suffers a critical illness or not he has protected his savings. The above example is for illustration purpose only. Situations may vary according to specific circumstances. |
Help protect your savings and keep your retirement dreams on track by including critical illness insurance in your financial security plan.
[1] https://cancer.ca/en/research/cancer-statistics/cancer-statistics-at-a-glance?gclid=CjwKCAjwq5-WBhB7EiwAl-HEkoKXGYu7dwATjxCZMT79DzE8GOtBJqhY600fq4FCkiIN3eWFSyXVxxoCmacQAvD_BwE