Money back insurance

by Michael Jodouin, CFP, CIM
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What would you do if you couldn’t work for a year…or longer?

If your health suddenly changed, you’d want to focus on the things that matter most- taking care of your family and taking charge of your recovery without the added stress of worrying about your finances. Health insurance is available for just that purpose, but you may feel it’s not important because you only need it if you get sick, However, you can choose options that give you back all your premiums if you stay healthy and never make a claim. This strategy can and should be built into the savings portion of your financial and investment plan!

Some Critical Illness insurance policies offer a lump sum benefit payout if you are diagnosed with one of the covered critical illnesses and survive for the period of time specified in the policy. (Usually a period of 30 days from date of diagnosis)

How you spend the money is entirely up to you:

  • Medical expenses
  • Mortgage and debt obligations
  • Daily living expenses
  • Having your spouse take time off work to spend with you and your children
  • Care for your children if you are physically unable to look after them
  • Hire someone to run your business until you recover and pay your staff
  • Taking a trip once you’ve recovered to appreciate and enjoy life!

There are countless ways you can decide on what to do with the funds once they are issued.

Luckily not all of us will be diagnosed with a critical illness. So the best part is, there are options that enable you to get your money back if you never make a claim. 

  • Return of premium on cancellation or expiry benefit (provided you never made a claim for a full payout) and can be as early as fifteen years. Imagine paying off your mortgage with the payout or taking a dream trip.
  • Return of premium death benefit (provided you never made a claim for a full payout)

So what does this mean to a young 40 year old couple with 2 kids?

It can literally mean they jeopardize they’re retirement dreams if they have to use up their RRSP’s prematurely (they pay heavy tax and have limited time for compounded growth), carry debt well into retirement- if they can retire at all and maybe even the education they planned for their kids.

I like to compare this strategy to skydiving, if it costs you $500 to jump out of a plane, ($450 for flight/instructor and $50 for the parachute) would you really benefit from saving the $50???
Michael (Mike) Jodouin, CFP, CIM, FMA
Certified Financial Planner, Canadian Investment Manager, Financial Management Advisor

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