Trusted Tips and Resources

Trusted Tips & Resources

Trusted Saskatoon Insurance Pro's at Wiegers Financial & Benefits Explain Critical Illness Insurance

Wiegers Financial & Benefits is one of the largest private financial planning and employee benefits consulting firms in Saskatchewan. Its Saskatoon Financial Planning Division provides business ownershouseholds, retirees, and students with expert investment and insurance planning services to help them reach their long-term financial goals. They also have a Benefits and Personal Insurance planning division. In this latest Wiegers Financial tip they explain the importance of critical illness insurance. Wiegers Financial Benefits are Trusted Saskatoon Financial Advisors and Trusted Saskatoon Insurance and Group Benefits experts


Unpacking Critical Illness Insurance and Why It Matters

No one wants to be told they have a terminal or critical illness. If you suffer from a heart attack, stroke, or cancer you could lead a normal life again. However, you need to plan for the financial cost of surviving a life-altering illness. In this article, we discuss key points about critical illness insurance and ask two Wiegers Financial & Benefits staff members with firsthand experience to explain the impact it has had on their lives.

Pat Kyle’s husband was diagnosed with a critical illness a few years ago after suffering a stroke at the age of 52.

Pat says: “You never think it’s going to happen to you. Everyone lives in a bubble. Even the healthiest people may have an illness at some point. In the moment, you’re so removed from your day-to-day and fixated on your situation that you don’t even think about it. In my case, I came back to work and it wasn’t even on my mind to apply. I was so concerned about my husband’s health. It wasn’t my top priority to fill in the application to submit the claim, but I knew it was there.
As the first employee at Wiegers to go through the critical illness insurance process, it was emotional and gratifying to know that I have that piece of the program to support me. It was very helpful to be able to put a claim in and ease the financial burden. It took away stress. Just the fact that we had it made all the difference in the world. That lump sum payment is a beautiful thing.
I’m now an advocate of both critical illness and life insurance. To me, they’re more important than purchasing an RRSP. My husband had a stroke, then a heart attack, and it builds. These things all work together. Strokes can happen at any time. It doesn’t matter what age. There are so many fundraisers or steak nights for people who are sick. You may know someone who has pulled money out of RRSPs to help their child have a chance to survive. Critical illness insurance protects the wealth that you’ve created and that others around you have created, too. It supports the family, not just the person affected by the illness.”


Kim Chicoine’s husband was involved in a serious accident at a young age that left a lot of uncertainty about whether he would survive.

Kim says: “Sitting in the hospital beside my husband, I didn’t have to worry about the finances if things went the other way. Knowing that there wasn’t going to be a change in our finances because we had that critical illness piece in our puzzle was so huge. There was the potential that if his condition didn’t improve, we could have a critical illness payout. We ended up not getting the payout because he got better. It’s great when it pays out, but it’s also great when it doesn’t. The money stress is not there. You know your finances aren’t going to change and you’re covered.”

What is critical illness insurance?

Critical illness insurance is meant to relieve the financial burden of recovery, so you can focus on the task at hand. It can be purchased for children as young as 60 days up to those at or nearing retirement.

It’s one of the newest products on the personal insurance market, having been available in Canada for approximately 20 years and internationally for nearly 40 years.

Critical illness insurance is a “wealth-protecting product”, says Pat Kyle. It keeps your finances at status quo – maintaining your debt, bills, mortgage, etc. – while you focus on getting better.

Why did the need for critical illness insurance arise?

A South African cardiac surgeon, Dr. Marius Barnard, pioneered critical illness insurance after he noticed his surviving patients were struggling financially. While it was excellent that his patients were living after experiencing a life-threatening illness like heart disease, Dr. Barnard observed they experienced a significant drop in their standard of living. The patients who had overcome surgery had emerged to a world where their quality of life suffered due to the costs associated with recovery.

Which conditions are classified as a critical illness?

Each insurance carrier’s definition of critical illness differs slightly. In general, there are 26 covered conditions with the top three being stroke, heart attack, and cancer.

What’s the benefit of using critical illness insurance?

The payout is designed to help support yourself and your family during extremely difficult personal health challenges. You can get policies starting as low as 25 thousand dollars in a tax-free cheque that you don’t need to declare on your tax return.

