Welcome to our presentation Bridge the gap between your health and finances. Life can throw unexpected challenges at you and your family. Today, we'll explore health protection options that can help you handle potential disruptions to your health and financial life.
Wellness is about more than just money. It includes your physical, mental, and social health, which all work together to make your life better. All these parts of wellness are connected. When you're stressed about money or other things, it can lead to physical health problems like high blood pressure or diabetes. It can also affect your mental health. By taking care of all aspects of your wellness, you can live longer and enjoy life more. This is true no matter how old you are. Making wellness a priority in your life can help you have a more satisfying and energetic life, letting you make the most of every day.
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A Ven diagram showing Wellness at the centre and Financial, Physical and Mental as the overlapping circles <End slide>
While many of us think of our physical health and can easily understand how our behaviours can both positively and negatively affect it, it may not be as obvious how important factoring physical health into financial planning can be.
Almost half of Canadians have experienced a health event which affected their personal finances. One in three Canadians are experiencing mental health challenges related to financial stress. And 7 in 10 Canadians do not retire as planned, with the number one reason for that being personal health.
Financial stress in Canada has reached a tipping point. With rising inflation, basic needs becoming increasingly unaffordable, and overarching economic instability, it’s no wonder why.
FP Canada’s 2024 Financial Stress Index reveals that personal finances, at 44%, is a top stressor for Canadians.
The survey also found that:
- Anxiety, depression, and mental health challenges continue to be the leading negative impacts on the lives of Canadians due to financial stress, affecting 38% of respondents, which is up from 36% the year prior.
- And nearly half of respondents reported losing sleep because of financial worries, a stat that was virtually unchanged from the year prior.
Despite Canadians continuing to grapple with financial worries, there is a growing sense of optimism as they prioritize financial well-being with a renewed focus on financial self-care.
Despite experiencing higher stress levels, 50% did express increased optimism about their financial futures compared to 47% in 2023, and 91% are proactively embracing strategies to reduce financial stress and combat growing economic pressures.
Whether our need for health coverage is driven by stress, or for another reason, government health insurance in Canada is unlikely to cover all the health-care costs we’re likely to run into at some point in life.
A variety of solutions have been developed to help us protect income and savings from health costs.
Each type of health coverage offers different protection for different stages of life. During our working years, it’s important to focus on protecting income. As you move toward retirement, it becomes more important to protect the financial resources that you’ve worked hard to build.
In the next few slides, we’ll discuss some of the important coverages and considerations for personal health, Disability, Critical illness and Long-term care insurance.
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A chart that has Working years and Retirement years along the top and a timeline from age 25 to 95 along the bottom. Disability insurance can be used for income protection during your working years. Long term care insurance can be used for protecting assets in your retirement years. Critical illness and personal health insurance show on the chart across both working and retirement years. <End slide>
Provincial and territorial health plans in Canada provide coverage for certain health expenses, but they generally won’t pay for all your medical bills.
Personal health insurance can help cover that gap. Personal health insurance (also known as private health insurance) is coverage that can help Canadian residents cover the cost of health-related expenses, including:
- Prescription drugs,
- Dental care,
- Vision care,
- Physiotherapy, and
- Medical equipment.
Personal health insurance can be helpful for many people. It can come in handy if:
- You’re self-employed or you don’t have benefits through your workplace plan,
- You’re retired or nearing retirement, or
- You don’t want to pay out-of-pocket for various health expenses, which aren’t fully covered (or covered at all) by the government or your employer’s workplace plan
If you’re leaving an employer who provides medical or dental coverage through a group plan, you can stay with Sun Life and easily replace this coverage within 60 days of when it ends with a Health Coverage Choice plan. There’s no medical exam or health questions when you apply, and a Sun Life representative can help you choose the Health Coverage Choice plan that fits your budget and needs.
