This is the second part in our series focused on self-insuring and health insurance options. The first article in this series, from Rocco Taglioni, SVP, Distribution and Marketing, Individual Insurance and Wealth, Sun Life Financial, looks at three strategies for managing clients’ future health and personal care costs.

When your clients start saving for retirement, including critical illness insurance (CII) in their plans can help protect their assets. As they get a little older and closer to retirement, having a conversation about long-term care insurance (LTCI) is just as important as the one you had about CII.

CII is still important for clients between 40 and 49 years old, because they may still carry debt and have children at home. For your boomer clients — 50 to 69 years old — it’s time to educate them about the benefits of purchasing LTCI. Many will eventually need long-term care. An LTCI policy can help them pay for the type of care they want when they need it later.

Research reveals clients are starting to realize they have to make plans for future health and personalcare:

  • 75% of clients assume they’ll be responsible for funding the majority of their own care.1

Another survey shows many Canadians haven’t considered health insurance as a way to fund some of their future health and personal care costs:

  • Only 33% of Canadian respondents who have a written financial plan report that their plan includes health insurance.2

You can show your clients how health insurance helps them cover costs resulting from an unexpected serious illness or an eventual need for substantial care and assistance. You can also demonstrate how health insurance preserves their assets, estate value and legacy plans.

Putting future care on the radar

Canadians are living longer — but not necessarily healthier.3 If you have clients who intend to self-fund their future care needs by allocating a portion of their assets to a health fund, consider offering them other options. It’s easy to underestimate the cost of care, which can deplete assets faster than expected.

Many advisors are building health-care conversations into their business practices.

Joe Sheehan and his son Jake Sheehan, who work together in their firm Life Design Systems, designed an Excel tool to help clients see their own financial strategies and structures from a unique perspective. They walk their clients through their financial futures, helping them address essential questions, like when they want to retire and whether they’ll have the retirement money they need for the rest of their lives.

Joe and Jake are examples of advisors who are including potential health and personal care costs in their clients’ current life and financial strategies. They know stress testing plans is an opportunity for interactive feedback that supports effective decision making.

They give the example of a 45-year-old single man — an affluent client.

Outlining the potential financial implications of a critical illness on the client’s life, they ask, “What are your assumptions for building your wealth in the future?” If it’s saving $50,000 a year for the next 10 years, they’ll demonstrate how a critical illness may affect productivity and therefore the ability to achieve savings targets. Then they’ll show the benefits of using a portion of planned savings to fund a critical illness insurance policy with a return-of-premium on cancellation or expiry option.

They’ll also discuss the importance of options for covering future long-term care costs with LTCI coverage or the ability to convert a CII policy to an LTCI policy.

For the LTCI discussion, Joe Sheehan gives this example: a 65-year-old woman, with $3 million in a registered retirement income fund (RRIF), $750,000 in non-registered funds and $100,000 per year in expenses. “Then we crash test this scenario and say, ‘What if you get Alzheimer’s disease, and your long-term care costs are now $90-100,000 per year?'”

Joe Sheehan would suggest a product such as Sun Retirement Health Assist (Sun RHA) — he calls it an “incredible product” for the client’s long-term care strategy. With a product like Sun RHA, an affluent client has the ability to cover initial costs of care. The benefit from this long-term care insurance product can also provide money for health and personal care, when substantial personal assistance and supervision are required that exceed expectations or last longer than anticipated.

Advisors who’ve spent a lot of time helping clients grow their investment portfolios know the importance of protecting their assets. You can build on the value of protection by showing clients there’s a connection between their wealth strategy and the role insurance plays in preserving it.

You may find it’s a good opportunity to start the conversation about how insurance solutions can help offset the cost of care as your clients age — ultimately protecting their assets, as well as their estate and legacy plans.

Resources to help you get started:

  • Money for Life whiteboard video: Options for care as you age – compares the long-term care funding options of self-insuring versus including health insurance as part of the wealth strategy. To help prepare clients for a discussion about their future care needs and funding options, you can send clients a pre-scripted email with a link to this whiteboard video.
  • Also show the Why health? whiteboard video to your clients who need help conceptualizing how health needs and costs typically progress as we age. It introduces how their health can impact their retirement, and the importance of planning today for their health in the future.
  • Money for Life – Let’s talk health needs. This conversation starter offers compelling statistics about health-care needs in retirement, sheds light on health risks, and presents potential solutions that can help clients manage their health-care expenses in retirement.
  • To help your clients understand how long they might live and the health risks they could face, use the Longevity Risk Illustrator tool on the Money for Life web app.

For more about protection solutions from Sun Life Financial, talk with a member of our Insurance Sales Team.

1 Sun Life Healthcare Survey Analysis and Clustering, Hill+Knowlton, February 2014.

2 Sun Life Canadian Health Index, 2014.

3 Tom Blackwell, We’re living longer, not better: Average Canadian will spend more than a decade suffering from serious illness, National Post, March 14, 2013.