Today's economy

Understanding health insurance

By Kevin Press,

Comments (3)

My post, Four dramatic ways retirement has changed since ’08 highlighted a couple of important retirement trends developing across Canada right now: delayed and phased retirement. It won’t surprise readers of this blog to learn that there are sound economic reasons for working past 65. But what’s sometimes forgotten is the need to plan for health-related expenses. The risk of getting sick, and of that illness affecting the income you and your family depend on, rises as you get older.

Image of a mature woman in a conversation with her doctor.It’s a message too few Canadians have absorbed.

Look at these numbers from the 2011 edition of the Sun Life Canadian Health Index. Despite the prevalence of serious health issues like cancer, heart disease and diabetes, fewer than one in five Canadians evaluate or re-evaluate their finances after they or someone close to them has a major health event.

In fact, only a small number of Canadians are preparing financially for a serious illness. Less than one-third (31%) are either prepared or are preparing for health costs now. And just 34% are saving for health costs in retirement. (These results are based on the percentage of respondents who rated their agreement with each statement at 75 or higher out of 100.)

Protect yourself and your family. Two recommendations:

  1. Ask your financial advisor to incorporate your work plan into your financial plan. If you don’t have an advisor, now’s the time to find one. These decisions can be complicated. If you’re rewriting your career plan because of what’s happened in capital markets since 2008, then you have even more reason to seek professional advice.
  2. Learn everything you can about insurance. Personal health insurance covers medical and dental expenses not covered by your provincial plan. Critical illness insurance pays you a sum of money if you’re diagnosed with a serious health issue that’s covered by your policy (provided the waiting period required by your policy has passed). Long-term care insurance covers healthcare costs over an extended period of time. Your expenses will be reimbursed or you will receive an income benefit during the period you require care. Disability insurance pays out if you are under age 65 and can’t continue working due to an injury or illness. (I don’t mean the Sun Life links here to be a sales pitch; these products are available broadly.)

One additional note: Canadians often ask why this insurance is necessary given The Canada Health Act’s commitment to universality and comprehensiveness. The Act is designed to cover “medically necessary” services such as those provided in a hospital. That leaves a range of health or health-related expenses uncovered.

That’s why health insurance is important, whether you’re planning to remain in the workforce past 65 or not.

Protect your health More ways to protect your health and your finances.

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Tim Landry on

One comment concerning DI. If you have quality individual DI in place and continue working beyond age 65, the DI will continue to protect you. There will be no health questions asked at age 65 – you will just be required to be working at least 30 hours/week. Prices can change – but (since any riders you may have will drop off) I would not worry excessively about that. Any claims occurring prior to age 75 are paid for 2 years. After 75? 1 year. This will allow you to time your maxing of your RRSP’s and other revenue sources

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