Disability insurance is important during your working years, because it replaces a portion of your income if you become disabled and are unable to work. Expenses such as a mortgage or rent, child care, and other costs of living need to be paid regardless if you’re able to work or not. And depending on why you’re unable to do your job, you may also require extra assistance for housekeeping or home maintenance, and that often comes with a cost.
It can be easy to think “It won’t happen to me,” but a look at the numbers shows that illness and disability do happen, and frequently.
Studies show that:
- 2 in 5 Canadians will develop cancer in their lifetimes.
- The average lifetime financial cost of having a disability in Canada is $640,000.
- 1 in 3 people will be disabled for 90 days or more at least once before they reach age 65, and
- In 2022, almost 30% of Canadians had a disability that limited their daily life.
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Footnote:
*Estimated. Canada.ca Canadian cancer statistics, 2021
**Study by the Canadian Disability Alliance, 2013
***On average, Canadian Life and Health Insurance Association, 2016
**** Statistics Canada, Canadian Survey on Disability, 2017-2022. <End slide>
Disability insurance protects against income loss due to disability. Group plans often have non-evidence maximums, which is the highest coverage available without medical proof, and maximum benefit amounts.
Long-term disability benefits typically replace around 55-65% of pre-disability income, but there's usually a cap on monthly benefits. This means high-income earners may receive less than the stated percentage.
Benefits usually cover inability to perform your own occupation for two years, then may require inability to do any occupation for benefits to continue. This will be outlined by the plan’s definition of disability.
Other income sources may reduce disability benefits. This prevents us from earning more while disabled than when working.
It's crucial to understand your policy's specific definition of disability and how other income might affect your benefits. We encourage you to carefully review your plan details to ensure adequate coverage for your needs.
With medical advances helping more people survive critical illnesses like cancer, stroke and heart disease, it’s important to understand that recovery and maintaining lifestyle can come with significant financial costs.
Critical ailments not only affect you physically; they can also quickly deplete or use a good portion of your savings.
During treatment, regular lifestyle expenses will still need to be paid and there are often extra costs for assistance with child care, housekeeping, prepared meals, as well as commuting and parking costs for medical appointments. Some medical costs are also not fully covered by Government healthcare and finding a way to cover these extra expenses can be challenging for many.
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4 bullets: (1) Incidence and survival rates, (2) Maintaining lifestyle, (3) Diminishing government benefits, and (4) Protection of retirement funds. <End slide>
Critical illness insurance helps to protect your finances against the significant financial impact of a serious illness. If you become sick with an illness covered by your policy, you receive a lump sum cash payment which you can use to cover such things as:
- Lost income
- Extra child-care costs
- Home assistance or renovation
- Special equipment
- Alternative therapies
- Private health care and/or
- Extra travel and living expenses.
You can also use it to repay debt, travel or any other purpose. You decide how to spend the money.
Due in part to the medical advances we’ve already touched on, Canadians are living longer than previous generations. But we aren’t planning for it. Estimates indicate that people underestimate the number of years they are going to live by five years. Imagine five years without income. Now layer that with the fact that it’s likely to occur at a time of additional health care and housing costs.
According to our 2023 Sun Life Designed for Savings study, it was found that Canada’s average retirement age in 2022 was 64.6 years. If we think of that in context of life expectancy, we clearly need to be saving to cover a long time in retirement.
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4 groups of two (1 male, 1 female in each group) showing the probability at age 65 of living to the following ages:
Group 1 shows female has a 76% probability of living to age 80. Male has a 65% probability.
Group 2 shows female has a 59% probability of living to age 85. Male has a 45% probability.
Group 3 shows female has a 38% probability of living to age 90. Male has a 24% probability.
Group 4 shows female has a 17% probability of living to age 95. Male has a 9% probability. <End slide>
But just because we’re living longer, doesn’t mean we’re aging in good health. Life expectancy, from birth, for a woman in Canada is 83.6 years. But, on average, only 72 of those are good health years. Whether from sickness, disability, or immobility, the average Canadian female will live 11 and a half years in poor health.
