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Sickness billing format for client for Operations

6. client profile as explained in previous chapters disability critical illness the need for long-term care and other health issues related to accident and sickness may cause great strain on a client's financial and emotional situation through loss of income and increased expenses the effects of these Health situations may be mitigated by accident and sickness Insurance however before presenting a recommendation to an individual client an agent must first analyze the client's situation to ensure that he has a clear picture of the risks the client faces and the needs he must meet due to the wide array of products that offer accident and sickness ANS coverage the client profile should cover the following aspects at a minimum black small square personal situation black small square financial situation including income and expenses black small square Insurance situation once a complete client profile is drawn the agent will be empowered to suggest the disability critical illness long-term care and extended health insurance products that are most appropriate to meet the client's ANS insurance needs and budget 6.1 personal situation of client there are a wide range of factors to take into consideration when conducting a fact-finding interview for an insurance review on a client where the review focuses on ANS insurance through disability critical illness long-term care or extended health insurance all of the following need to be taken into consideration personal factors unique to the client like age gender and advocation these may impact the risk of disability and the duration of Need for benefits or care marital status of the client a spouse constitutes possible alternate sources of income support dependents if any of the client they may also need financial support in the event of the client's disability or impairment clients occupation this highlights risk of disability and the likelihood of continued employment in the event of disability black small square current health and health history of the client and his family this constitutes an indicator of possible future health problems clients retirement goals these outline when the client hopes to retire and what his expectations are for his retirement lifestyle all of these personal details should be explored and their ramifications considered before the agent considers purely empirical data like income assets and liabilities 6.1.1 personal details there are personal characteristics of a client aside from his health income or assets Etc that can significantly impact his need for accident and sickness insurance and the type of insurance that is most appropriate for him specifically the client's age at the time of the review his gender and the type of non-work activities that he engages in can influence the types of risk that he is exposed to the analysis process and the agent's recommendations 6.1.1.1 age whether a client is new to the agent or a long-standing client whose program is under review the client's current age is significant in the ANS review and planning processes age is a factor in the risk of illness or disability but it also impacts the number of years that corresponding disability benefits might be needed and the medical care expenses that may need to be covered consequently the client's age impacts the cost of insurance protection 6.1.1.2 gender gender is another important factor in estimating both mortality life expectancy and morbidity risk of disability at any age statistics show that the average life expectancy of a woman is longer than the life expectancy of a man of the same age Point 32 particularly in relation to long-term care then it would have to be anticipated that overall care costs would be greater for a woman than for a man because care would likely have to be provided for a longer period moreover women generally have a higher likelihood of incurring a disability than would men of the same age 6.1.1.3 Sports Hobbies activities or Pursuits aside from what activities a client engages in to earn a living these are described later on in the chapter what that same client does in his off-work hours can have a major impact on his risk exposure for disability short or long term a client who exclusively leads a sedentary lifestyle outside the office watching TV reading playing chess Etc might be quoting health problems due to a lack of exercise one who takes regular walks Cycles recreationally or plays golf or non-contact hockey has a much better chance of remaining fit and reduces many of his health risks at the other end of the spectrum the client who engages in extreme sports or activities rugby skydiving rock climbing Etc is much more at risk of incurring injury and possible permanent disability it should also be kept in mind that these clients may be uninsurable for disability or long-term care coverage or at the least subject to exclusions of coverage 6.1.2 marital status it is important to determine whether a client is currently single married living common law or has previously been married or in a common law relationship because this will have an impact on sources of income and expenses during periods of disability or illness the simplest situation at least in terms of variables to consider is the client who is single has always been single and who has no immediate intention to change his status in this case the client likely has fewer or no Financial Obligations to others that must be considered in calculating the amount of income required to support him in the event of disability similarly the single client has only his own needs to consider should he suffer a critical illness or require long-term care of course there will always be the exception like the client responsible for the care or financial support of an aging or ailing parent on the other hand the single client does not have the financial or moral support of a spouse or common law partner no second family income to draw upon or life partner to provide caregiver support although other family members parents siblings might help out for the client currently married or living common law the spouse partner could provide a second source of family income to partially mitigate the need for insurance coverage in the event of disability example one Henry is single and earns sixty thousand dollars a year and would require sixty percent of his current income to survive during a period of prolonged disability if