Latest / The Chiro Money Show / 023 | Is Critical Illness Insurance Critical?
Transcript
- Chris: Welcome back to the Chiro Money Show, where we're helping chiropractors make better financial decisions so they can build stability in their finances and a lifestyle that they love. We're your hosts Chris Scheele and Scott Campbell of Align Wealth. Welcome back. Scott: got a new nickname this week for us Chris we have a collection we have a collection growing of nicknames for the two of us the latest is the money boys with a Z of course money boys Chris: Yeah, love it. Let's hear it. Yep. Yep. The Money Boyz Yeah. You know what? I was actually we had one. It didn't stick though, but remember we were called the Finance Bros? Scott: finance bros. Yes I forgot about that one. Yep. Chris: We kind of kiboshed that one because we're not finance bros. Scott: not your prototypical of what we would think of a finance bro for sure. And we're not really bros. Although we do Hyrox That kind of makes us bros a little bit. Yikes ⁓ we've grown a collection. What else do we got for nicknames? ⁓ Chris: No, no, no, no, no, Yikes. We better be careful. Yeah. Yeah, then one of the recent ones, crowd favorite I'm sure, is the two hot girls. Scott: What's the context there? Chris: Let's see the context. yeah, exactly. How do we say this? So client has an existing advisor and he's that's my wife, you know, been with them for a long term, ⁓ but now I these two hot girls on the side here that are doing all this, all this work for me and ⁓ kind of, kind been hiding it from the, from the, the wife a little bit. Scott: We need the backstory. Yeah. avoiding an awkward conversation, and pending divorce. Chris: Yeah, yeah, yeah, divorce been engaged. ⁓ Scott: That's been engaged. and we got the dream team. It's also another thing the dream team. Yeah. Yeah ⁓ we need to hear from you you guys the audience. What's what's the what's the nickname that needs to stick here? Chris: The dream team classic. Yeah. Yeah pretty good Yeah, do we have a vote? Let us know your thoughts. Scott: Well, in other news, the money boys are it back on the Hyrox front. Chris: Yep, it's official. Signed up as a team again in in May. ⁓ opened up additional dates. We were already booked for our individual races, but just too good to pass up. Had to have another chance at the doubles, ⁓ Scott: Yeah. Yeah. Yeah. That's right. For our new listeners, we up the Hyrox in Toronto when we were out at the AFC conference in October last year. Chris and I took a podium, number one spot. That was pretty exciting. So gotta go for it again. Try and shave down some time. ⁓ Chris: See if we can repeat the win, but ⁓ yeah, go even faster. Scott: I'll keep working on those wall balls. I'll keep working on them. Chris: And if our listeners don't know what Hyrox is, then just probably keep it that way. get involved. ⁓ Scott: Then they're gonna think that we're bros. We don't want that. At least we'd be finance bros. Chris: Yeah, exactly. Just... Yeah. We'll see. Anyway, what are we talking about today, Scott? Scott: Alright. talking about critical illness insurance today. Exciting topic. Favorite topic. Critical illness insurance. And basically the question is like, it, is it actually critical to have in place? Should this be part of your financial plan? Chris: Ooh, my favorite topic. Exciting. Yeah. All right. Mm-hmm. Yep. Yeah. I'm curious to hear your thoughts because I think we might differ on this one and yeah, I mean full disclosure I currently don't have critical illness coverage in place never have I've always kind of written it off as like Whatever that's that's kind of the lowest priority But curious to hear your thoughts on that Scott: Yeah, I'm on the flip side. We have different takes on this and we've heard from a recent listener that we need to have more banter and disagreement on certain topics. Chris and I agree on a lot of things, but maybe not everything. I, on other hand, I've had critical illness insurance in place for both my wife and I since I was like 25 years old. I wouldn't have it any other way. Chris: Right, yeah. Yeah, that's true. Scott: Another topic, yeah, a topic for another day is insurance on children. I even have critical illness insurance on both of our for ⁓ other reasons, but we'll get into those reasons a little on why we have coverage and why it's part of our financial plan today, for sure. Chris: Yep. Yeah. Yeah, yeah, cool. yeah, no, thanks for bringing that up. We did have some feedback. We got to have, ⁓ can't just agree on everything. Hey Scott. ⁓ that's boring. So shout out Matt. Thanks for the feedback. Scott: That's apparently not good fun podcast material. Matt. Chris: Yeah, hopefully this one's better. Yeah. All right. So yeah, here's, here's my take Scott. Like critical illness is there. It's what I understand of it. You get paid out a lump sum if and when you were diagnosed with a qualifying illness under the list of conditions ⁓ your contract. Okay. So most of the time, I mean, it's hard to say, right? Like you get diagnosed with something. Scott: Yeah. Yep. Chris: and it doesn't really impact your life. And on the flip side, you could get diagnosed with something and need a lot of treatment