With the right skills and mindset, effective financial management is achievable – until unexpected challenges derail your plans. If you’re diagnosed with a serious medical condition or disability, managing your finances can become just as difficult as managing your diagnosis.
At SolveYourDebts.com, we often see clients who are deep in debt due to life-altering circumstances such as divorce, a lay-off, or a newfound disability.
How Disabilities Influence Debt
Even in a country with universal health care, serious health problems or disabilities often bring numerous out-of-pocket expenses. Besides potential costs for medication, equipment and home care, there are also increased expenses related to travel for treatment, child care and home modifications.
Up to 40 per cent of patients in Canada with a cancer diagnosis report financial distress while facing substantial out-of-pocket costs. And it’s no wonder why. Many health issues make working full-time hours impossible – if working is possible at all.
Without a steady income, affording what you need to live can quickly affect your financial security, spiralling you into debt. The economic impact can be longstanding – even after someone recovers from a medical condition.
Medical conditions and disabilities can also affect the financial stability of people besides the one with the diagnosis. Studies show that about 26 per cent of caregivers take time off from work to care for someone with cancer, resulting in an average monthly income loss of $2,402.
The Importance of Insurance Policies
Canada’s cost of living is making it more difficult than ever for Canadians to afford housing, groceries, gas and general goods. And that’s when they’re able to work.
Our high cost of living leaves many people with minimal savings for difficult situations. Statistics Canada found that one in four Canadians cannot cover an unexpected expense of $500 – let alone months, and potentially years, of unforeseen costs.
Fortunately, various insurance policy options are available to help navigate the financial implications of a health condition or disability. But often, they’re complex and overwhelming to understand.
We’ve compiled key information about the most popular ones below.
Disability Insurance
Many standard group benefits packages offered through employers or other professional associations include short-term and long-term disability benefits. These income replacement programs offer employees unable to work with income replacement for a defined period.
Short-term disability (STD) benefits have a short waiting period ranging from one day to one week, depending on the policy. These benefits are calculated as a percentage of your weekly earnings, ranging from 50 to 100 per cent of your weekly earnings. They’re paid weekly for a specific period, with a typical maximum duration of 52 weeks.
Benefits paid through long-term disability (LTD) begin after your case is reviewed by either an LTD case manager or insurance company. Sometimes, a medical consultant review is necessary, which can delay when your LTD benefits start.
If you’re self-employed or work for an employer who doesn’t offer disability insurance, you can purchase private disability insurance. Various insurance companies in Canada sell disability insurance, which typically costs between 1-3 per cent of your annual income.
Critical Illness Insurance
Like disability insurance, standard group benefits often include critical illness insurance. You also have the option of purchasing it privately. However, unlike disability insurance plans, critical illness insurance only pays a tax-free lump sum benefit rather than regular payments.
To receive a critical illness insurance payout, you must be diagnosed with a particular medical emergency, such as a life-threatening cancer or heart attack.
Due to the long waiting periods often associated with disability plans, critical illness coverage helps address immediate expenses. You can use the money however you choose, such as to pay for certain treatment costs or to supplement your lost income.
The plan also helps safeguard your retirement savings and other investments by preventing the need to draw from them.
Employment Insurance
If you don’t have a private STD plan, the Canadian government’s employment insurance (EI) program may be an option.
To qualify, Canadians must meet eligibility criteria, such as being unable to work for medical reasons and having worked 600 insured hours in the past year. A medical certificate from a doctor is necessary.
If accepted to receive EI benefits, you can get up to 26 weeks of financial assistance at a maximum of $668 weekly.
Canada and Quebec Pension Plans
If you have a long-term or permanent disability, the Canada Pension Plan (CPP) or Québec Pension Plan (QPP) may be an option.
To qualify, you must be under age 65 and have sufficiently contributed to one of the plans. The current maximum monthly payment for either plan is approximately $1,600, with both plans typically involving a 3-4 month waiting period.
If you currently receive a CPP retirement pension, a CPP Post-Retirement Disability Benefit is available. The government also offers CPP children’s benefits for dependent children of disabled or deceased CPP contributors.
Similarly, the QPP offers a pension for a disabled contributor’s child.
Offset Extra Costs Related to an Impairment
The Canadian disability tax credit (DTC) can create substantial savings during tax season. Individuals with physical or mental impairments or people supporting someone with a disability can claim the non-refundable tax credit.
You must apply for the credit. Once approved, you can claim it at tax time.
Conclusion on Dealing with Medical Conditions, Disabilities, and Debt
If you’re already struggling financially, a serious medical condition can significantly increase the difficulty of managing your money. And when unexpected medical expenses often coincide with a loss of income, you’re often left with little support for debt relief.
You don’t need finances to be one more thing to worry about while you’re dealing with a medical condition or disability. Book a free, no-obligation consult to receive professional debt advice that keeps your best interest in mind.
