Women financially vulnerable in the event of health crises

By Rosemary McCracken | December 19 2011 06:32PM

Most women are aware of the toll that critical illness and accidents can take on their financial security, according to Nathalie Tremblay, Montreal-based health products manager at Desjardins Financial Security.
“Seventy-seven per cent of Canadian caregivers are women,” she said in a recent interview. “Many are in the sandwich generation. They’re looking after children and also responsible for the well-being of aging parents. Many are also the sole family breadwinners.”

The financial impact of recovering from a critical illness can be staggering. “There is loss of regular income, which can mean depletion of savings and RRSPs,” Ms. Tremblay noted. “In addition to regular bills and mortgage payments, there are supplemental childcare and housekeeping expenses, and prescription drugs that are not covered under provincial health plans. There are also specialized purchases: a good wig for a woman undergoing chemotherapy can cost $800.”

But many women are not protected from health crises under an employer’s benefits plan. DFS’ 2011 Health Survey found that Canadian women are less likely to be working full-time, less likely to work in a private-sector organization and more likely to depend on a provincial health care system if they become critically ill and disabled than their male counterparts.

The Canadian Breast Cancer Network’s 2010 survey also found that 80% of women who had breast cancer experienced long-term financial consequences. Forty-four percent of respondents depleted their savings and retirement funds, and 27% took on debt to cover treatment costs.

Loss of work or income can be another consequence of taking time off to recover from illnesses or accidents. The CBCN survey found that of the 81% of respondents who were employed in salaried jobs at the time of diagnosis, 16% had their jobs terminated while undergoing treatment and 12% were not allowed to return to their jobs with the same titles and salaries. And 21% of all respondents reported returning to work before they were fully able to because of financial pressures.”

Canadian women would seem to be a prime market for living benefits insurance, but many women are unfamiliar with CI and disability coverage. “Many don’t know what products are available to fill their need,” said Micheline Varas, Toronto-based managing partner and senior vice-president of CustomPlan Financial Advisors’ Ontario Division. “Women have been underserviced by the insurance industry because advisors did not understand the female market.”

In 2006, she noted, there were more than 877,000 women business owners in Canada. “That’s everything from a single-person operation to a business with up to 500 employees. Some women choose to work part-time in order to care for families, and some women are full-time homemakers. These women will probably need coverage to maintain their lifestyles. A stay-at-home mom, for example, may be able to use a DI product that provides monthly benefits for a certain length to pay for the help she needs to run her household if she has an accident.”

And a woman can’t be too young or too old for living benefits coverage, added Nancy McKenzie, principal advisor at Yellow Raincoat Benefits Consultants in Calgary. In 2008, one of her clients, a married woman in her 20s, was diagnosed with breast cancer. “Fortunately, she had both DI and CI coverage,” Ms. McKenzie said. “She used the DI payments to pay the mortgage and living expenses, and to free up her husband from his work while she was recovering. And she used part of the $50,000 CI payout to freeze her eggs before she underwent chemotherapy. Now, three years later, she has recovered and is pregnant with her first child.”

Reduced income

Women, Ms. McKenzie added, may also find themselves with reduced income and no health benefits after the death of a spouse. “Whether by choice or circumstance, most women will be responsible for their own welfare, and perhaps that of their children, at some point in their lives. There are four scenarios that face women today. Some will never marry and will have to look out for themselves. Some will marry and outlive their husbands. Some will marry and divorce. And some will marry and pre-decease their husbands, but this is a fairly small group of women.”

Financial education is the key to selling products to women, Ms. Tremblay noted. “You can’t sell a product in isolation. And you need to use real-life stories.” To that end, DFS has developed three videos, of an anticipated eight-part series, that feature cancer survivor Véronique Lettre describing how her life was turned upside-down when she was diagnosed with brain cancer at age 36. The videos are available to advisors who distribute DFS products.

In addition to DI and CI coverage, Ms. Tremblay suggested that advisors discuss extended healthcare with women clients. This type of coverage will reimburse purchases of prescription drugs, fees of psychologists, physiotherapists and chiropractors, as well as special clothing, wigs and medical devices that may be required during recovery.
She gave examples of the cost of protecting a 40-year-old non-smoking female client who earns an annual salary of $50,000. Under DFS’s Financial Security SOLO Disability Insurance plan, this client would pay monthly premiums of $101.60 and receive monthly disability benefits of $2,825 until age 65.

And the client would pay monthly premiums of $33.03 for Term 10 coverage, or $63.27 a month for permanent coverage, for a one-time CI benefit of $50,000 under DFS’s Harmony plan.

SOLO Healthcare, the company’s extended healthcare product, would cost a single person $73.40 a month, $129.60 for a couple and $194.40 a month for a family with two children.

“The advisor should first do a needs analysis,” Ms. Tremblay said. If the client has no coverage at all, she suggested starting with a discussion of disability insurance and moving onto critical illness coverage the following year. “Introducing them all at once can be overwhelming.”

Mitigate risks

Ms. Varas, on the other hand, likes to mitigate as many risks as possible, according to the client’s cash flow. “That may mean balancing term life insurance with CI and DI coverage. I can’t play God, and I wouldn’t want to have to live with myself if a client passed away without life insurance for her children,” she said.

“As advisors, we need to take everything into consideration for the client’s individual needs, including RRSPs. It all comes back to building a solid financial foundation for the client.”