Planning News
Estate Planning, Life Insurance and Financial Services Information
Insurers push health policies
Court decision seen as mareting opportunity
By Jonathan Chevreau
The Supreme court’s decision to end Quebec’s ban on private insurance for basic medical services seems to be viewed as a marketing opportunity by vendors of several new forms of insurance policies.
Unlike life insurance – which might better be termed death insurance – critical illness, disability and long-term care insurance are “living benefits” that insure against various calamities that may afflict the still living.
“The real value I see in critical illness is back-door health insurance, giving Canadians the cash to queue jump for immediate treatment in the U.S. for ailments like cancer, heart disease, etc.,” said one financial advisor posting to a new discussion forum at www.theadvisorforum.ca.
Whether or not other provinces follow Quebec’s lead such products are bound to get more attention as the Baby Boom generation hits retirement.
Ian Shaw, president of Oakvill-based insurance by Design Ltd. Says boomers become more aware of the financial side of old age when confronted by the decline of their parents.
Retirement and nursing homes are good examples of a two-tiered system that already exists. You can get basic government-assisted facilities at affordable prices, but may have to put up with the shared rooms and other inconveniences. Those who are wealthy – or have private insurance policies – can pay upwards of $4,000 a month to get luxury care in private rooms.
Long-term care insurance (LTCI) or critical illness insurance (CII) both provide flexibility, says Jonathan Sceeles, a financial planner with Edward Jones. CII is “not limited to what you can get for free. If you have a life threatening illness, you can seek options. LTCI is much the same in that most of us don’t necessarily want to be at the whim of the public system if we ever incur difficulties later in life.”
The insurance industry plays on the concept of “dignity of care.” This may mean private rooms or having enough to pay nurses for home care.
Such insurance is a long-term hedge against the public system deteriorating or not being as widely available in the future, Sceeles says. But he doesn’t think the system will actually fall apart. As with most insurance, those purchasing it hope they won’t have to collect.
Ian Shaw remains a believer in preserving the public universal health care system; he’s selective about recommending extra insurance.
He’s skeptical about LTCI, since statistics show most people qualifying for LTC need it less then five years. Those who have made adequate provisions for retirement should be able to handle a few years of long-term care, Shaw says.
LTCI has not sold well because people still believe in the public system. Also, as is often the case with other forms of insurance, it’s expensive to get coverage once you’re at the point you many need it – most firms don’t sell LTCI to those over 80 and it gets prohibitively costly in the years leading up to the cut-off age.
Once Boomers experience the cost of arranging care for parents, they may decide to get LTCI themselves while premiums are lower. The tradeoff is they may end up paying them a long time before collecting.
Shaw sees a greater need to insure against critical illness. CII premiums have soared the last few years because clients have begun to collect on policies. Insurers are also getting fussier about whom they will insure. If your family has a history of heart failure or other common conditions odds are you won’t qualify for coverage.
CII policies insure against 30 calamities, but Shaw recommends restricted policies covering only the big three of heart attack, cancer and stroke.
That’s where most claims come from, but premiums for these stripped-down policies are 25% lower than the all-encompassing ones.
Disability insurance has long been viewed as an essential form of income replacement for self-employed professionals, including advisors at the forum mentioned at the outset. They view DI as “mandatory” and warn group DI plans for employees may not be sufficient. But few have bought CII for themselves, let alone their clients.
Brought to you by Industrial Alliance Insurance and Financial Services Ltd. http://www.iaplife.com/