he had no other source of income or income replacement he would need three thousand dollars a month of disability insurance to support him during a period of disability sixty thousand dollars times sixty percent divided by twelve accident and sickness Insurance chapter 6 client profile 133. Henry's brother jock and his wife Marie each earned sixty thousand dollars a year and would require sixty percent of their combined incomes or six thousand dollars a month to live if either of them was to become disabled sixty thousand dollars times two times sixty percent divided by twelve however in the event of Jacques disability Marie would still be earning five thousand dollars a month and vice versa leaving a shortfall of only one thousand dollars a month should one of them become disabled and unable to work each of Jacques and Marie might only require one thousand dollars a month of disability insurance to protect the family in the event of the disability of one or the other although a higher level of coverage would likely be prudent to guard against eventualities one spouse might need to work part-time to help to care for the other the agent should be conversant with the laws of the provinces in which he practices with regard to matrimonial property support and civil or common law rights of married or common law couples these help understand rights and obligations that could intervene in cases where medical occurrences such as disability or illness impact the couple's financial situation in the case of clients who have previously been married and are now separated or divorced or who were previously in a common law relationship the agent should inquire about ongoing support obligations to the ex and or children and seek a copy of any agreements or court orders governing such support 6.1.3 dependents in assessing the financial needs and therefore the insurance needs of a client in the event of disability critical illness or other Health crisis the insurance agent must consider not only the personal needs of the client but also the needs of others that the client May support these add to the expenses that must be met by the client and may thus suggest a need for increased ANS coverage the following can constitute dependence for the ANS client spouse a spouse who has suffered disability due to illness or injury could require special treatment Medical Aid or adaptations to the home environment an aging spouse may require in-home or nursing home care children up until the end of their children's Secondary School careers parents are usually fully responsible for their housing food clothing educational expenses and often entertainment expenses responsibilities could continue for a few years if the children go on to higher education or for much longer in the case of a child with special needs due to physical or developmental challenges for instance other family members clients may be financially responsible or active Caregivers for others outside of their immediate families such as aging parents or grandparents or siblings in need of Special Care 6.1.4 occupation a client's occupation is the most critical factor in determining the type benefits and costs of disability insurance coverage for example the own occupation definition of disability and the right to acquire a policy that is guaranteed to be renewable without modification of costs or benefits are only available for those in low-risk classifications of occupation such as doctors lawyers and Senior Management personnel the degree of risk of disability inherent in the occupation may also determine the minimum waiting period that the insured must take the duration of benefits and of course the premiums payable some occupations may be so inherently risky that the client could be subject to stringent exclusions of coverage or may Simply Be uninsurable as such elements of the client's occupation must be carefully scrutinized and documented while knowledge of a client's occupation is useful for any insurance the amount of critical illness and long-term care insurance required is not primarily determined by occupation 6.1.4.1 duties explained in Chapter 2 occupations are classified ing to risk of disability with the highest classification being reserved for professionals who function in environments that offer the fewest physical risks risks May relate not only to the physical environment in which the client Works hazardous conditions not just chemicals Etc but also to the amount of physical exertion required by the job and the amount of stress to which he is exposed after considering these aspects insurance company underwriting departments look to the physical requirements of the job itself does the applicant work exclusively in an office environment low risk or does he work on a construction site or around heavy equipment high risk for example how many hours a week is the applicant required to work how much vacation time does he receive each year 6.1.4.2 work history it is helpful to know not only the details of the client's current occupation but what sort of work that he has done in the past some jobs involve inherently dangerous environments mining for example which could lead to postponed physical ailments lung damage for example that could in turn result in disability in the future even if the client is now working in less hazardous conditions how long the client has worked in previous positions could also be an important factor as for the details of a client's current occupation they could be less influential in determining the client's current insurability if he is in the habit of changing occupations every couple of years or so particularly if the changes involve jobs with dramatically different duties and risks 6.1.4.3 future work plans it is valuable to know the details of what the client does now in his occupation but what if he plans to change occupations or retire in the near future he could be changing to a job that pays more or less than he is currently earning or have little or no earned income in retirement a critical factor in determining the amount of disability insurance the client needs or can qualify for the intended new job may carry greater physical risks than the current job resulting in a lower classification for insurance purposes restrictions on coverage or even a decline to issue coverage 6.1.5 health a person's health is a critical factor in determining his qualification for all types of accident and sickness insurance how is the client's current health has he had health