Find out why they got insurance

• If you have group insurance, you might have critical illness coverage and could receive a lump-sum payment in the event you're diagnosed with an illness covered in your contract (e.g., $10,000). If not, disability insurance coverage is offered under most plans, which could offset the loss of income if you had to stop working (e.g., 70% of your salary).
• If you have individual critical illness insurance, check your contract to find out the provisions.
• Not covered? See The A to Z of Critical Illness Insurance - This link will open in a new window..

You don't need to take out coverage if you have enough savings to cover the expenses related to a critical illness. Here are some other possibilities:

• Use your savings, like non-registered investments or your TFSA. If you have to take money out of your RRSP before you retire, you'll need to consider the tax impact and might have to postpone retirement.
• Take out a loan. This might be a better solution than taking money out of your RRSP.
• Sell some real estate. You'll need to consider the financial repercussions, like loss of rental income. You'll also need to think about how long it will take to sell.
• Turn to loved ones for financial support.

• You might have individual disability coverage or coverage through your employer. If so, check your policy or contract to find out:
  • The percentage of your salary that would be paid in the event of disability
  • The waiting period
  • How long benefits would be paid
• You might be eligible for government benefits⁷. You might be able to receive benefits under government plans like worker’s compensation, employment insurance (EI) or the Régime de rentes du Québec [RRQ]. Contact these organizations to find out their eligibility criteria.

Here are some of the questions you might want to ask your life and health insurance representative:

• What percentage of my income would I receive? Is there a maximum?
• Is there a waiting period?
• Are there any restrictions or exclusions?
• How long will benefits be paid?
• Are benefits taxable?

Learn Why purchase disability insurance? - This link will open in a new window..

• Specialized care and services not covered. For example, a homecare nurse costs between $50 and $75 an hour. Some experimental care or treatments available outside the country may not be covered by the government.
• Housing: You might have to move into a public or private establishment that offers various services. The cost of living in a nursing home or long-term care centre can be more than $2,500 a month. And private establishments can cost between $3,000 and $8,000 a month if additional care and services (e.g., household maintenance, personal care, meal preparation) are provided.
• Drugs not covered. You might have to pay a certain amount for drugs that aren’t totally covered by your provincial health plan.

• Dip into your savings (TFSA, non-registered savings, RRSP, RRIF)
  • Your life and health insurance representative can estimate the impact of any unanticipated withdrawals from your retirement portfolio.
• Turn to loved ones for financial support
  • It can be gratifying to help a loved one, but not everyone has this option.
• Apply for disability benefits
  • Disability insurance should cover a loss of independence before age 65, after which it no longer applies because it’s designed to replace income. So it’s a good option for workers, but it doesn’t cover the period where loss of income most frequently occurs, which is after age 65.
• Take out loss of independence insurance
  • You could receive a non-taxable monthly benefit to help you cover expenses associated with a loss of independence. The younger you are when you take it out, the less it will cost. See The costs associated with the loss of independence - This link will open in a new window.

The advantage of life insurance is that the beneficiary nearly always receives the sum insured tax-free. The benefit can be used to pay for:

• Funeral expenses
• Notary and executor
• Taxes owing on death: most of the insured's assets are deemed to have been sold or cashed in before their death and taxes can then be paid
• The insured's debts (e.g., personal loans)
• Children's education
• Loss of income

Life insurance needs vary according to many factors, including what stage of life you're at. Your life and health insurance representative can help you determine the coverage that's right for you, based on your needs and budget. See the three steps to take - This link will open in a new window..