There are two components with any wealth management strategy; growing your assets and protecting them. Many financial advisors focus on the growth side while ignoring the protection side. But what good is accumulating wealth if you cannot protect it?
Protection can be done by:
Investment strategy changes- adjust your holdings, diversify and reduce volatility.
Insurance:
We’ll focus on the latter; using critical illness insurance as a key component of your wealth management strategy. First, we’ll start with:
What is it?
Critical illness insurance pays you a lump sum benefit in the event of a critical illness. The benefit is used to replace lost income, cover expenses that are not covered with health insurance, and anything else as you see fit.
It also works as a life insurance policy, where the benefit goes to your family in the event of death to be used for final expenses among other things.
What it Covers?
A lump sum benefit is paid to you, upon a diagnosis of a critical illness. This includes Heart Attack, Stroke, Cancer, Heart Disease & Respiratory diseases.
However, there are more conditions which trigger the payout; permanent disability, severe trauma, coma, impairment of daily living, organ failure and transplant, loss of vision and third degree burns.
To qualify, the illness must meet a minimum severity criteria.
By the Numbers
People are living longer now than ever before, with the global average life expectancy being 72 years old in 2019. Critical illnesses are also more survivable than ever before with modern medicine.
Combined, the chances of getting one or multiple critical illnesses within a lifetime are very high.
In a 2017 Global Mortality report, 73% of global deaths were caused by non-communicable diseases such as cancers, cardiovascular diseases, respiratory diseases and diabetes. Heart Disease and Cancer alone accounted for 49% of all global deaths.
Next was non-communicable diseases at 19% and then injuries at 8%.
4 Questions to Ask Yourself:
In the event of a critical illness:
There are immediate medical bills, which should be covered by your health insurance. There’s also ongoing care, therapy, and many other ancillary expenses that arise following a critical illness.
You may be entitled to a full or partial salary for a period of time. Your contract will have an incapacity clause which outlines what would happen if you’re unable to work.
How would you replace that lost income if it was 3 months, 6 months, 1 year or worst case, indefinitely.
If you have insurance through your employer, then if you lose your job, then so too goes your health insurance.
You usually cannot keep your policy if you leave a company. If you apply with a new provider, they will exclude any serious pre-existing conditions.
The medical expenses that were previously covered, you’re now on the hook for.
(If you have personal health insurance, then your policy would continue.)
Do you need to dip into your retirement? What about your retirement prospects now? How is your family negatively financially affected? Do you have to downsize your lifestyle? Will there be a legacy to leave?
With something so likely to occur, it’s time to make critical illness insurance part of your wealth management strategy. Unlike with life insurance, this directly affects you, not just your dependents.
Our goal is to provide you with the information you need to make informed decisions. Whether you’re exploring insurance or investments, these articles are designed to help. If you still have questions or are ready to take the next step, our team is here to assist you.
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