Faced with health issue, most Canadians would last three months before financial hardship

Few people know better than financial planners how difficult it is to get working-age Canadians thinking seriously about retirement. The future can be frightening and not many of us are eager to see the amount of money we’ll need to be comfortable in our old age laid out for us in black and white.

Imagine, then, the uphill battle it is to get any of us to own up to something even scarier — like what will happen if you are diagnosed with cancer and suddenly can’t work? What happens if you suffer a crushing depression or a traumatic injury lands you in the hospital for weeks, maybe even months?

Truth is, an illness or injury doesn’t just affect our physical health. Without careful planning, an extended disability threatens to have devastating financial implications for you and your family.

Canadians unprepared for health issues

A new survey by RBC Insurance found that most Canadians are woefully unprepared to pay the bills if they are forced out of work by illness or injury.

“They don’t want to think about it and when they do think about it, they are not necessarily realistic about the impact,” says Mark Hardy, RBC Insurance’s senior manager of life and living benefits.

According to the survey, which was conducted by Ipsos, 76 per cent of respondents said they could only last about three months before they would face serious financial hardship.

Most Canadians (34 per cent) would dip into their personal savings to pay for essential living expenses. Another 29 per cent said they would rely on their spouse/partner’s income, government support (19 per cent) and cash in investments (16 per cent).

Fifteen per cent of Canadian workers don’t know how they would cover their expenses at all if faced with a disability.

Yet, despite the concern, the survey found only about a quarter (27 per cent) of workers has discussed with their family how a disability could impact their lives.

It’s worth noting that this number moves a little higher – to just 33 per cent — even among those who’ve taken time off in the past because of a disability.

Employee coverage?

Hardy says Canadians can help to protect themselves from financial hardship by better understanding the disability benefits they may already have in place through their employer.

He cautioned that many benefit plans have a limit to the amount of coverage that is provided and it’s worth a closer inspection of the paperwork.

“Some things to look for include how your plan defines disability … and if you’re covered for illness as well as injury,” Hardy says.

Hardy says some workers may want to consider buying top-up insurance to fill in gaps in coverage. Workers who are self-employed and who aren’t covered by workplace benefits face even greater pressure to take the steps to seek out individual options that will protect them and their business in the event of a disability.

According to Statistics Canada, one in three working Canadians will experience a period of disability lasting longer than 90 days during their working lives.