problems in the past are there factors that would tend to be an indicator of health problems in the future health issues could be an indicator of potential needs and claims under all types of ANS insurance black small square current or past health problems could lead to illness or injury that would impact the client's ability to work and result in a claim under a disability income replacement policy black small Square Health factors like diabetes high blood pressure or smoking are significant risk factors for heart attack and stroke which would result in a claim under a critical illness policy black small square factors like diabetes could also lead to debilitating conditions in the future loss of or loss of use of Limbs for example that could require home care or residency in a chronic Care Facility covered by long-term care insurance the insurance health is also an obvious factor for extended health coverage those with health problems present or past are likely to have increased numbers of claims and medical expenses 6.1.5.1 personal health history aside from current health a person's health history including past disability claims and previous health issues is a major consideration for risk assessment for ANS insurance the medical underwriting questionnaire associated with all types of ANS coverage places extensive emphasis on the applicant's current health and health history and a client might be subject to severe coverage restrictions or of coverage denied completely if his medical history is too negative in completing the questionnaire care must be taken to answer every question fully providing all details necessary for the insurers Underwriters to evaluate the client particularly in regard to positive answers for example if the questionnaire asks about previous episodes of disability the agent should not just put yes on the form full details would be required nature of the injury or illness date of the disability duration of the disability treatment and any lingering effects 6.1.5.2 family health history of almost equal interest is personal health history to the insurance company's underwriting department is the health history of members of the client's immediate family parents and siblings as explained in previous chapters certain health issues although not strictly hereditary tend to run in families family longevity is a positive factor in underwriting life insurance longer life expectancy means lower premiums but may be a negative for critical illness or long-term care insurance the longer a client is expected to live the greater the likelihood of a claim and in the case of long-term care insurance the larger the claim is likely to be clients may be at greater risk of developing certain health issues particularly later in life if the same problems manifest themselves and their parents or grandparents it is not unusual for a client to experience adult onset type 2 diabetes if his parents or Grandparents were also type 2 diabetics Point 33 women whose mothers had breast cancer are more likely than the general population of women to develop breast cancer themselves point 34. some genetic conditions are actually inherited and pose the risk of future health problems particularly in the case of critical illness or long-term care insurance such family risk factors would likely lead to a restriction of coverage and or benefits or a decline of coverage altogether 6.1.6 retirement goals when the client plans to retire in the type of retirement lifestyle he anticipates having are factors to consider when the agent designs an ANS insurance program when retirement is scheduled we'll have an impact on how long benefits need be payable under a disability income replacement program ideally from the present until the retirement date 6.1.6.1 travel and living abroad or living at home the quality of retirement that the client anticipates could also dictate the nature and scope of ANS coverage required particularly critical illness CI and long-term care LTC insurance if the client plans to travel extensively in retirement there may be increased impetus to put critical illness and LTC coverage in place for example should the client suffer a debilitating heart attack or stroke the consequences could curtail his Mobility or necessitate special medical care or appliances like a wheelchair or manual controls on a vehicle while these AIDS would be important to the client in any event the need and costs might be even greater to those who plan on a more active lifestyle on the other hand retirement living arrangements could also be an important factor particularly if the client is considering living abroad even part of the Year Winters in Florida for example Health costs in a foreign jurisdiction might be much higher than in Canada and might not be covered or entirely covered by provincial health insurance travel insurance health insurance or long-term care policies might be required as supplemental coverage 6.2 client income disability income replacement insurances naturally all about the client's earned income the insurance is designed to replace earned income lost because of a period of illness or injury but sources of unearned income must also be considered Investments annuities pensions income from trusts Etc as these may be a continuing source of cash flow to support the client and its dependents regardless of whether he is able to work the client's income particularly earned income is a less important factor in assessing critical illness and long-term care insurance needs since the products are intended to provide benefits to defray expenses not replace income 6.2.1 sources of earned income for the pre-retirement client aside perhaps from investment income income from employment or self-employment will be the Mainstay of providing for living expenses savings and Investments Etc it is critical for the agent to be able to identify not only the source and amount of employment income but to assess its consistency and future viability 6.2.1.1 salary bonuses and commission income from working if the client is an employee the agent will want to obtain some history of that employment in order to determine the stability of the client's employment income length of current and previous Employments trending career path it is vital to obtain a breakdown of the client's employment income sources and amounts broken down between salary bonuses and commissions considering that they do not all offer the same level of predictability and stability of income it is