and attention that disrupts life completely. My take been like, you have ⁓ an emergency if you have enough flexibility and continued coming in throughout that, Scott: Yep. Chris: What do need the critical illness for? Scott: Yeah, a few things that would come to mind right away. So let's back up before we get into that. Let's just, just step back and break down what a critical critical illness policy is. So it's a contract you have with an insurance carrier. It's different from a disability insurance policy where you get paid out a monthly benefit if you get hurt or sick and can't work and do your job. You get paid a benefit amount on a monthly basis. Where a critical illness policy, you're applying to be insured for a lump sum. $50,000, $100,000 policy, maybe even upwards of $250,000 or more for coverage to say, if I get diagnosed with one of the covered conditions, usually that's, I think it's around 22 30 listed conditions depending on the carrier obviously the big ones being cancer, heart attack, stroke, they probably make up at least 80 % of claims being made. That if diagnosed and it meets the condition, you get the lump sum, deposit it into your bank account, say it's a hundred grand, and you can do whatever you want with that money. Chris: No restrictions, like it's not like it has to be used for treatment or whatever. It's just, here's the cash, do with it whatever you want. Scott: Exactly. Yep. Chris: What are, can I ask what are some of the things you've heard of people doing with that cash? Scott: I that's the beautiful thing with this type of insurance, at least from my perspective, is that I guess I'll share from my own standpoint. If I were to get critically ill, like if I got hit with cancer tomorrow, a few things would happen. Yeah, I have a well-established emergency fund. I could tap into that, but I don't have a hundred thousand dollar emergency fund. So that would be one thing. Second, I probably wouldn't be working for a period of time. So there might not be necessarily income coming in. Chris: That would suck for me. Scott: that would suck for you, you'd be doing a lot more work for sure. So maybe you should be encouraging me to have this or vice versa. need to have, you need to be insured. If you get sick, I need to hire someone just as good as you are better, right? Here, I'll break it. Like the way I think about this is that in a worst case scenario, I want to have flexibility and options so I can. Chris: Yeah. ⁓ man, that should be too hard. Scott: completely eliminate any potential financial stress or major setback in terms of my long-term goals. I don't want to have to take out a HELOC. I don't want to have to remortgage my house for a large amount of money. I don't want to wipe out my tax-free savings account to go pay for medical bills. I work hard to build my wealth. I feel strongly about shifting that risk to an insurance carrier for what I think is a very nominal cost to say, hey, if I get sick and it's to that degree, I want to have options. want my wife to be able to be with me and support me. it's treatment here locally in Edmonton where I live, or I need to travel elsewhere in Canada or go to the U S or heck go to Germany because I need to get, see some specialists there to get treatment. I want to be like, I got the cash, I'm going, I'm taking care business, I don't want to worry about finances at that point in time. Hopefully, I do consider myself as someone in good health, but shit happens. Usually in those cases, it's those people that can survive a critical illness, right? They get knocked down, but they're the ones who are going to get through treatment. You know, might take them out for a short period of time, but they're going to get back on their ⁓ and get back live in life. I don't want a financial setback. So that's my broad take on it. Chris: Yeah, that's fair. Yeah, I mean, yeah, I don't want to from my retirement assets to live on if I can't work for a few months because I'm getting treatment or have to travel somewhere or whatever. I I ⁓ kind buy that. ⁓ Yeah. Scott: Yep. I guess one thing I'll share too in terms of the reason why I brought the topic up to have a discussion on this today around critical illness insurances. I saw a recent post on Instagram and I see these all the time. someone posting a GoFundMe request to say, here's a story, someone got diagnosed with cancer or whatever the case is, community rallies around asking for donations. And don't get me wrong, those stories, they tug at my heartstrings and I'm not saying GoFundMe is bad. I'm usually one to say, yeah, I'm happy to pitch in and make a donation as well and support that person in a time of need. I'm not discrediting any of that. But I can't help but think of like, ⁓ man, like... how much better it would be for that individual and maybe their family members to say, oh, this person had a critical insurance policy in place. It was costing them four or five, $600 a year. And now they got a hundred K in the bank and they don't necessarily need now to go to the community and ask for financial support in a time of need. So when I see those, like, ah, I just, I feel like that could have been avoided potentially with shifting that risk. Chris: for sure. There's exactly there. is a solution that the world has come up with to do exactly that, to shift that risk from the individual to a company, an insurance company. And it's like you say, in a lot of cases, it's a fairly nominal cost. I mean, on the flip side, say you have a critical illness policy for 20 years, that's 500 to, you know, $800 a year, something like that, like Scott: Yep. Yep. Chris: It's $5,000 to $8,000 for a 10-year period of time. $10,000 to $16,000 if we have that in place for 20 years. Yeah, I guess what's the likelihood of actually being diagnosed with a critical illness? Is there strong probability for most people to warrant that transfer of risk and that cost? Scott: I think so. I don't use stats to, I don't share these stats for the sake of like putting fear in someone, but the stats are what they are. And that is two in five Canadians will be diagnosed with cancer in their lifetime. 45 % of people, that's just cancer, right? I saw a stat here that says about a quarter million new cancer cases projected in Canada in 2024. Like, Chris: It's just cancer. Scott: I'm assuming a lot of these people are healthy individuals. I often hear the rebuttal like, I'm, I'm young, I'm healthy. I take care of myself. I don't know about you, Chris, but I've heard plenty of stories where people it's like, what? That person, she got cancer. was 40 years old. She was a marathon runner. She like, she ate well. Like you would least expect it, right? Chris: Yeah, for sure. Like they still happen. Obviously the probability is probably a little less lower than someone that has, know, whatever of ⁓ ailments you know, stuff that our healthcare system would say is not the best. ⁓ But. Scott: Still happens. Lower. Right. the cost of that insurance is a good reflection of what the probability is, right? Chris: Right. So if I'm young, healthy, active, is my insurance cheap? Or what if I have a family history of illness? Is it more expensive then for me? Or how does that work? Scott: It depends right but generally speaking. Yeah, that's her favorite answer generally speaking yet. you are young and healthy That's the time to get the coverage of plates If you have family history could that impact Insurance underwriting could you get an exclusion from your policy potentially? Could you pay a potentially higher premium? Both the answers are yes. That's a possibility but Chris: Favorite answer. Scott: more reason to potentially get coverage in place when you are young and healthy and can get through underwriting. As you get older, as you have more ailments, maybe other family history, things like that, it can get to a point where you can apply and successfully be approved for a policy or it becomes so expensive or it's like, I'm not ⁓ pay $400 a month for a critical illness policy. Chris: Hmm. Interesting. So would you say critical illness, if we had to rank the different three main insurance types, like I know this probably isn't, probably don't want to say like definitively on this, but if we're looking at just life insurance, disability insurance, critical illness insurance, how would you rank those personally and what would you kind of start with? Scott: I don't know if I could rank them necessarily. I guess to answer the question though, ⁓ of our listeners, as a chiropractor, disability, we've talked about this on previous episodes. That's such an important piece of your financial plan. If you can't work and bring in an income for a period of time, like you are your biggest asset. We won't get into that again, but disabilities, like if you don't have that, you should have got that yesterday. In our opinion, life insurance, that can vary depending on your circumstances. If you're individual, spouse, no kids, maybe don't need life insurance right now. But opposite, no dad, right? Chris: On the flip side, you got a mortgage and you got people that depend on you. You probably need that yesterday as well. So the, is it fair to say that critical illness kind of doesn't take a backseat, but maybe is not at the top of the priority level for people that are considering like maybe someone doesn't, one of our listeners doesn't have any coverage in place. Like probably say address disability and life insurance first and then critical illness next. Scott: for sure. I would agree. I think the important thing that I would say here is that, yeah, let's get the pieces that are what we would say are critical to a good financial plan, especially if you are, you know, have a spouse, dependents, insurance, disability insurance, those are such important pieces to the overall to protect your financial future in our opinion, from a critical illness standpoint. Chris: Yeah. Scott: My perspective is that we as planners at least need to shine a light that potential risk for a client and say, let's have a discussion about this. Maybe that's not a policy that you want to have in place, but let's talk about your, what your concerns are. Do you feel like this is a risk? If something were to happen, what would you want to see happen at that time? You know, maybe if you're someone like for you to like you you tell us Chris, you don't have a policy in place. You've probably thought about