Living Benefits: Insure your life to ensure your survival
By Robb Lovell, MBA
When one thinks of insurance usually our mind wanders to life insurance, or perhaps our home and car insurance. While all of those are important, they are, in fact, only half the story.
Living benefits are the other half of that picture, and have become increasingly popular and an important part of many family’s or individual’s risk management plan.
Living benefits are insurance plans that cover certain unforeseen events that can happen in your life. These plans help you manage the consequences and pay for your needs and welfare. Living Benefits includes Disability Insurance, Critical Illness Insurance, Extended Health Benefit plans and Long Term Care.
Below is a brief overview of the types of Living Benefits policies. If you have questions on anything outlined, please contact the office:
Most of these policies deal with a negative life event like a disability or critical illness, These products address what is a very real need. Statistically, between the ages of 18 to 65, you are, in fact, 4 times more likely to suffer a disability or critical illness than to die. Disabled people tend to have not only their normal expenses of living but additional burdens and expenses for their care (so which do you think is more important to cover?).
Many clients will be somewhat familiar with Disability Insurance as this might be something that their employer provides. However, in recent years and with employers tightening their belts, increasingly these important benefits are being reduced or cut completely for employees. Disability policies cover a percentage of your income if a major injury or illness prevents you from working for a given period of time. The policy can cover you if you become sick and ensure that if you are unable to work and provide for yourself and/or your family.
These policies can be designed with a host of options and can generally cover up to 75%-80% of your salary or wages should you become disabled. Many employers provide some coverage, but in recent years budget constraints have caused many employers to reduce the percentage of wages covered or reduce the timeframe for benefits. As you can imagine if disabled, you face not only your regular expenses but the costs of your care and extra needs.
If you have some coverage at work, a policy can be designed to compliment and fill in the gaps of your work policy to ensure that you have a reasonable level of coverage.
Extended Health Benefits:
This type of coverage can cover a range of things from prescription drug coverage to eye glasses and dental care. Plans can be custom designed allowing you to choose the benefits that are most important to you and your family.
Again, this is a common item that has been on the chopping block for many employers looking to cut costs for employees and retirees.
In response to this, many insurance companies will now allow you to opt into your own plan without any restrictions or ratings if you buy a private plan within 3-6 months of losing your employer's coverage.
Critical Illness (CI)
It’s no secret that in Canada and especially in Windsor/Essex County, we have very poor health care (especially for major health issues). Long waiting lists for important items like cancer care and cardiac care exist throughout Ontario.
Critical Illness is a great option for clients that want to take full control of their health care situation. Most policies provide a lump sum of funds should you be diagnosed with a critical illness. These are funds you can use to secure treatment and to cover your expenses while you recover. Most policies provide you with free access to medical referral services like BEST Doctors which will allow you to find treatment immediately in the United States or elsewhere. This allows you to bypass waiting lists and ensures that you can receive cutting edge treatments that frequently are not available in Canada. Policies can be set up with a return of premium option (meaning that if you are claim free on the policy, you can get back all of your premium at a certain age like 65 to 75 years of age). Many clients secure this type of coverage for children or grandchildren because it can provide important coverage at a low cost for a lifetime with a large premium refund in that child’s retirement years.
Long Term Care (LTC)
Statistically, we know that one in two people will need Long Term Care during our lifetime.
Obviously, the need is statistically large and with the cost of Long Term Care increasing substantially, currently a semi private room in most long term care facilities runs about $70 per day or about $2,100 per month. It’s not hard to imagine how quickly an individual needing Long Term Care can erode their portfolio paying for their care or the care of a spouse.
Long Term Care coverage can be set up to cover both home care as well as care in a LTC facility. Most good policies will provide a certain daily benefit for a lifetime, if needed.
Most long term care policies have premiums that are payable for a period of 20 years (after which the policy is paid up and the coverage remains in effect for a lifetime). LTC coverage tends to be very cost effective in most cases if you insure both spouses the total premium for both spouses over that 20 year period is equal to about 1.5 years of benefit (meaning if either spouse needs care for more than about 450 days then both policies have more than paid for themselves).