The holidays have come and gone, the bills have arrived and many are starting to look at how they are going to pay those bills along with scraping together enough money to contribute to their retirement savings plan this year.

After a long career in the insurance industry, there is one thing I have always found very puzzling: people often take planning for retirement (which can be years out into the future) more seriously than planning to protect the key thing that drives their ability to contribute to RRSP’s or 401(k). You are the machine that drives your earning potential, yet unfortunately, it is often the one asset that is grossly unprotected and often the most neglected.

Medical advances are helping more and more of us to be survivors of cancers, heart attacks, strokes, etc., but this can necessitate financial support to maintain a certain standard of living. If you suffered a critical illness and if money were no object, I am sure all of us would spend every last dime we had to recover and get on with our lives. Sadly, most of us are not in such a position. If it were you, where would you get the money if there were no money tree in your backyard or bottomless vault in your basement? If you’re not lucky enough to have one of those, here are some alternative funding methods for your recovery:

  • Dip into savings – most people have less than six months of income in an emergency fund let alone enough saved up to cover a long-term illness.
  • Get a loan from the bank – I do not know of many banks that would be eager to lend someone money if they are currently out of work.
  • Borrow from family – pride will usually not allow someone to become a financial burden to those close to them.
  • Sell your home – you still need a place to live, selling could take time and/or drastically reduce the value of your house because you cannot wait for the best price. In addition, do you really want to deal with a move when someone is critically ill?
  • Borrow from your RRSP or 401(k) – this usually has a long term affect on retirement savings. When you withdraw it, you lose the potential growth through compounding which is a key factor in building your wealth for retirement.
  • Purchase critical illness insurance.

Facing a critical illness can affect anyone at any age or any time. Critical illness insurance is a unique product, which is designed for the living and can give you the financial safety net you need so that you don’t use your savings and assets. You may very well survive a critical illness, but there will certainly be a financial loss that you may never fully recover from. Here are some ways you can use critical illness insurance to fill a financial void:

  • Leave of Absence for you or your spouse
  • Child Care costs
  • Domestic help
  • Costs of medication that might not be covered
  • Alternative treatment which can be costly but effective
  • Timely treatment outside of Canada or the US
  • Time away from work to properly recover
  • Education for you, your spouse or children
  • Nursing Home/Private Nursing Care costs
  • Make changes to your home or vehicle if required
  • Repayment of your debt
  • Ability to change jobs if you so choose
  • A recovery vacation with loved ones
  • Open your own business

If you are currently a business owner critical illness insurance can provide much-needed funds for:

  • Covering business expenses
  • Shareholder Buy-Out
  • Key Person Coverage
  • Corporate Debt Repayment
  • Provide cash for family members to come into business

Finding out that you or someone you love has become critically ill can turn your life upside down. It can affect you, your spouse, family and business partner emotionally, physically and financially. Help protect yourself, your family and your business from unnecessary financial hardship by speaking with a professional advisor about adding critical illness insurance to your financial portfolio while you are making your RRSP or 401(k) contribution this year. Educate yourself about the real-life costs of having a critical illness. You will be thankful you did if anything unforeseen comes your way.