important to keep in mind that where an employee is a member of an employer slash employee group plan the group plan only covers his income from that employer not possible outside sources of earned income if the employment income comprises a base salary plus bonuses how consistent have the bonuses been in the past can they be counted on to form part of the client's income in the future how are the bonuses calculated if the client earns income in whole or in part from commissions it is important to obtain a trend of that commission income over several years about five years to ascertain the stability of the client's current income and the viability of his income in the future 6.2.1.2 business income if the client is not an employee but works for himself or in partnership with others or is an employee with one organization but also has additional sources of earned income it is important to discover details of the business itself and the history of the non-employment income sources in order to assess the viability and consistency of the business income stream in the case of an employee disability income replacement insurance coverage is generally based on a percentage of pre-tax income and in the case of the self-employed on pre-tax but after expense net income however in the case of a self-employed client business expenses may also need to be taken into consideration if the business has substantial fixed overhead premises rent employee salaries Etc a separate disability business overhead expense policy may be required in addition to Insurance to replace the income of the owner slash operator himself in the case of a smaller operation a consultant or freelance salesperson perhaps whether or not overhead needs to be factored into the amount of coverage required will depend on the nature of the overhead a consultant operating from a home office May incur overhead only when he is working travel expenses Courier costs supplies Etc if so the cost of overhead does not need to be factored into the amount of coverage required during periods of disability on the other hand if the same consultant has fixed overhead a rented office outside the home a vehicle leased exclusively for business use a business accountant etc those expenses will still need to be covered during periods of disability and should probably be factored into the amount of coverage required 6.2.2 sources of unearned income when considering a client's overall sources of replacement income or income to defray medical or care expenses earned income is generally the first thing that an agent will review however passive income must also be taken into consideration income available to the client even when he is not working passive income could include income earned by other family members investment income income received as beneficiary of a trust or sources of cash flow that are not strictly income but which could be utilized as a substitute for income 6.2.2.1 income earned by spouse for couples who are married or living common law it should be kept in mind that the income of a spouse whether earned income or passive income could be considered to be passive income to the benefit of a client it is passive income in the sense that it is a source of income that could be expected to continue even if the client were disabled suffering from a critical illness or in need of long-term care it should be kept in mind however that the spousal income is in this sense family income and not an income Source available exclusively to the benefit of the client the spousal income has to be valued in the context of the overall family needs not merely the needs of the client consideration must also be given to the possibility that the spouse may have to assume the role of caregiver for an Afflicted client resulting in a reduction or elimination of that spousal income 6.2.2.2 investment income investment income interest dividends and capital gains may be earned on either registered or non-registered Investments in the case of registered Investments the income is normally locked within the registered plan and forms part of the growth of the registered plan rather than the cash flow of the client as such income on registered Investments is not normally taken into consideration in conducting an accident and sickness Insurance review interest and dividends derived from non-registered Investments May either be paid to the investor periodically or reinvested within the Investments as is often the case with mutual funds and segregated funds if the investment income is paid out to the client it becomes part of the client's cash flow and should be taken into consideration when determining disability income replacement needs if the investment income is normally reinvested a decision must be made in the planning process in the event of an emergency disability for example would the client wish to convert current investment income into current cash flow or continue to reinvest it if investment income is currently being paid to the client or would be converted from accumulation mode to payout mode in the event of an emergency it needs to be factored into an income replacement calculation both as a pre-disability and a post-disability income source allowance needs to be made however for possible Market downturns when investment values may have been depleted and it might not be prudent to liquidate assets 6.2.2.3 support payments a divorced or separated client may be in receipt of either spousal or child support payments or both these payments would be a factor in calculating both pre-disability and post-disability income since payments to the client would still be payable regardless of whether the client was disabled had suffered a critical illness or was in need of long-term care it is important to know how much the payments are whether they are taxable or tax-free income how frequently they are paid and for how long into the future they will be payable as part of the review and planning process it would also be important to ascertain the long-term ability of the payer to continue meeting his support obligations particularly if he himself was to die or become disabled an insurance review of the payer could also be an important element in an overall plan 6.2.2.4 pension income pension income government corporate or private can be a source of replacement income for a disabled earner or a resource to help defray the costs of a critical illness or of long-term care in the case of the pre-retirement client it is important to ascertain