A recent Montreal Gazette story on post-retirement health insurance raises many important issues and especially as they pertain to critical illness insurance. The additional cost retirees in Quebec face after retirement and the tenuous state of many private health and pension plans make additional insurance coverage an important consideration.
Reporter Paul Delean touches on many important topics in his thoughtful story that should be shared with and discussed with every retirement age client:
Financial advisor Marshall Johnson says one of the questions that regularly seems to catch potential clients off-guard is when he asks how they’re set for health and life insurance in retirement.
“It never dawned on a lot of them that their coverage came from work, and they might not be covered as well once they left, or lost their jobs,” he said.
Johnson, who works for Investors Group, also gets a lot of blank stares when he asks people what’s in their group health plan at work.
“For a lot of them, it seems just having a plan is sufficient information. They don’t actually know what’s in it.”
Quebecers accustomed to the benefits of private health plans often find the transition to the provincial drug-prescription plan a bit of a rude awakening, he said.
Contrary to popular misconception, the provincial plan isn’t free for most people; there’s an annual fee that can run as high as $595 a year, payable on the provincial tax return. You may also have to shell out as much as $79.53 a month toward the cost of your prescriptions. Dental work isn’t covered.
“It’s better than nothing, but there are holes,” Johnson said.
While some corporate plans do extend benefits to retirees, many do not, which means longtime employees are reduced to limited coverage at a time in their lives when they’re most likely to face complicated, and costly, health issues.
Johnson said it’s also not unheard of for companies, particularly smaller ones, to scale back or cancel private plans altogether if the costs become too onerous, as they sometimes do if a couple of employees get sick or hurt simultaneously.
Even the best private plans often have coverage gaps. That’s why it makes sense to supplement private plans with individual coverage, Johnson said. And the younger you apply the better, because insurance costs rise with age.
Among the products Johnson recommends people consider are critical-illness and long-term-care insurance
A long-term-care policy provides coverage for expenses such as an elder-care facility or in-home nursing, for as long as they’re needed. Your premium cost is based on the benefit level you buy. For a 55-year-old man, a policy offering $3,000 a month in benefits at a long-term care facility or $1,500 a month of non-facility care typically would run from $1,200 to $1,800 a year.
“They’re not cheap,” saidJohn Archer, an investment representative at RBC Dominion Securities, “but if you do the economic projections, they can save you money. An elder-care facility today can cost you well over $3,000 a month.”
So what happens if you never enter such a facility? “Some do have a return- of-premiums benefit,” Archer said.
Johnson said long-term-care plans seem to interest women in particular. “It costs more for women than men, because they live longer, but perhaps because so many of them have looked after an elderly parent, they worry about ending up the same way without the funds to provide for the extra care. If you don’t have kids to take care of you, the long-term-care money can go a long way.”
Critical-illness insurance pays you a specific amount if you have a heart attack or are diagnosed with any of a series of illnesses, from cancer to Parkinson’s disease.
“We usually recommend coverage equivalent to about a year’s salary. Because even if you do beat cancer, you’ll probably be out of commission for about a year,” Johnson said.
Though the odds of contracting cancer are actually a lot higher than your house burning or car getting stolen, insurance for critical illness still isn’t widely held by Quebecers, he noted.
As with long-term-care, some critical-illness insurance offers a return-of- premiums option at the end of the contract.
Life insurance is another product people sometimes ignore, to their detriment.
Archer said that, while it may be tempting for people over 50 to cancel life- insurance policies because they feel their families are no longer as vulnerable financially and they could use the cash, he rarely recommends it.
“If you stop, it can be very difficult to put in place again. And it can really provide a wonderful windfall for the next generation, or the charity of your choice,” Archer said.
If the expense is becoming an issue, and the children are beneficiaries, they might be willing to take over paying the annual premiums in order to collect the eventual benefit, Archer said.
A lump-sum life-insurance payout at death also can help offset any taxes owing, for instance on a cottage that’s been in the family for years.
“Life insurance is pretty much the only thing left that is not taxable,” Johnson said. “People still think of it as burial insurance, but you can use it as a tool to counter estate or capital-gains taxes. You can insure an annuity. You can use it in a lot of creative ways.”
|
|
All the latest news from
industry experts
with host and CIIC
President Alphonso Franco! |
|
|
Critical Illness Insurance News |
The Critical Illness Insurance Centre is pleased to announce that the second module for the Registered Critical Insurance Specialist™ designation is now available.
A goldmine of information and insight for industry professionals, this collection of expert knowledge and strategies touches on a variety of critical insurance areas, including: practice management; sales and marketing; and guidance on how to answer objections while developing a personally unique, proficient and powerful process for presenting and selling the product.
First stop is on April 14, 2010 in Vancouver at the Vancouver Convention Centre. Early bird registration ends soon – get your form by 
