Financial Adjustments: October 2009

Nancy Philip, CFP,  CLU and Paul Philip, CFP, CLU
September 30, 2009
Written by Nancy Philip, CFP, CLU and Paul Philip, CFP, CLU
THE CLIENT
On July 13, 2009, Danielle received news that stopped her in her tracks.  A 38-year-old dental hygienist and new mom, she had just been diagnosed with oral cancer. She had self-discovered an abnormality in her mouth while brushing her teeth at home. Her next step was to have it examined at the dental office where she worked. It was sent for a biopsy and the news came back that it was definitely cancerous and immediate treatment was required.  Danielle had never smoked, had always been in excellent health, and was one of the most energetic people one could meet. Something like this is not supposed to happen to someone like her, but unfortunately it did.

THE BACKGROUND
When Danielle graduated from dental hygiene school in 1995, she found herself faced with many of the financial needs and questions that are typical of young single professionals. One of these was a proper individual disability plan to protect her income. Danielle soon began working with a carefully sought out qualified and experienced financial advisor who took the time to examine and compare various plans and options for her. A suitable disability plan was put in place.
FA1
If you have the best coverage available, you can turn the financial stress of a health crisis over to your advisor and try to focus 100 per cent on your recovery.

In the years that followed, Danielle’s financial advisor monitored her plan, guiding her in adjusting and upgrading her disability insurance as her income and needs changed.

In 2005, Danielle married Doug and they proceeded to start a family. They now needed to organize their finances as a family unit and secure protection for the family as a whole. After spending time with Danielle’s financial advisor and feeling confident, Doug agreed to obtain a carefully constructed life insurance plan through him.

During these discussions Danielle relayed that her mother had suffered lung cancer and although she had survived, it had been a real struggle financially. While a top-notch disability plan was already in place for Danielle, she was acutely aware of the significant costs associated with a life threatening illness. She was concerned there could be a financial gap for her family if her health changed in the future. Once again Danielle’s financial planner – acting as the advisor for the whole family – examined a variety of options and made recommendations that were appropriate for them. Doug and Danielle agreed to follow these recommendations and individual critical illness plans were set up for both Danielle and Doug in 2005 with a major insurer.

WHAT HAPPENED NEXT?
When Danielle was diagnosed, she contacted two people immediately – her husband was the first and her financial advisor was the second. Danielle knew she had the best coverage available and that she could turn the financial stress of the situation over to her advisor to focus 100 per cent on her own recovery. With the assistance of her financial advisor, claim forms for both her disability and critical illness policies were immediately completed.

But this much one can expect from any financial advisor. The difference in the outcome, in this case, was determined by what happened next.

Rather than leave the disability and critical illness claim forms in the hands of the insurance companies, the financial advisor sent a direction letter to the insurers instructing them to include the advisor in all correspondence. This would enable the advisor to be actively involved in the claim process and to ensure that the claims would be handled promptly and efficiently.

Danielle and Doug were able to concentrate solely on setting about their numerous medical appointments, secure in the knowledge that their financial advisor was ensuring that their claims were being responded to according to the plans that had been meticulously set out prior to Danielle’s illness.

CRITICAL ILLNESS INSURANCE VERSUS DISABILITY INSURANCE

Danielle’s disability plan has a 60-day waiting period (most are 90 days) before benefits are payable. The prognosis given by her medical specialists indicated that things looked positive, in that the cancer was caught early and, if her initial surgery was successful, she could recover in approximately two months. If this were to be the case, disability payments were not likely as she would be able to return to work just as the waiting period was satisfied.

Her critical illness coverage is a different story. The definition of a critical illness policy is that the insured survives 30 days after the diagnosis of a covered condition. No disability, permanent or otherwise, is required to qualify for a critical illness benefit. The advantage of a critical illness policy is that it pays cash up front, to be used for anything that the insured individual chooses. These uses can range from paying for the many indirect expenses of coping with the illness, to pursuing treatments and therapies, to paying for home and child care, to paying down debt or clearing off a major expense like a mortgage.

FA2  
A financial advisor’s efforts must be consistent in the beginning, in the middle and through to the end of a crisis to ensure that, financially, things will work out in your favour.
 
In Danielle’s case, the completed critical illness claim form was sent to the insurer on July 20, 2009. On Aug. 22, 2009, her advisor received a call from Danielle’s claim adjudicator notifying that her claim was approved. On Aug. 27, 2009, a cheque for $200,000, tax free, was delivered to Danielle at her home.

A big reason this experience played out the way it did, involves the role of the financial advisor. It can be very stressful dealing with a serious illness and a large insurance company at the same time. In this case, Danielle and Doug weren’t left on their own to complete the claim forms or deal with the insurer. They worked with a financial advisor whose efforts had been consistent in the beginning, in the middle, and through to the end of the crisis to ensure that, financially, things would work out in their favour.

To say that Danielle and Doug value the relationship they have with their financial advisor and their decision to follow the advice that had been given them over the years is an understatement. 

THE BEST NEWS

As this article was being written, Doug and Danielle received confirmation that Danielle’s surgery had been 100 per cent successful, and she is now cancer free. Followups are required every six months for the next five years, but her prognosis for the future is excellent. Danielle is very relieved and their life is beginning to get back to normal. She expects to be back to work and resuming her normal routine in a few weeks.

CRITICAL ILLNESS PLANS

There are many different plans and options available in the marketplace today. Recent industry statistics indicate over $250 million dollars in critical illness claims have been paid out since the product’s inception in the late 1990s. This type of insurance is a “living benefit.” With advances in health and medicine, more and more people are surviving serious illnesses, meaning the cost of this type of coverage will likely increase in the future. There are up to 23 different conditions that are covered (75 per cent of claims arise from heart disease, stroke or cancer). Currently, plans are being offered that lock in all costs on a guaranteed contractual basis for the life of the policy.

Chiropractors need to look out for themselves, as much as other professionals do, when it comes to making sure their financial needs can be met under all circumstances.

Contact with an advisor who understands your profession is vital. The individual you choose to work with can prove indispensable in your time of need. Take the time to investigate this important coverage for yourself. It could turn out to be a financial lifesaver. •

Paul Philip, CFP, CLU, and Nancy Philip, CFP, CLU, have been advising hundreds of chiropractors across Canada since 1992. Their firm, Financial Wealth Builders, is located in Toronto, Ontario.  To learn more about building your wealth, visit their website at www.fwb-inc.com or contact Paul or Nancy at 416-497-0008.

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