In 2009, I met with my financial advisor for our annual review meeting. When he brought up critical illness insurance and disability insurance, my first reaction was, I don’t need this. Given the fact that I was healthy, in shape and had no history of cancer or heart disease in my family, it just didn’t seem like something I would need. The premiums seemed high and — quite frankly — my Superman mentality kicked in. I thought nothing would ever happen to me, so I wouldn’t need the coverage. If I did, I would self-insure.
My advisor continued to speak about the importance of protecting my assets, income replacement and return of premium. After much persuasion and follow up, I finally moved forward with a critical illness and disability insurance policy.
Two and a half years later and five months pregnant, I found a lump in my breast. Five days after discovering the lump, I was diagnosed with breast cancer. I had surgery to remove the tumor and was told that I was stage 2, grade 3 triple negative, which would require eight rounds of chemotherapy and 20 rounds of radiation. My son was born two months early so that I could begin my cancer treatment.
Knowing that I never had to worry about my financial situation was an unbelievably huge relief and allowed me to focus all my energy on my baby boy, and the fight for my recovery. Today, my son is a big, strong, healthy boy in third grade, and I am nine years cancer-free.
I began my career as an advisor prior to my cancer diagnosis, and I often spoke to my clients about the importance of critical illness insurance, not knowing exactly how important it would be for me. I talked about ways they could use the money should they ever have to make a claim, such as medication costs, vacations and medical tourism. Little did I know that I would be the one having to make a claim.
In addition to having the ability to continue contributing to my investments and savings plans, I break down the costs of where my own critical illness claim money was spent into five buckets:
- Medication: Neupogen – $8,000, miscellaneous – $820
- Child care: Nanny salary – $27,000
- Cancer accessories: Wigs, scarves, hats, compression sleeves – $1,250
- Physiotherapy and massage: $1,300
- Miscellaneous costs: Vacation – $4,600, Inspire Health membership – $350
My cancer journey and my experience with critical illness insurance completely changed my perspective on the value of living benefits. My career focus changed, and I began working for a top insurance carrier as an advanced planning strategist. I was working with top advisors with a focus on living benefits, assisting them to help clients the same way my advisor helped me. I shared these transferable ideas that they could incorporate into their everyday practice.
Risk management planning
Risk management isn’t only about life insurance; it’s about living benefits as well. Life insurance protects against premature death but can leave your clients exposed to the risk of a health interruption that could result in early withdrawals from their investments, or not contributing to their financial goals as they intended. The objective here is to expand the breadth of fundamental planning products you are already supporting by incorporating living benefits into your practice. Living benefits products work to protect other aspects of financial planning. A client’s ability to achieve their financial goals, including retirement, is based on their ability to earn an income. What would happen if that income were reduced or taken away?
How much coverage is enough? The needs analysis process is very similar to the rest of the critical illness insurance conversation. Tailor the conversation around the client you have sitting in front of you. As an advisor, you likely do a needs analysis for life insurance, and the same can be done for living benefits. One of the easiest ways to begin the critical illness insurance needs discussion is to use an amount of benefit that resonates with them, such as their gross income. To build on the client’s understanding of their basic needs, you can use a multiplier to expand the conversation. This multiplier is known as the survivor multiplier. For simplicity’s sake, you can break the multiplier into three categories: 1X, 2X and 3X their income and what each one of those would look like in terms of covering costs.
The affluent market sees the value of using insurance money over their own. Without proper critical illness planning, what happens to a client’s portfolio when they are recovering from a critical illness? Quite often, clients will need to start to reallocate active or passive cash flow into other buckets to provide the capital needed to recover. In many cases, affluent clients will be invested in assets that are not highly liquid (businesses, real estate, etc.). A lack of proper critical illness insurance planning can force your client’s hand to quickly dissolve those assets at inopportune times, causing additional financial and emotional strain to their personal and professional lives. A lack of proper planning could cause the following outcomes:
- Inefficient use of the client’s money
- A negative impact to the client’s lifestyle
- Delays in sufficient liquidity, which could prolong the recovery process
- Potential for taking something personal and private — recovery from a critical illness — and making it public knowledge simply through lack of proper financial planning
Have the conversation
I highly encourage you to have these critical conversations with your clients again and again. This is why you are in this business: You have the ability to change people’s lives and provide financial security when they need it most. Now more than ever, people are focused on their health and well-being. There’s no better time to incorporate critical illness insurance into your practice.
Life doesn’t always go as planned. I implore all advisors to have the risk management discussion with their clients. I’m certainly glad that my advisor did.