Today young and healthy Canadians might want to consider owning critical illness and disability insurance ahead of life insurance. But most 20 and 30 year olds don’t spend a lot of time thinking about a sickness or disability.
If you’re young and healthy and low on savings, it may not be a high priority, especially if you have not started a family. But, having coverage could be an important consideration. The type of coverage to have that makes the most sense might be surprising to most of you.
Traditionally: The first policy that most people buy is affordable term life insurance, as it’s a straightforward affordable solution that pays out a tax free lump sum to a named beneficiary on your premature death. The issue to consider here is, that going forward, younger Canadians are more likely to be diagnosed with and survive a critical illness or suffer a disability than die prematurely.
Putting this in perspective: A 30 year old female non-smoker has only a 5% chance of dying prior to age 65, but a 19% chance of suffering critical illness, while a 30 year old male non-smoker has a 7% chance of dying before 65 and a 27% chance of suffering a critical illness.
The risk with sickness or disability: If you get sick and have to take time off work to recover, you can risk the combined whammy of lower income and higher costs from unexpected medical bills. This can have a significant impact on your finances and your ability to continue living at your accustomed lifestyle. Plus, if your partner has to take time off from work to help with care, driving you to medical facilities for treatment, etc., this could further reduce the household income.
What’s at stake: When starting out at a career you could be making less than when you become established, so if there’s not much wiggle room in your budget. Absorbing any extra expenses if sick or disabled could be devastating. If the paycheques stop, how will you pay the rent, the mortgage, car payments, child care, etc. as the money has to come from somewhere?
Where to start: Today there’s a host of choices out there. It’s best to consider some level of affordable term critical illness coverage. Another option to consider is policies that offer combined coverage at affordable prices. The amount of coverage and choice between term or level cost coverage depends on each individual’s budget and need.
The differences between the plans: Critical illness plans provide a tax free lump sum after diagnosis to spend as one chooses and disability plans provide tax free monthly income replacement until recovered. Some plans can transition to long term care if the need arises.
Find a trusted advisor: With all the choices out there and host of definitions as to what does and does not qualify, sit down with an expert to help find a cost effective plan to fit your budget. The idea being to help take the focus off worrying about your finances and put it on what truly matters – on recovery and getting back to work.
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