what sources of pension income can be available in the future when the pension can begin and how much would be payable at different start dates should the client become long-term or permanently disabled prior to retirement future pension income could replace much or all of his income lost to disability the amount of disability income replacement benefit would then be the amount required to fill the income gap between the date of a possible disability and the dates that the client's pensions could commence government plans will be addressed later in the chapter some offer disability benefits and or may allow for a government retirement pension to begin earlier 6.2.2.5 royalties and other income sources similar to investment in pension income ongoing royalties and residuals for past work continue to be paid regardless of the client's ability to work in the present or the future these payments must be taken into consideration in calculating the client's current and future income regardless of any potential disability or need for Extraordinary medical or lifestyle treatment or support example home care or residency in a nursing home the agent should also inquire as to the possibility that the client is or will be in the future the recipient of income from a trust or a state established by a grandparent parent or other family member or individual if such funds are being received currently it is important to ascertain the amount of trust income received annually the frequency of payments and the future duration of the payments if such payments are prospective only it is still important to record the particulars for future reference example Clarence is named as income beneficiary for his father's estate with the capital residue of the estate to be paid to clarence's children at his death at present clarence's father age 78 is alive and relatively healthy for his age so no income is forthcoming from the estate to Clarence nor is it known when such income might commence or how much it might be such speculative income cannot be factored into clarence's estate and financial planning but its potential existence still should be recorded as part of an overall review 6.2.2.6 disability income as outlined later on in the chapter the client's existing sources of disability income benefits must be taken into consideration when assessing the need for additional coverage existing sources of disability income could be private insurance plans group plans or government plans like CPP or the Quebec Pension Plan qpp workers compensation and employment insurance the availability of these disability income sources benefit amounts and duration and the qualifying definition of Disability should all be explored details can be obtained from policies group benefits booklets Service Canada or provincial agencies responsible for managing government plans 6.2.3 in-kind income not all income comes in the form of cash payments in-kind income is provided in the form of goods or services offered on an exchange basis for goods and services previously provided by the client or gratuitously most often by a close family member 6.2.3.1 contribution to Elder Care from stay at home caregiver in the case of a client in need of In-Home Care due to illness injury or the effects of Aging the care services of a living family member can be considered to be a form of income the care provided for free replaces Professional Services such care could be in the form of cooking cleaning bathing or other personal or household services that the client might not be able to perform for himself the caregiver might be a spouse child or a friend or other relative typically Living With The Afflicted individual the income provided by such Services is indirect the free care eliminating expenses that would otherwise be paid to a third party the offset to such in-kind income might be the actual income that the caregiver could otherwise earn outside the home particularly if the caregiver is a spouse or child who was previously working and contributing to the household budget 6.2.3.2 Community programs of simple similar value as family caregiver support are the free services available through government and Community associations including in-home care rehabilitative care at community centers Meals on Wheels and like services available in the client's community the simplest way to find information about the types of service available to the client is through an organization like the local Health integration networks Lin's 35 Ontario the lens can provide contact information for such services and for visiting health professionals including nurses physiotherapists occupational therapists speech-language Pathologists dietitians pharmacists respiratory therapists and Social Service workers 6.2.4 other sources of income the concept of income is classically defined as the money or other gain periodically received by an individual Corporation etc for labor or services or from property Investments Etc 36 in times of need like when a client is disabled and unable to generate income on his own savings and assets may be converted into cash flow to replace the Lost income thereby becoming a source of income in their own right 6.2.4.1 emergency funds and other assets the purpose of having an emergency fund is to have a liquid source of cash ideally three to six months worth of expenses to cover expenses in the event that extraordinary expenses should arise or regular income flow should be interrupted by disability or another health related crisis other assets may not be expressly designated as an emergency fund but if they can be accessed quickly and with little or no negative tax consequences they could also fulfill the role of or augment emergency funds 6.3 client expenses disability income replacement needs can be calculated as a percentage of income usually about 60 percent of pre-tax income since private disability insurance benefits are generally tax-free or the need can be calculated based on the amount of net income required to meet household and other expenses it is the role of the agent in consultation with the client to ascertain which approach is better in a given situation example Sophia is a freelance translator and earns on average sixty thousand dollars of pre-tax income annually her portion of family expenses such as mortgage payments and groceries amounts to two thousand dollars a month because she would not be able to continue obtaining contracts if she was to become disabled she wishes to purchase