Canadians are failing to protect against key health risks that could derail their retirement plans and insurance advisors should be helping them plan for these risks, according to Max Mahardi, business development manager at Ontario Blue Cross, who spoke at the Independent Financial Brokers of Canada Spring Summit in Toronto on Wednesday.
The three biggest factors that can throw a client’s financial situation into upheaval include a disability, a critical illness, or a need for long-term care (LTC), Mahardi said, as “they can devastate [clients] financially.”
The chances of facing these kinds of health events, he added, are far higher than most clients realize. Clients between the ages of 30 and 65 have a one in three chance of encountering a disability and a one in 2.4 chance of getting a critical illness, he said. Clients over the age of 65 have a one in two chance of requiring LTC.
Despite these high odds, few Canadians are planning for these key health risks and their damaging financial impacts, Mahardi said.
“Most of our clients tend to put their heads in the sand and try to ignore what is basically the big reality of what’s coming,” he said. “Very few people that do estate planning, from what we’ve found, have an active living benefits component in there.”
Living benefits, Mahardi said, should play a key role in clients’ estate plans and retirement plans. Without this kind of protection, he said, a disability or a stint in an LTC facility could drain a client’s savings and unravel their retirement plans.
“This will deplete [their savings] very, very quickly,” he said. “You do want to protect your clients’ savings.”
In particular, Mahardi said disability insurance (DI), critical illness insurance (CI) and LTC insurance can help clients protect against these risks.
Although many clients have DI coverage through their workplace, he said the coverage offered under such group plans is often not as comprehensive as what clients need. Furthermore, more than five million people in Ontario are not covered under any DI plan, presenting an opportunity for advisors to help protect against this risk.
With respect to LTC insurance, Mahardi said advisors need to do a better job of educating clients on the risks. He said many Canadians incorrectly assume that the government will cover all of the costs associated with this kind of care. He pointed to statistics showing that two-thirds of Canadians over the age of 60 don’t have a financial plan to cover the cost of LTC.
By the time Canadians realize how expensive such care can be, he said, many can no longer qualify for LTC insurance coverage due to health reasons. If they can qualify, many can’t afford the coverage.
“When do people start to realize the need? When it’s too late,” Mahardi said, adding that advisors should be discussing this risk with clients early in the retirement planning process.
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