Well, me, and a seemingly increasing number of middle aged adults. In my case I was incredibly fortunate in recognizing the symptoms of a possible heart attack, reaching the hospital quickly and receiving top notch care at both Grand River and St. Mary’s Hospitals. I should make a full recovery and live a full, healthy life.
Where I was also very fortunate is with the team we have built at DSK, the full support that I received from our staff and from my partners Paul and Rob, which allowed business to continue largely as normal. However, despite the structure we have in place, the extended time off I needed and still need during recover and rehabilitation will have a financial impact on our business.
Now, I want you to consider the above, and how not being able to work in your business for six to eight weeks, and then needing significant time off during rehabilitation would impact your business and your income. Would you be able to afford to take the time needed to recover? Would your personal income suffer due to decreased billings or sales? Would you need to hire temporary employees to cover the shortfall? All of these can add significant stress to a time when you are supposed to be avoiding stress!
There are ways to mitigate the impacts of an unexpected medical issue arising. In our case we have a large enough structure in place that we could cross cover each other, so the work was still completed. The whole team rose to the challenge. However, I know that for a number of you, sole owner operators for instance, this won’t be possible. In that case, it’s time to look at insurance solutions.
A product that is available and relevant is Critical Illness insurance. Generally speaking, a critical illness policy will pay out when the insured individual suffers one of a number of listed medical conditions, and survives. This could be a heart attack, stroke, or cancer diagnosis among others. Different policies have different lists of covered conditions. Once the insurer has reviewed the medical information and determined that the conditions for payment are met, the insured receives a lump sum payment. As with most insurance payments, this receipt is tax free. The proceeds can be used as the insured sees fit; provide cashflow to a business, replace personal income lost during the illness and recovery, make accessibility renovations to your home that are now needed, or take a stress reducing vacation. The decision is yours.
There are also planning opportunities available with corporate owned critical illness policies. The corporation can be the policy owner, with the owner operator or key employee as the insured individual. Should the insured become ill and the policy is triggered, the payout is received by the corporation. The proceeds can be used to replace lost revenue or cover additional expenses incurred. While the premium payments are not tax deductible to the company, the proceeds are not taxable.
For example, John Smith is the owner of ABC Corporation. ABC Corporation purchases a critical illness insurance policy on John for $100,000 with ABC Corporation as the owner and beneficiary. John suffers a heart attack and survives. The policy pays out and ABC Corporation receives $100,000 tax free. The company uses $50,000 to cover lost revenue and increased expenses, but the remaining $50,000 is not needed in the company. A dividend of $50,000 is declared to John who pays tax on the proceeds. This is a simplified example, and there are more planning opportunities available, such as adding a personal return of premium rider to a corporate owned critical illness policy so that if the policy is never used the shareholder directly receives a refund of the premiums paid tax free, or using a group critical illness plan to cover your employees in the event that they are the ones to suffer an illness.
With my recent experience, I can honestly say that no one can predict when an illness is going to strike. I know that I was lucky in my outcome, but we had also planned appropriately to ensure that we were appropriately covered where we could be. If you haven’t considered the impact of a critical illness and don’t have coverage, I strongly urge you to consider it now. We are here, and would be happy to help you assess if insurance coverage is right for you, be it personally owned or corporately, and to determine the proper coverage. Through our partners at DSK Wealth Management we can assist in applying to the best policy for your needs. Let us help you be as prepared as you can be.