The value of critical illness insurance is totally dependent on your personal situation, for instance:

  • a stay-at-home parent could provide for their family with their partner’s critical illness payout;
  • a self-employed individual would need critical illness insurance to cover them in the absence of workplace benefits such as long- and short-term disability;
  • or a recent grad would be able to maintain their student debt payments, etc. while going through treatments.

It’s important that you consider both life insurance and critical illness in tandem. Each situation will vary in priority as to when they’re paid out. There is no one-solution-fits-all insurance product.

When is the best time to buy critical illness insurance?

The ideal time to buy critical illness insurance is when you’re healthy. If you’re not in good health, it’s a more difficult application process.

Kim Chicoine’s husband is still young, but his health has changed. If the Chicoine’s didn’t have critical illness insurance prior to the accident, they would likely be declined. Because they had it, they will continue to have it in the future.

Family history also comes into play during the underwriting process of critical illness. Your parents’ diagnoses can affect your application, so it’s best to apply while they’re healthy.

What happens to your life insurance after using critical illness insurance?

Nothing happens to your personal life insurance after you use critical illness insurance. It depends on your personal life insurance that you’ve been medically underwritten for with an insurance carrier. If you’ve continued to pay the premiums, your life insurance is still enforced. It is difficult to get life insurance after making a critical insurance claim, so it’s better to have both products beforehand. You’ll want your advisor to package life insurance with critical insurance when you’re healthy.

How long, on average, does it take to get paid after a diagnosis?

There is a clause that says you need to pass a survival period of 30 days. After that, payment can take anywhere from a few weeks to a month. After the survival period, your doctor will need to give evidence to support the need. The decision to payout is dependent on the attending physician’s statement and all other sources.

How can the funds be used once they’ve been distributed?

If you pass the 30-day survival period, there are no restrictions on how you use the money once it’s been paid out. You decide how to use it. For example, you could use it to cover experimental medical treatment to see specialists that may not be covered by the Canadian health care system.

What will purchasing a premium do?

You can upgrade a base policy with a simple lump sum payout by adding riders. When you add additional riders it adds additional costs, but it can help in certain situations to have the return of premiums.

Here are a few riders to consider:

  1. Return of premium on death rider: the lump sum won’t get paid out, but your beneficiary will be paid out what you have paid into the policy.
  2. Disability waiver premium: if you become disabled, the insurance company waives the premiums.
  3. Rider name? If you have a policy for 15 years, you can give back the policy and get back everything you put into it. Once the policy is finished you get all your premiums back.
  4. Second event rider: pays out if the second condition is different than the first.

Prioritize your future self

Pat Kyle says: “Critical illness insurance manages the risk of what could happen in your early years, so you don’t have to take money out of savings. My financial priorities are 1. life insurance, 2. critical illness insurance, 3. slush fund, 4. RRSP. Yes, saving is important. But if something comes up your savings aren’t going to last. In my opinion, it’s not about 'should I get critical illness insurance?' it’s 'why shouldn’t I have critical illness insurance?' Protect your future self.”
Kim Chicoine says: “Peace of mind is important. In Pat’s situation, it paid out, in mine it didn’t. But I wouldn’t have wanted to be in the hospital without it. I wouldn’t have been able to focus on my husband; I would have been stressed out about our finances.”


Your ability to earn an income is worth more than your house and vehicle combined. Everyone gets coverage for their material possessions and it’s important to insure yourself, too. The best time to start the process is when you’re healthy and you don’t think you’ll ever need it. Speak to a financial advisor at Wiegers Financial & Benefits about finding an affordable critical illness policy.

Wiegers’ Benefits Consulting Division includes many consultants and support staff who custom-design the most employee-valued and cost-effective group benefit, personal insurance, employee assistance programs, and retirement plans available. Contact Wiegers today for a no-obligation consultation to determine how they can help you.

Wiegers Financial & Benefits are Trusted Saskatoon Insurance and Group Benefits Advisors 


Trusted Saskatoon Financial Services partner answers Saskatoon's questions

 Saskatoon Directory in our Trusted Saskatoon Financial Services category

TrustedSaskatoon.com Talk to the ExpertsTrusted Finance Sho

Q: M Liz Beisel:  Is it better to buy back pension years that one did not contribute to or buy RRSP's or TFSA's?

