This article is the second in the 4-part series taking a look at how life, health, and wealth solutions can create a powerful retirement plan.
The latest numbers about the frequency of a stroke1 in Canada reveal an increasing and concerning trend2:
- There are 62,000 strokes in Canada each year.
- 80% of people survive after having a stroke.
- Age is a strong risk factor for stroke; 80% of all strokes happen to those over 60.
There are eight million caregivers across Canada, providing at least $25 billion of unpaid care every year. According to the Heart & Stroke Foundation, 31% of Canadians say they would not feel capable of personally caring for a family member who experienced a stroke. Their top three concerns are lack of skills and ability to provide care, finances, and not having free time or help from others.
Imagine if a client, or their spouse or partner, had to deal with a stroke, and the effect of the disease on the money they’ve put aside for their retirement savings.
To start the conversation about helping to protect their retirement assets, ask clients these three key questions:
- Do you have enough accessible cash to cover costs, if you or your partner had a stroke or a heart attack, or suffered a critical illness such as cancer or Alzheimer’s disease?
- Would you be able to replace the retirement savings you spend on care?
- If you’re still making mortgage payments in retirement, could you make your payments if you had to spend money on recovering from a serious illness?
A retirement solution clients may not have considered
For an average 45-year-old couple, the risk of at least one spouse suffering a serious health condition by age 70 is 61.5%, and 90.7% by age 95.3 With so many Canadians at risk of experiencing a critical illness, it’s important to explain the benefits of critical illness insurance (CII) to clients, which can help them avoid dipping into their retirement savings:
- CII provides a lump-sum payment, which gives clients flexibility to use the benefit any way they choose.
- CII can help clients manage additional costs like paying for specialized care, including travelling to treatment centres, paying for medication not covered by a health plan, buying medical equipment, and more.
- Clients can avoid making early withdrawals from their retirement savings to cover health-care costs.
You can present several solutions to clients to show them how CII can be an integral part of helping to protect their retirement from a life-changing event.
Flexibility of CII policies
Organizations that provide CII may have a variety of plans that allow you to present CII solutions that best fit clients’ financial and lifestyle situations:
- Renewable term insurance to address shorter-term coverage needs, while allowing conversion to a long-term or lifetime coverage without needing to provide new medical evidence in the future.
- Term insurance that ends at age 65 or 75 to address longer-term needs that will end at the start of or during retirement.
- Permanent insurance, which provides coverage for life.
Lifetime coverage solutions are especially worth discussing, since more Canadians are living past age 654 and could use the CII payment in retirement, if they had to recover from a serious illness.
In addition to these various plan types, clients can choose from a variety of payment period options that give them the flexibility to accelerate premium payments and pay up the policy. This can be an attractive feature for those who don’t want to worry about premium payments after retirement.
CII policy with conversion to Long-term care insurance (LTCI)
Some CII solutions on the market offer the possibility of converting some or all of the CII coverage to LTCI coverage at a later age, without evidence of insurability. As an example, with Sun CII, clients can convert anytime between the policy anniversaries nearest their 60th and 65th birthdays, and they’re guaranteed they’ll be able to choose an LTCI policy with an unlimited benefit period.
CII + LTCI policies
In building a retirement plan, ideally the client’s plan would include both CII and LTCI:
- CII to help protect retirement plans against the impact of surviving a critical illness. The lump sum benefit can help clients cope with the immediate financial costs.
- LTCI can help protect clients if they become unable to care for themselves due to aging, an accident, illness, or deteriorated mental abilities. The income-style benefit can help cover the cost of care over a lengthy period.
Retirement is a complex time of life with many changes to finances, health and relationships. As you build and review retirement income plans with clients, it’s important to help them recognize and consider their future health-care needs and the impact their choices and expectations for care will have on their plans and finances.
“Know financial products — life, health and wealth — very well and work with clients to help them build the right solutions for their situations. Spend the time to be a financial coach for clients, understand their needs, and recognize how their needs will change throughout retirement. Break down the complexity of all products into simple solutions for specific situations. Be the clients’ trusted advisor, today and throughout retirement.” – Vineet Kochhar, Vice-President, Insurance Solutions, Individual Insurance and Wealth, Sun Life Financial.
This health-focused article is the second in a 4-part series. Read “How life, health and wealth solutions can help create a powerful plan” and watch for articles on life and wealth solutions in the coming months.
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1 To see how Sun Life Financial defines a stroke, go to page 33 in Guide to critical illness definitions.
2 Statistics in the following three bullets, as well as in the paragraph that follows the call-out box, are from The Heart & Stroke 2017 Stroke Report, June 7, 2017. http://www.strokebestpractices.ca/index.php/news/the-heart-stroke-2017-stroke-report/
3 Based on data from the Canadian Pensioners’ Mortality Table (published by The Canadian Institute of Actuaries, 2014) and the 2008 Canadian Critical Illness Tables (published by The Canadian Institute of Actuaries, July 2012).
4 Life expectancy continues to rise for Canadians aged 65. For males who reached age 65 in 2015, they could expect to live another 21.3 years, up by 0.2 years from 2012; females who reached age 65 in 2015 could expect to live another 23.7 years, up by 0.2 years from 2012. Actuarial Report on the Old Age Security Program, Office of the Superintendent of Financial Institutions, August 16, 2017.