If you speak to most Trustees-in-Bankruptcy in Canada, you will find that it is pretty hard to go bankrupt from medical expenses alone. Freida Richer, a Vice President and Principal at Grant Thornton Limited, noted this in an interview with Global News; and, if you think about it, that makes sense.
We, in Canada, are very proud of our social safety net. We believe in the idea that government programmes should cover basic physician and hospital expenses; while other social programmes should provide financial assistance to Canadians who are unable to work because of disability or illness. Accordingly, Canadians don’t receive bills from our hospitals for procedures like a hip transplant or cancer operations.
As a society, our employers and ourselves often go the extra step by creating Extended Health Benefits through Group Benefit Programmes or by purchasing private products individually. According to the Canadian Life and Health Insurance Association (CLHIA), some 24 million Canadians receive these benefits.
However, Ms. Richer was not done. She then went onto say that in a study performed by Grant Thornton just over 25% of the people that her firm helped in Alberta said that medical expenses were a contributing factor to their bankruptcy, consumer proposal or poor financial state. Because of the nature of what Ms. Richer said let me repeat it. Just over a quarter of the Alberta clients of one of the largest Bankruptcy-in Trustee firms in Canada said costs from a health related issue or medical condition pushed them to seek a bankruptcy professional.
As a financial professional, I am not surprised. While representing SunLife Financial, I often recommended clients get additional disability or health insurance coverage. We would talk about their income and whether they had a plan to replace it. After some conversation and many calculations, the answer was usually “no”. Sometimes, they said the product was too expensive; while others said their group benefits plan was enough. A small few said that I was being too worried; they had some RRSP, investment or savings; or they could borrow from their house or family. While, the difficulties of those scenarios were pointed out and a product - sometimes, a Long Term Care Insurance was proposed; other times, it could have been Disability, Health or Critical Illness Insurance - was recommended people often said “no”.
Today, I understand why. Canadians rarely look at their financial plan in a risk oriented fashion. To put this in concrete terms, let's think about the way that we speak about the way we plan for retirement. Oftentimes, we are told by advisors, commercials and other professionals that we need to make sure that we don’t outlive our RRSPs. We are told to save everything we can because there is a real chance that we could live to 100. Yet, in 2014, Canada’s Office of the Chief Actuary published a study, “Mortality Projections for Social Security Programs in Canada Actuarial Study No. 12” which stated that “currently, five out of ten Canadians aged 20 are expected to reach age 90, while only one out of ten is expected to live to 100”. While, at the same time, actuaries were saying that Canadians had a 1 in 3 chance of getting a critical illness (ie. cancer, heart attack or stroke) in their lifetime. Today, the odds are 1 in 2.
Now, these numbers might seem to be at odds with the reality we are told. How can it be that we have a 1 in 2 chance of getting a critical illness and a 1 in 2 chance of making it to age 90? The answer is simple: it is both. The Canadian Cancer Society notes that “based on data from 2012 to 2014, 63% of Canadians diagnosed with cancer are expected to survive for 5 years or more after a cancer diagnosis”. While it is true that cancer is a death sentence to some, the vast majority of people will be alive 5 years after a diagnosis. Accordingly, the question should be: can your family, your friends and/or yourself survive the financial effects of your cancer? That answer we already know because Freida Richer, a Vice President and Principal at Grant Thornton Limited, told us: probably not.
Canada’s medicare system is great. Because we pay for our medicare system through our taxes, we ensure that we don’t have to come up with money - on the spot - to take care of our health. Canada’s safety net ensures that many of the essentials are taken care of. With that being said, our safety net or our medicare system don’t take care of our residential mortgages, our car payments or our payments to our credit cards or lines of credit. Canada’s social safety net and our system of medical care don’t consider many things essential like paying for a babysitter or non-generic drugs or time off from work to recover. I am proud of the way that Canadians look after each other but I also know that provincial WSIB and WCB systems often don’t provide the resources to ensure that you return to your former self. Those things are seen to be perks and this is why someone like me is here.
Before an injury, an independent financial advisor can start to plan around the risks that can be created by living. Sometimes, this means creating new insurance policies, while other times, it just means saving more. The advantage of someone like me is simple: I ask hard questions. I ask whether you have planned for your disability or for your retirement. I ask you if you have planned for a devastating accident or for your child’s post-secondary education or for your child’s potential wedding. I ask about your lifestyle and about your life because I want to avoid a critical financial event - either one that is happy or sad, bad or good - that will cause a person to run out of money. So the best way to avoid someone like Freida Richer, Trustee-in-Bankruptcy at Grant Thornton Limited, is to see someone like me.
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