A: Pension buy back really applies to those individuals who are part of a defined benefit pension plan and who may have missed out on some years of contribution service. Some examples might include a maternity leave, sabbatical, leave of absence or war service. When it comes to the buyback dilemma, the numbers will be the biggest determining factor. That being said, there are many other issues that will affect your decision to buy back pension:

-     Length of tenure.The longer you work for the same employer under a defined benefit plan, the more likely it will be that buying back pensionable years will be the best investment you can make. Defined benefit plans reward longer-term employees.

-     Employer contributions.In most cases, buying back years of service also means that your employer will be making some contributions to your pension.

-    Can you afford the cost?Obviously, this is one of the biggest issues. Often employers will help by allowing you to buy back the pension over a period of time rather than being forced to come up with one lump sum. If you have money in your RRSPs, you can also transfer the RRSP into the pension to buy back years of service.

-    Estate planning.Pension plans will often provide some income to a spouse but the pension will not be passed on to your children. With RRSPs, there is an estate provided to beneficiaries other than your spouse.

-     Flexibility and liquidity.As much as pensions are the cornerstone of retirement income for those belonging to a defined benefit plan, you will have greater flexibility and liquidity with other types of retirement savings like RRSPs. Pension funds are more restrictive.

-    Time.Buying back pension later will result in a higher cost. The sooner you buy back pension, the less costly it will be. This is simply the time value of money.

-     Life expectancy.Remember that pension income will pay for as long as you live no matter how long you live for. Although no one knows when they are going to die, keep in mind that if you think longevity is on your side, anything to do with the pension will weigh in your favour.

There you have some important considerations to think about if you are faced with the decision to buy back your pension. Most employers have calculators to help you make this decision. Alternatively, look for a retirement expert to help you make the best decision for your circumstances.  When we have reviewed these types of arrangements in the past there has often been more advantage than disadvantage to buy back the years.

 

Q: Vanessa Froese: How would one invest money if they took a work severance package during lay offs? And, would one leave their RRSP contributions in the former work plan or take out and put in a mutual fund? 

A: It is important that when considering to invest a lump sum from something like a severance package there is a careful analysis of the individual investor’s objectives, risk tolerance, cash flow needs and tax situation.In the case of severance, typically we are dealing with an emotional time for the investor and if there is future job uncertainty it is even more important to use a cautious and systematic approach as cash flow needs may be quite different at this time. 

When we work with people in this situation we would always do an analysis on the former work plan to see what the investing options, performance and flexibility would be before we would make suggestions as leaving it in the former work plan or transferring into an individual account where the investor would have more control over how the account would be managed going forward.Once a person leaves employment of a firm it is often more cumbersome to try and manage the investments but it is totally dependent on the firm and the structure of the former plan.If you were take the assets out of the former plan and invest then generally there are more options available to the investor and the choices would be dependent on what the investor/advisor would like to use going forward ie. Mutual funds, stocks, bonds, etc.We have seen more people move them then keep them with the former employers plans. 

Our best advice is to see a qualified Financial Planner, as there are so many variables to look at depending on age, personal situation, dependents, your goals and more. 

Q: Sheila Benesocky: I'm two steps away from building a business I'm short on equity, how can I go about finding an investor in my project? I am a member of the Woman's Entrepreneur’s.

A: Women Entrepreneurs of Saskatchewan Inc. is an excellent organization and has the ability to provide a number of services that may assist you in building your business – Business Advising, Networking, Lending, Mentoring are all services that are accessible to members.  Depending on the scale of the new business and how much investment would be needed we quite often see these type of investments come from “Angel” investors. 

According to Wikepedia the definition of an angel investor: An angel Investor or angel (also known as a business angel or informal investor or angel funder) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital, as well as to provide advice to their portfolio companies.[1]

There are a number of angel investor organizations that you may want to have a look at in the province:

            Saskatoon Capital Network: http://saskcapitalnetwork.com/

            Saskatchewan Angel Investor Network: http://www.saint.sk.ca/

 

Q: Kathleen Rose: At what age should you stop contributing to RRSP and begin to spend them without penalty? Is there a certain allowable percentage that won't result in paying a large amount of taxes per year?