It’s similar for Canadian men. The average will live 9 years past the time when they’re healthy.
What does this tell us? Planning is vital and it’s especially important to plan ahead while you and your loved ones are still healthy.
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A bar chart showing the gap between life expectancy and health-adjusted life expectancy. It is 11.5 years for women and 9.3 years for men. <End slide>
Typically, we move through stages of care as we age. The progression through these stages is different for everyone but, in time, most of us can expect our health needs and costs to grow. For many, this means we’ll eventually become dependent on a friend, family member or professional caregiver for help.
Let’s review in a little more detail the 5 stages of care in retirement:
Stage 1 is Independence. Seniors are self-reliant and take care of themselves without help, managing their own lives and health.
Stage 2 is Interdependence. Seniors start accepting help from family for tasks like cooking and banking during this stage. They don't want formal care yet but might consider places that offer basic services.
In Stage 3, the Supportive Living phase, seniors need more help with daily tasks and personal care. They might need assistance to dress, bathe, and groom. Families look into hiring helpers and may consider moving seniors to assisted living facilities.
Stage 4 is Crisis Management. In this phase families struggle to meet seniors' growing health and care needs. They face many emergencies and find home care hard to manage or too costly. Professional help is needed at this point.
Stage 5 is the Dependence phase where seniors must move to long-term care homes. They need constant skilled nursing and extensive personal care. In this stage the family focus shifts to giving emotional support and making sure their loved ones get proper care.
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A chart showing the 5 stages outlined above and how lifestyle and growth needs
are likely to decrease with age, while protection and health needs are likely to increase with age. <End slide>
Long-term care insurance is a type of insurance that provides benefits to policyholders when they become dependent on others for care due to deteriorated mental or physical abilities.
It covers situations where a person needs constant supervision due to mental decline, substantial physical assistance with at least two out of six daily living activities (like dressing or eating) or stand-by assistance for tasks like bathing or transferring.
The benefits can be received in two main ways:
(1) As reimbursement for eligible care expenses up to a maximum amount, or
(2) As a pre-determined monthly payment.
The insurance is designed to help cover the costs of long-term care services and helps provide financial support for extended care needs that may arise due to aging, chronic illness, or disabilities.
Life can take sudden, unexpected turns that can significantly impact our lives.
As the saying goes, “Most people do not plan to fail, they just fail to plan.”
Failing to plan can lead to:
- Increased stress,
- Being unprepared for a major health event and
- Financial impacts such as depletion of savings that can lead to a delay in retirement or increased debt.
Having a plan and reviewing it periodically, can help protect you and your loved ones, when the unexpected happens.
We’ll close the recording with some crucial aspects to consider when planning how to bridge the gap between your health and your finances.
First, consider your medical information. You may wish to share any health conditions and preferences for care with your loved ones.
Next, think about Wills and Powers of Attorney, known as Mandates in Quebec. These documents ensure your wishes are followed and someone you trust can make decisions for you if needed.
Don't forget about beneficiaries. Naming a beneficiary let’s you decide who’ll receive your assets. We encourage you to review this information regularly and update as needed.
Lastly, planning your cash flow will help you figure out how you'll manage your money and expenses in the long run.
These topics can be complex, so don't hesitate to work with financial and legal experts. They can explain your options and help you make the best choices for your future.
Discussing these matters with your family now can bring peace of mind later. Why not start the conversation today!
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Thank you! The information provided is of a general nature and cannot be construed as personal financial or legal advice. Neither Sun Life nor its affiliates guarantee the accuracy or completeness of any such information. Don’t act on this information without obtaining advice from a professional, such as a lawyer, notary, tax professional, or financial advisor (registered as Financial Security Advisors in Quebec), as may be applicable to your individual situation.
Workplace benefits, savings and investments are provided by Sun Life Assurance Company of Canada, a member of the Sun Life group of companies. <End slide>