This is the second segment in a look at insurance from an investing perspective.
Various kinds of health and care insurance are of growing investor importance. Disability and critical illness insurance can be of real value to investors building a savings or investment portfolio and who need some protection from premature withdrawal of funds as a result of a prolonged illness or disability.
The real value of a disability or critical illness policy (and assessing if the premiums are worth the coverage) depends on a clear understanding and knowledge of exactly what your coverage is and the claims qualifications and conditions. For instance, it is important to know how the policy defines disability. The insurance can initially define a disability as a person’s inability to do work for which they are trained and qualified. But there is usually a time limit. After two years, the insurance coverage may be limited to your inability to perform any kind of work at all. The reason for the disability — accident or illness — may also be specifically defined in the policy. The cost of a disability policy also depends on the wait period — up to 180 days — before the first disability cheque arrives, and for how long the benefit can be expected to last.
A critical illness policy defines very specifically what illnesses or diseases are covered by the policy and the lump sum you will receive. Payment is made usually within 30 days of a claim’s acceptance after a physician confirms the diagnosis. From an investor’s point of view, critical illness insurance can have distinct advantages. The prompt, one-time payment has no restrictions on how it’s used. It could pay debts, take items off the “bucket list”, be invested or used to finance medical treatment. Some critical illness policies will return paid premiums if the contract is surrendered without a claim.
Long-term care insurance is another protection option. It covers the cost of in-home or institutional care for the insured and protects against the financial hardship of maintaining a loved one in an assisted-care facility for a long period of time. The value of this type of insurance depends on the details of the policy and on the circumstances of individual investors.
Insurance can be an important part of any investment strategy, especially if it means you’re able to sleep better at night. Investors need to be perfectly clear on how their insurance protects them, and the conditions and terms under which they can expect to make a successful claim. The amount of the insurance benefit is determined by what you and your family need to protect both present and future assets. If wealth management and asset protection are becoming part of your investment thinking, then your financial advisor can arrange a meeting with an estate planning and insurance specialist who can help you focus on insurance products that prepare and protect you and your family for the future.
Judy Poole is a financial advisor with Raymond James, and has spent the last 39 years involved in the financial industry. You can reach her at judy.poole@raymondjames.ca. This article is provided as a general source of information and should not be considered personal investment advice. The views expressed are those of the author and not necessarily those of Raymond James Ltd. Securities offered through Raymond James Ltd., member – Canadian Investor Protection Fund. Financial planning and insurance offered through Raymond James Financial Planning Ltd., not a member – Canadian Investor Protection Fund.