A: The age at which investors should stop contribution to RRSP’s and begin withdrawing is unique to every investor depending on household cash flow needs, tax situation, employment situation, goals and objectives, etc.  These factors may change from year to year and should always be part of the annual planning review that you do with your advisor or if a do-it-yourself investor that you look at yourself.  You are required to start withdrawals in the year after you turn 71 but before that you can make that choice depending on your circumstances.   Ideally in years when incomes are highest you want to be making RSP contributions and you would want to wait for lower income years (if that was an option) to make withdrawals but every situation is unique.

In our office we start tax planning for this type of thing with our clients in October/November of every year and not only is it different with each individual, it can change every year!  While people are working we are often used to only one source of income from employment;  in retirement we can have over 6 different sources of income that now need to be managed for the best tax efficiency to meet your needs.  

Q: Mike Maille: Is it better to invest in RRSP's or mutual funds?

A: RRSP’s stand for Registered Retirement Savings Plan’s and this is a type of retirement account that can be setup for clients.  There are also Locked In Retirement accounts(LIRA), Tax Free Savings Accounts(TFSA) and Non Registered accounts.  Mutual funds are a type of investment that can be used inside the RRSP or other accounts.  Other types of investments that could also be used are individual stocks, Exchange traded funds(ETF’s), bonds, GIC’s, segregated funds.  Each type of investment has their strengths and weaknesses depending on the individual client situation. 

What you should be invested in should be determined based on your goals and objectives.  If using an investment advisor, they will assist and help you stay within your appropriate portfolio. If doing yourself, a lot of the direct investing websites have questionnaires to help you, but then you are responsible for watching and staying within your appropriate portfolio mix.

Q: Chris Mercereau: Am I better off buying more RRSP's every month or putting that money towards paying off my mortgage faster?

A: The pay down mortgage versus contribute to your RRSP is a common question that we get. Your best option depends on the following factors which are unique for each individual:

-          Mortgage rate

-          Remaining term on mortgage

-          Years to retirement

-          Future rate of investment return

-          Marginal tax rate 

 

What happens if you put the money in your RRSP?

 

You get tax-free compounding of your investments and a tax refund that you can re-invest in the

RRSP or could be used to make an additional mortgage payment. 

 

What happens if you pay down your mortgage?  


You get reduced mortgage payments and you could invest the monthly savings back into your RRSP. We will typically get all the information from the clients and then can use our planning software or an online calculator 
to put some numbers around the exercise which are individualized for the client.

Trusted Saskatoon Financial Services tip on Pension Income Splitting

Saskatoon Directory in our Trusted Saskatoon Financial Services category.

Tip on Pension Income Splitting: Save taxes and enhance your family's wealth:

Income splitting is a tax planning strategy that shifts income from a higher income earner to a lower income earner in order to reduce the overall tax paid by the family.

While there are various income attribution rules in the Income Tax Act that restrict income splitting strategies, one strategy that is widely utilized during retirement is pension income splitting.

Canadian residents who receive eligible pension income can allocate up to 50% of this income to their Canadian resident spouse thereby reducing taxes by shifting income from a higher income earner to a spouse who is in a lower tax bracket. As a further benefit, by keeping the retiree’s taxable income below a certain threshold, they can reduce the amount of the Old Age Security (OAS) claw back each year. Only certain types of income qualify as eligible pension income depending on the recipient’s age. 

For individuals aged 65 and over, eligible pension income includes:

·         Prescribed annuity payments

·         Lifetime annuity payments under a registered pension plan (RPP), a registered retirement savings plan (RRSP) or a deferred profit sharing plan (DPSP) and

·         Payments from a registered retirement income fund (RRIF)  

For individuals under 65 years of age, eligible pension income includes:

·         Lifetime annuity payments under a registered pension plan and

·         Certain other payments received as a result of the death of the individual’s spouse or common-law partner.

For income tax purposes, the amount allocated will be deducted from the income of the transferor (the person who actually received the pension income) and will be included in the income of the transferee (the person to whom the pension income is allocated). 
There is no age restriction for the spouse or common law partner who receives the income 

Managing your wealth effectively requires an annual review of all the income splitting opportunities available.

