It’s not unusual for people to have a regular annual appointment with their family physician to check up on the state of their physical health. Unfortunately, the same level of diligence does not appear to be happening when it comes to Canadians having an annual financial check-up.
A recent study by Edward Jones points to an overall lack of financial preparedness by Canadians to deal with unforeseen life events and crises such as a sudden illness or death, loss of a job or the inability to work from an extended injury or disability.
While 63 per cent of Canadians have some form of insurance, less than one third are covered for serious unforeseen life events. Almost half admit they do not believe they have enough money to cover the unexpected or even expected expenses should a serious illness prevent them from working of if they were to experience a prolonged recovery from work. This ranges from having sufficient emergency funds that may be needed right away to continuing to fund their retirement goals.
The study highlights that many Canadians could be in trouble if they suddenly are unable to work, with only 15 per cent saying the feel very prepared financially if they get too sick to work and 21 per cent saying they are not at all ready to tackle this unexpected situation. Twenty-two per cent say they would not be in a position to deal with a prolonged injury.
Further, 23 per cent of Canadians admit they are not at all prepared financially if they pass away too soon and only 16 per cent have purchased a life insurance policy that could cover their remaining mortgage payments in the event of death.
“While Canadians may think they are protected there is a gap between what many people have and what they might actually need to cover a serious issue,” says James McKeown, a senior insurance specialist with Edward Jones.
What makes the situation even more alarming is that the results of the current study are very close to those of a study on the same issue that Edward Jones did more than two years ago.
“In other words, there hasn’t been much progress made over the last couple of years to make sure that Canadians have the necessary safety nets in place to protect themselves and their families,” McKeown said in an interview. “Many Canadians still remain vulnerable should a crisis hit them”
The study concludes that a lack of understanding of their insurance needs might explain this deficiency gap in coverage because only 26 per cent of Canadians say they have thoroughly reviewed their insurance needs within the past year.
Other studies which have looked at this issue add other reasons such as people believe the insurance they have at their workplaces is sufficient, insurance is too expensive and too complicated to understand, and they may not feel they need insurance because they are healthy and feeling well.
“It’s all about education,” says McKeown. “The onus is on us (financial advisers). We need to do more work to educate our clients about the need to prepare for the unexpected and to realize that insurance is an integral part of their financial plan.”
McKeown says access to insurance advice now is becoming more common as many of the major banks now own insurance companies and/or have insurance divisions and more and more financial advisers are getting insurance licenses.
“We’re not too pleased about the results of this survey because it shows there’s still a lot of work to do but at least now we’re having this conversation with our clients and have the knowledge and expertise to educate and advise them,” McKeown says.
Talbot Boggs is a Toronto-based business communications professional who has worked with national news organizations, magazines and corporations in the finance, retail, manufacturing and other industrial sectors.