disability insurance based on an income approach her agent could recommend monthly benefits of three thousand dollars I.E sixty percent of her monthly pre-tax income sixty thousand dollars divided by twelve by sixty percent based on an expense approach her agent could recommend monthly benefits of two thousand dollars both would be appropriate and the final decision would have to take into consideration other factors such as affordability critical illness insurance benefits are usually predetermined as a lump sum based on the agent and the client's best estimate of how much might be needed to cope with a critical illness the amount of the benefits selected is often tied to lifestyle or an estimate of expenses that might be incurred but is not based on a percentage of the client's income affordability of the premiums is of course always a consideration as with any other form of insurance long-term care benefits are based on a maximum reimbursement amount expected to be required to provide the covered services there is no specific link to the client's income other than the consideration of affordability accident and sickness Insurance chapter 6 client profile 143. if the expense route is taken for computing disability income replacement needs the agent will have to solicit a variety of information and documentation from the client to get a clear and complete picture of needs expenses can be broken down into three categories black small square living expenses black small Square Savings and Investments black small square debt 6.3.1 living expenses living expenses make up the majority of outflow under most family budgets living expenses Encompass a wide range of items accommodation food light and heat car maintenance or lease payments Etc a compilation of the client's living expenses indicates the minimum amount of after-tax income from all sources required on a month-by-month basis to operate 6.3.1.1 mortgage statement or rental agreement a client's mortgage or rent payments are usually the single largest monthly expenditure usually running many hundreds or thousands of dollars each month however it is not sufficient for an agent to know only how much the client is required to pay monthly because the expense must be mapped out in the future to foresee how it may be impacted by a period of disability or illness the terms of the mortgage or rental agreement sometimes found on monthly statements such as renewability term interest rates balance outstanding Etc must be explored 6.3.1.2 bank statements most but not all other living expenses can be identified through a review of the client's bank statements over a period of one year this will tell the agent not only how much the client spends each month but on what the funds are spent and when in consort with the family budget explained below the bank statements will give a clear indication of the minimum amount required to maintain the client and his family if the agent is able to get the client to complete net worth and income and expense statements there might be no need to review the bank statements 6.3.1.3 budget not every client will have a formal budget but each one should a budget in theory at least permits a client to plan ahead for expenses and live within his means also the budget helps to give the agent a clear picture of when and where the client spends his money permitting identification of which expenses are in need to that must be provided for in a disability plan and which are nice to and can be left out of the plan if necessary the following example presents a sample budget indicating the types of income and expenses that should be tracked on a monthly basis 6.3.2 savings and Investments saving and investing are a two-sided coin in regard to cash flow in times of disability or a debilitating illness if the client has savings and investment accounts they can obviously be utilized as a capital source to replace or augment current income if earned income is curtailed due to disability from that perspective the savings or Investments are an asset however if the client is in the habit of contributing regularly perhaps monthly to these plans he may wish to continue the contributions even during periods of reduced income in order to ensure the accumulation of sufficient retirement income or wealth for his estate these plans could also be seen as a form of liability with the contributions being a cash drain similar to other personal and household expenses the best way to determine the nature and extent of saving slash investment plans is to review the client's documentation and statements pertaining to black small square registered investment accounts black small square non-registered investment accounts black small square pension plans black small square life insurance 6.3.2.1 registered investment account statements the client's registered retirement savings plans rrsps and tax-free savings account tfsas can be a source of capital to replace lost income or pay extraordinary medical or care expenses details of the plans and their Holdings can be derived from the client's regular statement for these accounts of particular interest would be black small square the balance in the account black small square the character of the individual Investments liquid or non-liquid black small square maturity dates for any term deposits and black small square surrender fees if the accounts hold mutual funds or segregated funds of course in the case of rrsp's or registered retirement income funds Rifts allowance would have to be made for tax payable on withdrawals if consideration was being given to surrendering part or all of the account to supplement lost income or to pay medical or care bills it should also be kept in mind that both Capital Investments and accrued income can be withdrawn from a tfsa tax-free if the client or a member of the client's family is already suffering from a disabling condition that qualifies for the disability tax credit DTC he may also have a registered disability savings plan rdsp rdsps are registered plans approved by the federal government to provide qualifying disabled beneficiaries with a tax-deferred savings program and support payments in their later years a disabled person is eligible to be a beneficiary of an rdsp who black small square is eligible for the disability tax credit disability amount black small square is a Canadian resident black small square is under 60 years of age if 59 the individual must apply before the end of the calendar year in which he turns 