 

 

Trusted Saskatoon Financial tip on health insurance

 

 Saskatoon Directory in our Trusted Saskatoon Financial Services category.

tip on Insuring What Matters The Most: Our Health:

Most of us would never give up our home insurance, our car insurance, and even our life insurance. Nevertheless, when the time comes to insure our health, some of us believe it’s an unnecessary expense, since the government health care is readily available.

Unfortunately anyone can be confronted with a critical illness or long term disability, and as a result, require some form of long term care that is not covered by government plans. Solutions are available to protect your savings and wealth in the event of sudden health care needs. Here are some types of insurance you may want to consider.

Disability Insurance
Long Term Disability coverage or income replacement insurance allows you, should you become disabled due to illness or injury, to receive monthly benefits during a certain period of time. The amount of coverage available is based on a percentage of your earned income and can be payable up until age 65.

Critical Illness Insurance
Critical Illness insurance allows you, should you be diagnosed with certain types of cancer, heart disease or a life altering event such as paralysis or a stroke, to receive a lump sum benefit provided that the illness or event is covered under the insurance program. If you do not make a claim, the program can be designed to return the premiums paid at a specific period of time.

Medical Care Insurance Outside Canada
A few insurance companies offer a supplementary product to Critical Illness insurance intended to cover medical care expenses that you could incur outside of Canada. This coverage, instead of paying a lump sum in the event of an insured critical illness, covers expenses related to medical care received outside Canada for up to $1,000,000.

Long Term Care Insurance

With age, you may ask yourself:

·         Will I be able to rely on my spouse or family members to provide proper health care for me?

·         Will I be able to have care and treatment at home?

·         Will I be forced to reside in a provincially funded care facility?

Long Term Care insurance can assist with costs associated with home or facility care. This benefit is tax free and can be payable as a result of suffering from a cognitive impairment (such as Alzheimer’s disease) or being unable to perform important activities of daily living.

 

Trusted Saskatoon Insurance Expert Answers Questions on Personal Insurance on Saskatoon Directory PART 2

 

 Trusted SASKATOON INSURANCE expert!

Here experts answers questions on Personal Insurance on the SASKATOON DIRECTORY:

PART 2:

1. Jennifer Sparks: How much life insurance should a single parent have with 2 children who just entered their teens?

A: Again a needs analysis should be done. There are many variables. Who would the teens live with in the event of your death? Could that person afford to support the kids? You need to consider eliminating any debt that may be present when you die and of course providing enough income to support the kids until they are old enough to be on their own. Add your debt and at least 75 to 80% of your income x 10 years.

2. Melodie Poorman: How long is the coverage period of life insurance?

A: The coverage period on life insurance depends on the type of policy you have. Term insurance plans definitely have an expiry date but that varies from plan to plan and company to company. Most permanent plans have no expiry date and the coverage will be in place until the date of your death.

3. Corry Stewart Dorosh: If you got your children life insurance at birth and they get medical issues can you still purchase them more life insurance or if they choose when they are older can they get more?

A: Even if you purchased a life insurance plan for your child at birth their ability to purchase more life insurance in the future will depend on the type and severity of their medical problem. Depending on the problem it is possible that they will not be able to purchase any other life insurance in the future. To prevent this from happening I advise my clients to add a guaranteed insurability option to their children’s policies. For very little additional monthly premium this option can be added and allows your child to purchase more life insurance numerous times in their life without difficulty or having to answer any medical questions.

4. Kimbrolina Linke: What kind of life insurance should parents get and when should they get it?

A: The type of insurance parents should get can vary according to individual need. Why are they getting it? The most common type for young new parents is term insurance. It allows a young couple to make sure they have protection in the case of unexpected death to cover debt, mortgages, children’s education and to replace their income for the family, all at an inexpensive rate. If they are looking at purchasing insurance as an inheritance for their children or for estate planning then permanent insurance is the product of choice. Again a proper needs analysis will help determine the right amount and the right product.