this. What do you want to see happen if if worst case scenario you get hit with you get hit with a diagnosis? Knock on wood. What do you want to see happen? Chris: Yeah. Yeah, yeah, like you, I flexibility and options and yeah, if the... Ultimately, yeah, that's what it comes down to. It's like can can we get healthy? How do we? How do we get healthy? What's the best option? Is it going somewhere for a specific treatment or know, is there out-of-pocket cost for ⁓ that health care component ⁓ does it equal ⁓ an extended kind of time with family where you can kind of reflect on the big picture of life and just try to make some memories and and have some important family time and take a bit of a slow down. Scott: Yep. Yep. Here's something that you might not know, Did you know that critical illness insurance was actually essentially kind of developed or the idea was inspired by a doctor and not a financial insurance company saying, ⁓ I have a product that we can start selling and make a profit of. It was actually a doctor, I think in and around the seventies. At that time, essentially this doctor was saying, you know what? Chris: Really? Wow. Scott: Back 20 years ago, maybe in the 50s, if you had a heart attack, the chances of you dying from said heart attack were pretty high. But as medicine has advanced further and further... In these days, a heart attack may not like you, not good to get a heart attack, of course, but people are surviving them at a much higher rate than they were in the 30s, 40s, 50s than they are today. And that doctor said, well, there's also, you know, they're surviving this heart attack or whatever the illness is at a higher rate than they were, but it's also coming with a whole lot of added financial stress. Chris: Yes. Thank Scott: because they don't maybe have the funds to pay for the treatment and the extra costs of, know, maybe they need to fit their home with like a wheelchair ramp, or they need to fly to the Mayo Clinic in the States to get the best treatment, or they just need to spend, you know, three or four weeks in Vancouver and that costs hotels and parking and, you know, family coming in from out of town to support. That's what that doctor was recognizing to say, this is coming with some financial stress. How can we solve that problem? Chris: Do you know if this was a doctor in the States where healthcare is a burden? Cost? Financial cost? Scott: It is. think so. I think so. Don't quote me on that, but I believe it was a doc in the States. Chris: Yeah, not that it can't be in Canada as well, right? Like there can be additional costs beyond, you know, the traditional medical system, but yeah, interesting. Okay, so let me ask some clarifying questions around coverage and stuff like that. What if I have a disability policy and a critical illness policy? How could that work if I'm diagnosed with something that takes me out of work for... Scott: Yep. Chris: a few months. Scott: there is a world where you could potentially claim on both of those policies. Just because you can make a disability claim does not necessarily mean that you can make a critical illness claim and vice versa, depends, right? There are situations where you might be diagnosed with a critical illness but are still able to work but it's gonna come with a financial toll still the expenses but you're not completely disabled with the inability to go be a chiropractor, But there certainly is a world where you might be able to claim on both those policies. And from my standpoint, your disability policy is intended to replace your monthly income and protect that because we're still going to have your typical things that you need to cover your bills, your mortgage, loan payments, et cetera, et cetera, to support you and your family. But you add in the layer of like, away from work and I also got hit with whatever illness I need to go get some treatment for that. Again, from my perspective, I want to have flexibility in options and I'm willing to four or five, $600 a year to say, if I get hit with something major, I want to have to keep my bank account so I can go figure, figure some things out. Chris: fair. about early stage diagnosis as something that like ⁓ you we've caught it early maybe it's not like is is there things in the contracts with these policies where maybe they don't pay out ⁓ or you we should be concerned about like the the wording on these? ⁓ Scott: Yep, obviously due to diligence with whomever advisor you're getting a policy in place, a lot of them are very similar in nature in terms of how they're how they're put together, but you want to understand those terms. Most of the major carriers will have like an early. early diagnosis type of benefit like say it's an early stage of breast cancer for example at stage one it's caught early in some cases those policies might pay out 10 or 15 or 25 percent of the benefit amount and in which case you receive that cash as well do what you need to do with it obviously the the best outcome is that you know you recover and it doesn't progress from there but if it were to progress into a later stage of cancer which is now deemed to be a lot more critical than the rest of the benefit would then released to get your full ⁓ benefit that you're insured for. Chris: And what about, like I know with other policies, like disability, other things like that, there's an option for ownership, like it could be owned by an individual or it could be owned by the corporation. Where does critical illness fall into that and what's the, is there a rule of thumb on that or not? Scott: No rule of thumb. It's a good discussion to have with your financial professional. Like how do you want to see that structured? If you own it personally and pay for a policy with after-tax dollars, you're going to receive your benefit amount that you're insured for tax-free. No taxes being paid on the $100,000 that you might receive, for example. But you could also, if you're incorporated, you could say, I want to have a policy that my corporation pays for. It's a deductible expense to my corporation. And if I were to get sick, maybe it's for a different purpose. Hey, you know, if you're the primary dock in your practice and you get hit with something, maybe you feel good to say, hey, I would like to see, you know, $100,000 or a couple hundred thousand dollars land in the corporate bank account. I need to step away from the practice and deal with whatever I have to deal with right now. I need some cash from the corp to make sure that I can, you know, the practice can keep flowing, know, expenses are covered. I can bring in some support, whatever you need to see happen. Maybe keep paying yourself a salary as well. that's why you maybe want to consider a corporate policy. But again, it depends. It's a personal situation. depending on what your needs are. Chris: Yeah. So ultimately if it's owned by the corporation, that benefit amount is going to the corporation. It could be paid out to you personally, there would be taxation on that. ⁓ it could be there to support the corp and the business. Yeah. Cool. Scott: Exactly. Yep. Exactly. I'll share a quick story. it's personal to me ⁓ and my mom, ⁓ she diagnosed with an stage of breast cancer when she was in her early to mid ⁓ 50s or so. Fortunately for her, she caught it very early. It was at a stage where she did receive the full benefit amount. believe it was $75,000 that she received in cash. So before that, in my mind, if you were diagnosed with an illness and you got your benefit, you typically need that cash for some of the things that we talked about. You want to go get the best treatment possible. You want to, you need to make your home wheelchair accessible. You need to have your family take some time off work and stop earning an income, et cetera, et cetera. interesting about my mom's story, which she said, you need to share this is that you're not restricted of how you spend that money. For mom, she, she didn't want to get chemotherapy. She didn't want to go down that path. She wanted to take a more natural approach to recovering from cancer. that point she wasn't fully retired and she said, I need to use this money to focus on my health. She truly believes that ⁓ cancer diagnosis came from being overstressed. So she's like, I need to get out of Edmonton. I hate the cold. I need to get to the West coast. I need my feet to be in the ocean. I need to eat good organic food and like nurture my body with good natural forms of therapy. need to need to focus on my health, I need to take a step away from my business ⁓ she spent every single dollar in that fashion ⁓ she has zero regrets and she didn't have to tap into her retirement fund to go through that and she wouldn't have had that option to do that without that policy in place. Chris: Right. ⁓ argument. Yep. For sure. ⁓ sure. Yep. Definitely. You've given me something to think about, Scott. Scott: So just another perspective, just another perspective. Yep. Yep. That's what we're here to do, Chris. You know, there's one thing that it doesn't cover though, which is like, I feel like we need this type of coverage for those of us who partake in high intensity activities. at the end of a Hyrox race, I'm in a critical condition, very critical. I'm lying on the floor horizontal. There's something, if you're at 190 beats per minute for an hour, like... Chris: That's right, it's all about me. Scott: In some cases, there should be an insurance benefit maybe paid out. Chris: We need some, yeah, most of our stuff is ⁓ endurance in nature, but some of sport specific coverage that, yeah. Scott: But the thing with long endurance races, if you run like a long, long trail race, like you're never in a point of critical condition. haven't experienced that. ⁓ would, I would take, I would take running slowly for 12 hours over running 190 beats per minute, that high intensity at Hyrox. ⁓ Chris: I don't know man. Okay. Yeah, that's fair. That's fair. Yeah. I don't know, man. I can suffer for an hour through Hyrox doing five hours on the trail is different. Takes a lot more mental capacity for me to do that for some reason. But anyway, great conversation. Thanks for sharing your insights on critical illness, Scott. Hopefully our listeners got some good nuggets out of that and yeah, we'll leave her there. Scott: Fair enough. Fair enough. Yeah. Yeah. Cool. All right. Thanks for the conversation. See you again next week. Chris: Yep, take care.