Once passed the initial shock of an illness, we must move on and continue our life with some adjustments. To move things swiftly and efficiently, we need to have a team of experts on our side. Let’s start with the Certified Financial Planner (CFP), who is your quarterback to answer and coordinate all financial and some healthcare decisions.
First things first, your immediate worry may be where to look for additional income if you quit your current job. A CFP practitioner can help you identity other possible sources of income, start long-term care (LTC) benefits, and mitigate hidden risks. (For more, see: Failing Health Could Drain Your Retirement Savings.)
Identifying New Income from Insurance Policies
Nothing is as urgent than finding out what other income is readily available to you. Your CFP may immediately ask you to provide copies of all life and disability insurance policies.
If you have had any cash-valued policies (whole life, universal life and/or variable life) for a long period of time, you may be surprised to know how much cash value has built up in those policies. You can access it directly or through borrowing. If you have a private disability policy, this is the time to peruse the contract to find out the waiting period and learn how to file the claim.
The two most important riders you want to pay special attention to are waiver of premium and accelerated death benefit (ADB). If you have the waiver of premium, you can stop paying the premium going forward, which in itself is a huge relief for a tight budget. I was able to help a client to stop paying a $38,000 annual premium on a whole life policy after I discovered the waiver of premium on the contract she purchased four years ago.
Don’t think you can benefit from you own life insurance? Think again. Your life policy is designed to help your loved ones at your premature passing, but the policy may also provide you, the policy owner, with certain living benefits that you could tap in the event that you become seriously ill or develop a chronic illness. That’s when the ADB becomes handy. It allows you to receive a portion of your life insurance benefits while you are still alive.
Just one heads up: not all life insurance policies uses the ADB rider as a standard feature. Some insurers may require an additional premium for such coverage.
Social Security Disability Income
Social Security disability income may have the toughest definition of what a disability is and sometimes it may take a few tries to get benefits. But certain diseases are on the fast track to get approved. (For more, see: How to Manage Chronic Illness Expenses.)
Case in point, an MSA (multiple system atrophy), a rare sub-category of Atypical Parkinson’s disease is listed on the Social Security Administration's website as a fast track case to get the approval for disability income. Knowing the severity of your illness may help your case expedited. Also, good organization enhances the probability for approval. In my practice, I have made sure all of the required documents are in good order before sending them out. Time is money, literally in this case. The sooner you get approved, the sooner the clock starts to tick for that six-month waiting period and the more assurance you have to plan for your budget.
Because both disability insurance and long-term care insurance require a waiting period, it’s ideal for you to file the claim immediately. However, some people actually want to wait to file later for the fear of exhausting benefits too soon. The reality is if you don’t need round-the-clock care, the usual three-year benefit period could last a lot longer than your thought.
When you are diagnosed with a neurological illness, you may have a difficult time proving whose at fault in a car accident. Thus, your CFP practitioner may check your liability insurance to recommend higher coverage in your existing policy.
Combing through insurance policies and making claims on Social Security disability income are the starting place to find additional income, which undoubtedly assuage the sudden financial impact of separation from employment. Unraveling fact from fiction about LTC benefits not only reduces the out-of-pocket medical care cost, it also gives family members/caregivers a break they desperately need by seeking outside care or using respite care coverage. Reminding patients and family members about hidden risks is another way to protect the family fortune. It reduces liability risk that could be caused by the illness.
In Part II of this series, you will learn what CFP practitioners do for your investment and cash flow analysis. Until then, stay positive and cheers! (For more from this author, see: Financial Planning in the Context of Chronic Illness.)