5. Amanda Starosta: I'm a funeral director and have heard some horror stories about families trying to obtain life insurance benefits after a death, is there any advice I could give them to make sure they have all the documents/information they need to go through the process with ease?

A: Generally speaking obtaining life insurance benefits shouldn’t be difficult for a person. I think a lot depends on the type of life insurance policy. It may be more difficult to obtain benefits that are provided through creditor protection plans than from individual life insurance contracts. In my experience I have had no problems obtaining the benefits for beneficiaries. The usual documentation required is a death certificate or funeral director’s certificate, claimant’s statement completed by the beneficiary and sometimes a copy of the deceased’s birth certificate. If everything is in order they usually receive the benefit with a week to two weeks

6. Andrea Pyle: Jennifer, do I need to get more life insurance, even though I'm covered with my work? Is it beneficial to do so?

A: I always advise my clients to have additional insurance to their coverage at work. Today it is very, very common for a person to change jobs or careers a few times. The life insurance coverage you have through your work is tied to the group benefits plan at that job. If you leave that employer the life insurance does not go with you and the next employer may not have a plan offering the same coverage or if you become self-employed you may no longer qualify for life insurance if your health has changed.

7. Ann Lyte-Maille: Jennifer, are there any policies that cover critical illness? Such as Chron's disease?

A: There are critical illness policies that cover a large list of illnesses, usually anywhere from 24 to 28 illnesses. However, at this time I do not know of any that cover Crohn’s disease.

8. Trish Planchot-Voldeng: Jennifer, I have heard it is hard for cancer survivors to get any form of life or travel insurance. Is this true or do they pay a very high premium? Does it ever decrease if a person is cancer free for a number of years?

A: First I will respond to the travel insurance. A cancer survivor can get travel insurance but depending on the type of cancer. They are not eligible if they have received any treatment for pancreatic or liver cancer or had any type of cancer that has metastasized. If this is not a problem they can qualify for travel insurance as long as they have no reasonable expectation of needing to see a doctor and are not travelling against their doctor’s advice. Now this applies to people under age 70 travelling for less than 36 days. For client’s older than 60 travelling for an extended period of time, they will have to answer a detailed health questionnaire and they could find it more difficult to qualify for the travel insurance or pay an extra premium.

Now for life insurance, it is possible for cancer survivors to obtain life insurance but there are many variables that need to be considered; what type of cancer, what stage or grade of cancer, age of diagnosis, what type of treatment was required, how many years since the person has been considered cancer free. Was there any metastases? For example: someone diagnosed with malignant melanoma or skin cancer that had the cancer removed and it was in the low stages may be able to obtain life insurance within a year; for higher stages it may be five years. Prostate cancer: again this depends on the age of diagnosis and the severity. In this case the older you are at time of diagnosis the better. Breast Cancer: This can be harder to get life insurance. Even with the lowest grade of cancer you would need to be 5 years post treatment. With any type of cancer a rating or additional premium may be applied but it is important to note that with these ratings, as the years go by and the length of survival increases, the rating/ premium can be reduced. If you are a cancer survivor don’t assume you won’t qualify for insurance. Talk to someone or call me.

9. Tanis Macala: Jennifer, Saskatchewan has some of the highest percentages of smokers. Currently, Saskatchewan has the highest number of smokers between the ages of 15-19 (20%)... a title we've had for nine straight years. Can you explain the effects this has when it comes to obtaining life insurance and the difficulties it may cause?

A: Generally speaking if you are in good health being a smoker won’t cause any difficulty in obtaining life insurance. However, it definitely will increase the cost. Smokers see an additional 40 to 70% increase in premiums compared to non-smokers depending on the type of life insurance, the amount and whether they are male or female. The good news is that if you quit smoking and maintain this for 12 months, you could have the smoker rate reduced to non-smoker rates, providing your health is still good.

 

Categories

Previous Posts

ADDRESS

S & E Trusted Online Directories Inc
TrustedSaskatoon.com
129 21st St E #500
Saskatoon, SK   S7K 0B2
Ph: 306.244.4150

GET THE APP

App Store Google Play
Follow us on Facebook Instagram Linked In Twitter YouTube RSS Feed
Abex
Abex
Stevies
Sabex
NEYA
Website hosting by Insight Hosting