In this, the third and final installment of Future Finances, I continue my conversation with Shelley, who is a financial planner with Investor’s Group. This post deals with personal insurance.
TAoTB: I’m self-employed. What kind of personal insurance should I consider having?
S: There are four: Disability Coverage, which covers your income in case you get sick, Critical Illness, which covers you in case you get a debilitating illness, Long Term Care Insurance, and Life Insurance.
TAoTB: But I work from home. Why do I need disability coverage?
S: Because more than 65% of people will become disabled for up to 3 years in their working lives.There are many types of disability – from a slip and fall that breaks a bone to the diagnosis of a critical illness. There are just as many types of insurance to cover these instances.
Disability insurance can cover your expenses for a period of time depending on what kind of insurance coverage you have. If you don’t pay into EI or WCB, you can’t collect those. Let me share my story with you:
A number of years ago I was working as the Business Manager for Theatre M.O.M. A few months after starting with MOM, I noticed my hands/wrists would feel quite sore and fatigued at the end of the day. One day, I was emptying my dishwasher and dropped a mug. I didn’t have enough tensile strength to hold onto a mug. This was a problem. I went to my doctor that afternoon and she told me I needed to stop working immediately and begin intensive physiotherapy for both Tendinitis and Carpal Tunnel Syndrome. EEK! I hadn’t planned for this! I didn’t have much backup!
I called WCB and began the claims process – and it was a long one – ultimately ending in the denial of my claim nearly 1 ½ years later.
So what happened? After 6 months of painful therapy, completely depleting my emergency fund and borrowing money from family for food, rent and utilities, I had to go back to work prematurely and against my Physiotherapist’s recommendations because we had to eat!
So… do I have disability insurance now? Yes. My point is that this can happen to anyone, and the safeties that we think we have may not necessarily be there for us.
TAoTB: What about Critical Illness? I’m young, and I don’t like to think about the possibility of getting a serious or life-threatening disease.
S: Yeah, I totally get that. But it’s not unknown, and what happens if it does? Your family could be devastated if you were diagnosed with Cancer, or had a heart attack. What Critical Illness Insurance does, in essence, is create an immediate cushion for you and your family, should you be diagnosed with one of these terrifying illnesses. The fact is that your chances of surviving are very good. What CI insurance does is offer you options – options for treatment, options for staying home during your recovery, options for care.
TAoTB: Okay, what’s Long Term Care Insurance?
S: It’s actually a bit of a misnomer. It is an essential extension for your disability Insurance. Should you become disabled for a period of time and you are unable to do 2 of the 6 essential daily activities (bathing, dressing, feeding, transferring (for example, getting out of bed), toileting, cognitive function) without aid, who’s going to look after you? Probably a friend or family member, yes? How will they earn money while helping you? LTC is designed to pay you a pre-determined amount to help with your care – whether it’s $250/wk or $2,000/wk, you can plan for your own care without relying on friends and family.
TAoTB: I should probably have life insurance, huh?
S: Not everyone may need it. Read the questions below:
1. Do you have children/family?
2. Do you have assets that will have value when you die?
3. Do you care about whether or not your beneficiary/next of kin will be responsible to pay your estate taxes on death?
4. Do you want to leave a bequest for a charitable foundation or other cause?
5. Do you want to leave an estate for your friends/family/loved ones?
If you answered “yes” to any of these questions, then the answer to Life Insurance is also “Yes”. There are a variety of coverages that are available, but it is impossible to give you an adequate quotation unless I know your precise situation and requirements. But remember – the younger you are, the less you will pay for ALL types of insurance.
TAoTB: But isn’t insurance super expensive?
S: There is no precise answer to that, without example. I’m going to counter with this: How much do you pay to insure your car? …your house? …your possessions? Well, the fact of the matter is that you will pay less to insure yourself. Are you worth more than your car? …your house? …your “stuff”? At the end of the day, what will matter more?
TAoTB: Okay. But it still makes me a bit crazy that I will spend money on something I may never use.
S: Cost/benefit analysis shows definitively that insurances are worth it. Also, there are products that are available for purchase with CI and LTC that give you a premium-refund option, should you not utilize these services.
In short…? Insure yourself.
TAoTB: Thanks, Shelley!