59. black small square has a social insurance number contributions are not tax deductible there is no annual limit for a private contribution to a plan the lifetime private contribution limit for an rdsp was two hundred thousand dollars in 2021. the federal government May pay a matching Canada disability savings Grant depending on the amount contributed and the beneficiary's family income the government may also pay a Canada disability savings bond into the rdsps of low-income and modest income Canadians investment income earned in the plan accumulates tax-free however grants bonds and investment income earned in the plan are included in the beneficiary's income for tax purposes when paid out of the rdsp 6.3.2.2 non-registered investment account statements most of the same considerations apply to non-registered savings and Investments as to the registered accounts with all relevant information being found on the account statements the tax considerations are different though with capital gains upon surrender of Investments being the main consideration the statements from the account manager or fund should provide the current adjusted cost basis ACB for the client's account or Investments facilitating the calculation of capital gains reportable upon surrender of assets 6.3.2.3 Pension Plan statements in the case of those approaching retirement a client's Pension Plan may be a source of income to supplement earnings lost to disability or to help to pay medical bills or the costs of long-term care a review of the client's annual pension statement should provide an overview of black small square commuted value of Pension funds on deposit to the credit of the client black small square portability of the funds black small square earliest age at which the pension may be commenced black small square whether the pension is structured to bridge coordinate with CPP qpp or OAS black small square based on current credits on hand the amount of pension payable depending on the age at which pension payments commence 6.3.2.4 life insurance statements cash value life insurance can also serve as a valuable asset the client is likely to be able to provide both the policy itself and the most recent annual statement from the issuing Insurance Company the annual statement will disclose the premium and the frequency with which it is payable annually monthly Etc the statement will also State the most recent policy dividend in the case of participating Whole Life policies and may State the cash surrender value CSV of the policy at last anniversary a review of the policy itself will likely be required to determine if the contract provides four premium holidays periods during which no premiums need be paid by the policyholder the premiums are supported by the cash value of the contract the policy will also note if there is a waiver of premium Rider in force providing the premiums do are paid for by the insurance company during a period of disability after a three to six month waiting period as such cash value life insurance could be a source of cash flow during emergencies four ways black small square annual policy dividends paid to the policyholder black small square cash value loans black small square premium holidays not a source of incoming cash but a reduction in expenses and black small square waiver of premium during disability again a reduction in expenses 6.3.3 debt a client's personal debt load is of particular interest to an insurance agent for three reasons black small square debt must generally be serviced monthly establishing one of the primary baselines for a monthly budget end therefore the minimum amount of monthly cash flow required in the event of disability black small square at some point debt must be discharged ideally at least prior to retirement age establishing a deadline for debt retirement and black small square the client's debt load is a telling indication of his ability to manage cash flow and his willingness to assume risk 6.3.3.1 personal line of credit and home equity line of credit helic statements the client may have an unsecured personal line of credit with his financial institution and or a home equity line of credit secured by his home these credit lines are amounts that the client can draw upon at any time the monthly statements for these lines of credit Will indicate the maximum amount that may be borrowed the current balance outstanding and the rate of interest applied against any outstanding balance typically only the monthly interest owing need be repaid regularly and perhaps a percentage of the outstanding principle but not the entire balance owing secured lines of credit particularly have much lower rates of Interest than Consumer Debt see next section as with credit cards the unused portion of personal lines of credit can in extreme cases be regarded as a source of emergency funds it may also be prudent to draw against these low-rate sources of capital to discharge High rate sources of debt like credit cards which often have annual interest rate charges in excess of 20 percent 6.3.3.2 credit card statements bank if Canada Research conducted in 200 and 1038 indicated that 80 percent of Canadian adults held at least one credit card and for the majority of larger purchases fifty dollars or more the credit card was the payment method of choice credit cards are available from a wide variety of sources banks credit unions retail stores and gas stations among others so odds are that a client will have at least one card the simplest way to review the status of a client's credit card accounts is to examine his three most recent monthly statements this will provide an indication of how often the client uses the cards the level of purchase is normally made the average monthly payment and whether the client discharges the balance in full each month if not the most recent statement would provide information regarding the current balance on hand and the interest charged on the balance Additionally the statement will outline any other benefits available from the issuer FED protection accidental death insurance job loss protection Etc and the statement will outline the amount of credit limits still available on the card a potential source of emergency funds 6.3.3.3 tax liabilities clients may have a variety of different tax account balances pending or outstanding that need to be taken into account when assessing the current and future financial position personal income tax the client's personal tax situation can be determined by reviewing