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No one likes to discuss the likelihood of becoming seriously ill, but it’s a real possibility. While focusing on recovery is a priority, understanding the potential effects on client assets and retirement plans is crucial to their financial success. Help clients discover options that protect them and keep them on track with their goals.

The risk of illness is real

Investments are especially vulnerable during the years immediately before and after retirement. The average 45-year-old male has a 53.6% chance of suffering a significant health condition before age 75. Also, 69% of retired Canadians didn’t stop working on the date they planned. Among those Canadians who didn’t retire as planned, 41% cited personal health as the primary reason for retiring earlier. 1 Providing clients with secure coverage can lessen the impact on their future retirement income.

Key client concerns

Managing finances at this worrisome time can add unnecessary stress. Clients may have some concerns about how a serious illness could affect them financially. Some of the key questions they might ask include:

  • Will my business perform at the same level without my attention?
  • Will my income be enough to make personal mortgage and other debt payments while paying for my basic living expenses?
  • Will I be able to manage additional expenses related to my recovery?

Answering clients’ uncertainties lets them focus on what matters most – their recovery.

Using savings for recovery costs

You can help clients better understand what can happen to their finances if a critical illness occurs. By explaining the consequences of taking money from savings to help pay for costs related to recovery, you boost their confidence in choosing the right options for their financial future. Topics to talk about include:

  • Tax – Let clients know that any money they withdraw from an RRSP is taxable and that a withholding tax is applied based on the amount withdrawn. Clients may also be required to pay additional tax when completing a tax return.
  • Reduced investment growth – Clients need to be aware that any money withdrawn no longer earns returns, slowing investment growth. Fluctuating market conditions can also reduce investment growth. This is due to missed opportunities during periods of market recovery or withdrawing funds during a market decline.
  • Permanent loss of contribution room – Although clients can continue to make the maximum annual RRSP contribution, they aren’t allowed to re-contribute amounts they have withdrawn from their RRSP. This reduces the potential value of their RRSP when they retire.

Meet Anthony

Anthony, age 45, owns a small business as a sole proprietor. He has $200,000 in his registered retirement savings plan (RRSP) and $40,000 in a non-registered savings account. His goal is to save $1.5 million by age 71. He’ll use the money to cover basic living expenses, fund his desired lifestyle and help his children.

Anthony’s current plan is to make annual contributions of $18,000 to his RRSP and $3,000 to his savings account for 20 years until he retires at age 65. Below are four possible scenarios he could encounter on his way to achieving his savings goal.







$1.5 million




$1.7 million* after converting his RRSP to a registered retirement income fund


$1.5 million


Serious health event at age 64

$140,000⁺ increased by inflation to $250,000 over 19 years

$1.28 million*


$1.5 million


Serious health event at age 64

$140,000⁺ increased by inflation to $250,000 over 19 years

$1.48 million* if medical expenses don’t exceed the $250,000 one-time payment


$1.5 million




$1.6 million**

Anthony’s earned income is $100,000 for the purpose of RRSP contribution rules, and his tax rate is assumed to be 35%. This tax rate is for illustrative purposes only. The actual rate will vary depending on the province.

*Assuming a 5% pre-tax growth rate.
**Assuming a 5% pre-tax growth rate and that the client has made all premium payments and has had no policy changes.
+Estimated total costs at age 45 are based on lost income for one year, healthcare expenses of $25,000 and other expenses of $15,000.

In scenarios C & D, Anthony chose to redirect a portion of the funds he planned to save to purchase Sun Critical Illness Insurance. He selected a T75 policy, with a return of premium on cancellation (or expiry) at age 65 and a benefit amount of $250,000. With this package, Anthony’s planned deposits to his RRSP and non-registered savings are reduced by the annual insurance premium of $6,010. 

By purchasing Sun Critical Illness Insurance, Anthony is successfully protecting his assets during these important years of accumulation, while still achieving his retirement savings goal.

How critical illness insurance helps

Help clients protect their assets. Talk about the benefits of critical illness insurance and help them reach their retirement goals. Some important things to remember:

  • Critical illness insurance helps to protect a client’s plan from the financial impact of a serious illness
  • With critical illness insurance, there may be no need to withdraw funds from investment portfolios
  • Consider inflation costs – over the past 10 years, healthcare inflation has been averaging 4%2
  • Clients can redirect a portion of money that would have been invested to purchase critical illness insurance
  • If a client is diagnosed with a condition covered by the critical illness insurance plan and meets the policy requirements, they’ll receive a tax-free one-time payment to use to help with recovery3
  • If the client doesn’t need all the money, they can put the unused portion back into savings

If you have questions or want more information about Sun CII, contact the Sun Life insurance sales support team.

1 Sun Life Financial interpretation of Canadian Pensioners’ Mortality table published by the Canadian Institute of Actuaries in 2014 and the 2008 Canadian Critical Illness (CANCI) tables published by the Canadian Institute of Actuaries in July 2012 trended to 2014.

2 Sun Life Home Care Surveys 2004–2017.

3 The Sun Life interpretation of the Income Tax Act: The Sun Critical Illness Insurance benefit will be tax free, because we believe our product conforms to the requirements governing sickness or accident insurance policies in all provinces. The return of premium benefit will be tax free if the amount does not exceed the premiums the recipient paid, and the premiums were not deductible expenses. Our interpretation is based on information provided by the Canada Revenue Agency, which may change.