03/05/2014 12:18 EST | Updated 05/05/2014 05:59 EDT

Illness Can Strike at Any Time -- Insure Your Savings

The flurry to meet the March 3 RRSP deadline has come and gone for another year and many people are heaving a sigh of relief that they were able to scrap together enough money to contribute this year.

After a long career in the insurance industry, there is one thing I have always found very puzzling. People often take planning for retirement, which can be years out into the future, more seriously than planning to protect the key thing that drives one's ability to contribute to RRSPs. You are the machine that drives your earning potential yet, unfortunately, it is often the one asset that is grossly unprotected and often the most neglected.

Medical advances are helping more and more of us to be survivors of cancers, heart attacks, strokes, etc., but this can necessitate financial support to maintain ones standard of living. Here are some statistics you might not be aware of:

  • 1 in 4 Canadians will develop heart disease

  • 1 in 9 men will develop prostate cancer

  • 1 in 12 men and 1 in 17 women will develop lung cancer

  • 1 in 8.8 women will develop breast cancer during their lifetime

  • 70,000 Canadians suffer a heart attack each year

  • 40,000-50,000 Canadians have a stroke each year

If you suffered a critical illness and if money were no object, I am sure all of us would spend every last dime we had to recover and get on with our lives. Sadly, most of us are not in such a position. Therefore, where would one get the money if there were no bottomless money pouch available? Here are some different ways to fund your recovery in the event of a critical illness.

  • Dip into savings -- most people have less than six months of income in an emergency fund let alone enough saved up to cover a long-term illness.

  • Get a loan from the bank -- I do not know of many banks that would be eager to lend someone money if they are currently out of work.

  • Borrow from family -- pride will usually not allow someone to become a financial burden to those close to them.

  • Sell your home -- you still need a place to live, selling could take time and/or drastically reduce the value of your house because you cannot wait for the best price. In addition, do you really want to deal with a move when someone is critically ill?

  • Borrow from your RRSP -- this usually has a long term affect on retirement savings. Not only are you using a fully taxable dollar when you withdraw it from an RRSP, you also lose the potential growth through compounding which is a key factor in building your wealth for retirement.

  • Critical illness insurance -- when this is set up properly it will pay you out a tax-free amount of money.

Facing a critical illness can affect anyone at any age or any time. Critical illness insurance is a unique product, which is designed for the living. You may well survive a critical illness, but there will certainly be a financial loss that you may never fully recover from. Here are some ways you can use critical illness insurance to fill a financial void.

  • Leave of Absence for you or your spouse

  • Child Care costs

  • Domestic help

  • Costs of medication that the provincial system might not provide

  • Alternative treatment which can be costly but effective

  • Timely treatment outside of Canada

  • Time away from work to properly recover

  • Education for you, your spouse or children

  • Nursing Home/Private Nursing Care costs

  • Make changes to your home or vehicle if required

  • Repayment of your debt

  • Ability to change jobs if you so choose

  • A recovery vacation with loved ones

  • Open your own business

If you are currently a business owner critical illness insurance can provide much-needed funds to:

  • Cover business expenses

  • Shareholder Buy-Out

  • Key Person Coverage

  • Corporate Debt Repayment

  • Provide cash for family members to come into business

Finding out that you or someone you love has become critically ill can turn your life upside down. It can affect you, your spouse, family and business partner emotionally, physically and financially. Help protect yourself, your family and your business from unnecessary financial hardship by speaking with a professional advisor about adding critical illness insurance to your financial portfolio while you are thinking about making your RRSP contribution this year. Educate yourself about the real-life costs of having a critical illness. You will be thankful you did if anything unforeseen comes your way.

To learn more tips and strategies to help you take control of your family's financial future please visit Jane Blaufus to order my book, WITH THE [STROKE] OF A PEN®, Claim your life. Follow me on Twitter and join the Claim Your Life Community on Facebook.


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