The Reality
Most people love a good reality
show but only if it turns out well. We occasionally
watch a clip when an accident occurs and the person escapes grave injury. They are able to get up and walk away.
Imagine this.
The towering poplar and maple
trees’ branches lean over the farm buildings. When the rain drips down from the leaves, the shingles
deteriorate. When the leaves fall and remain on the roof, even more damage occurs.
One day, the farmer evaluates the situation.
“A chain saw and ladder will fix
this problem,” he thinks. The ladder is
cautiously propped up against the tallest maple tree. After precise
calculation, he determines the branch that needs to be cut. There’s only one problem: he miscalculates
and the law of physics prevails. The ladder falls to
the north; the chain saw to the south, and the farmer and the ladder bounce
onto the ground below.
“This is going to hurt!” is my
husband’s first thought when he comes to terms with what just occurred. He’s winded and cracks a couple of ribs.
For me, when reality kicks in, my
first thought is, “This could have been much worse!”
My husband is generally not
accident prone. He doesn’t usually get caught in situations like this but
sometimes an accident just happens by accident. That’s reality.
The unknown in his situation is
the “what if”.
Being self-employed and working
on your own comes with a disadvantage. You are the sole-proprietor and key
operator of your farm business. You
don’t have the privilege to phone your supervisor, tell him you are injured, expect
someone to step into your farmer boots, and take over during a lengthy
recovery.
The reality is present in any sole
proprietorship where there is limited amount of excess cash for medical
expenses and hired help. The value of
your business is invested in the assets, the equipment, buildings and land. You
can see the assets but cannot and do not want to liquidate them. This is when
an injection of insurance money helps fund, at the very least, the health care
expenses while one recovers.
The
Mistake in Identity
The most common mistake most
people make is associating Long Term Care (LTC) Insurance with funding the cost
of living in a long-term care facility or nursing home. But quite frankly, this type of insurance can
be beneficial during anyone’s life time.
Many health situations can have a lengthy recovery period. You may recall someone you know who has been
in this situation. Whenever a person is restricted from performing any two daily
living activities, they are entitled to make a claim for benefits. These activities are defined as:
- Eating
- Bathing
- Dressing
- Toileting (being able to get on and off the toilet and perform personal hygiene functions
- Transferring (being able to get in and out of bed or a chair without assistance
- Maintaining continence (being able to control bladder and bowel functions)
Think about it. Any
unexpected debilitating illness or an accident could limit your activity and
warrant the need for long-term care insurance at any age.
The Push-back
I often recognize there’s a “push-back”
to insurance. Fighting your financial
battles can be done by carefully evaluating your own personal situation and the
associated risks.
The real questions are:
How many
types of insurance do I need?
How much can I afford to
pay for the coverage?
When you face the decision of
funding your health care costs, you can choose to self-fund, share the risk, or
transfer the risk.
Sun Life Financial describes
these choices best in this brochure, A Health Conversation featuring Long Term Care Insurance.
A. Self-funding means to
allocate a portion of existing assets into a “health fund”. This approach requires discipline and risks
underestimating who will need care, when care will begin, how long it will
last, and how much it will cost.
B. Share the risk means
to self-fund initial care and transfer the risk of a catastrophic need to long
term care insurance.
C. Transfer the risk
to insurance means that all risk of
an unexpected illness or need for care is transferred to long term care
insurance or critical illness insurance if the individual is still in good
health.
My Number #1 concern for any
aging couple is when their situation changes, where one spouse is required to
live in a private care home while the other continues to live in their
home. Essentially, the couple’s total
lifestyle costs may have doubled. They
are managing and juggling two homes: the expense of private health care and the
expense of home ownership (utility bills, insurance, taxes, and others). They
are doing so with the same retirement income they had when they were living
under the same roof.
The Compromise
I totally agree you can’t be fully
insured against every risk. We have many
different kinds of insurance: life, disability, property, and medical health
insurance. Now I am inviting you to
consider an additional kind of insurance, long-term care insurance.
In every insurance circumstance,
you are able to negotiate how much risk you are willing to assume when you
self-insure (use your money) and how much premium you can afford when you share
the risk with the insurance company.
With long-term care insurance,
the task is to tailor your financial need to an affordable premium. When you choose one option over another, you
are able to adjust the cost of the premiums. For example, you can select a
minimum number of days, either 90 or 180 days, before you require financial
help and are able make a claim. You can also
choose the length of time you want to receive a weekly benefit to be paid, from
a minimum of 100 weeks to unlimited. Your age and health will also have a bearing on
the cost of the premiums. If you are
slightly interested in long-term care insurance, make the decision sooner
rather than postpone it. Most often, we have a tendency to shrug the decision
off with a casual “I’ll-think-about-it.”
Our Decision
My husband’s tree incident
triggered our decision to get long-term care insurance. When he applied, he chose a five-year benefit period.
We know this will buy us “time” in any catastrophic event to determine
whether his health will improve so he could continue to farm or whether he will have to “pack it in and call it quits.” You could say this insurance policy gives
us time to make the right decision without any added financial pressure.
The other feature we appreciate
is “The return of premium on death benefit”. No one likes the thought of spending money (or
should I say ‘wasting money’) on something they may never benefit from using. The thought of a death occurring without the
opportunity to take advantage of this coverage may cross many peoples’ minds. For a slightly higher cost, this feature is an
add-on which ensures the insurance company will return the premiums if the
insured person dies while the policy is in effect. Granted, you personally
wouldn’t benefit from the money. The
premium money goes to the estate likened to money sitting in a savings account.
Your
Decision
I am a firm believer that good
information leads to good decisions. Making the time for a heart-to-heart
conversation with your trusted insurance advisor is the only way to receive
good information. If you don’t have an
advisor, ask for recommendations from your family and friends. You could
interview insurance advisors. You are
like an employer seeking someone to work on your behalf. You must understand
the information they are providing to you. You should feel comfortable with
their recommendations.
As a CERTIFIED FINANCIAL PLANNER® professional, I don’t sell insurance but I do know its importance in a
well-constructed financial plan.
Insurance is part of a wealth protection strategy and the premium should
never be viewed as an “expense.” I don’t have a preference for any particular
insurance company. They all provide the
same kind of products with slightly different features and premiums.
To learn more about long term
care insurance, click this link,
to access a guide provided by the Canadian Life and Health Insurance Association
(CLHIA). You may also watch this “Learn and Plan” video produced by Sun Life Financial. There is no shortage of information, only a
shortage of time to sort and sift all of it.
Please make the time to discover the ideal fit for your financial needs.
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