his most recent federal income tax return and for Quebec residents the most recent provincial income tax return and related notice of assessment and any subsequent tax statements tax arrears owing if any an unpaid quarterly installments may be subject to both interest and penalties corporate income tax if the client is the sole owner of an incorporated business the agent will need to review the provincial and federal tax returns for the corporation and notices of assessment to determine whether any current tax is due or owing or the corporation as tax arrears Gulf Standard Time slash Hawaii Standard Time if the client is a sole proprietor or partner and has gross business revenues of more than thirty thousand dollars a year he will be required to collect and remit taxes details of any amounts owing current installments or arrears can be obtained by the client's GST return GST notice of assessment or quarterly remittance statements point 39. residential rental or vacation property tax if the client owns his own residence house condominium Etc or a rental or vacation property he will be required to pay property tax to his local municipality details of tax owing installments pending or tax arrears can be obtained from his annual property tax statement from his municipality and any subsequent statements 6.3.3.4 other liabilities 39. in addition to those debts and liabilities discussed above the insurance agent Should Be watchful of such additional items as black small square commitments under support agreements for a child or ex-spouse black small square actual or potential lawsuits against the client in progress or pending black small square likely need to provide financial support for family members aging parents for example in the foreseeable future 6.4 financial situation of the client aside from income sources especially those that could continue in the event of disability the biggest factor in determining a client's ability to weather the storm of a prolonged disability critical illness Etc is the soundness of the client's overall financial position does he have the assets available to replace lost income or pay for unexpected medical and care expenses or will insurance benefits be needed to fill the gap and does the client have the resources available to pay premiums for needed insurance coverage 6.4.1 net financial position a client's overall financial position is generally referred to as net worth assets less liabilities however net worth might not be quite as simple as it sounds in the following questions may need to be answered black small square should assets be valued at fair market value or on an after-tax basis black small square in terms of emergency situations can the client count on the accessibility of non-registered assets that can easily be converted to cash provided market conditions are favorable black small square by how much and for how long could assets be converted to cash flow before other key financial objectives retirement for example would be put at risk black small square should net worth be computed on a living or at a death time basis concurrently should assets like Insurance be valued at their death benefit or investment value and do additional liabilities at Death final expenses income tax Etc need to be taken into consideration it is important for the agent to ensure the approach taken is consistent throughout his analysis in order to produce a coherent recommendation 6.4.1.1 review of assets a net worth statement will ideally list all assets rather than cash flow valued at their current fair market value it should note whether the assets are registered as an rrsp for example or non-registered and provide the adjusted cost base ACB for all non-registered assets it would also be helpful if the cost of registered assets was listed to simplify identifying winners and losers if consideration must be given to liquidating Investments in terms of assessing the availability of assets to assist in emergency situations it is important to identify assets as current or not current assets would be those that could be easily converted to cash immediately or at least within 12 months certain assets like the family home should be eliminated from consideration as a source of emergency funds except in the most dire of circumstances 6.4.1.2 debt the liability statement would include such items as mortgages bank loans credit card balances and unpaid taxes included in the tax analysis should be potential taxes payable on registered funds or capital gains should assets have to be liquidated as with assets liabilities can be divided into current and long term current liabilities would include the service cost of debt whereas longer-term liabilities might include the principal value of the debt itself the key to the overall exercise is to determine two things black small square in the event of loss of earned income due to disability does the client have sufficient resources cash flow and liquid net assets to cover the income loss for at least one year black small square in the event of a medical emergency critical illness need for long-term care or emergency medical treatment does the client have sufficient resources cash flow and liquid net assets to cover medical and care expenses for at least one year the following example presents a sample format for a standard net worth statement the cash flow statement lists all sources of net income income after income tax and all expenses including debt payment for liabilities reviewing such a document with the client can assist the agent in a number of areas black small square it can provide a more detailed summary of amounts and sources of the client's income black small square if the statement shows a surplus of income over expenses it can identify possible cash flow resources to offset lost earned income or increased medical expenses black small square the expenses portion of the statement can be used to identify those cash outflow needs that must be met helping in calculating the minimum amount of accident and sickness ANS coverage required black small square if the statement shows a surplus it can be used to determine resources available to fund an ANS insurance program and black small square even if the statement does not show a surplus it could be used to identify current expenses that could be cut back freeing up cash to fund such a program the cash flow statement can be developed for a period of time as long as a year or as short as a month it is most accurate when it is backed up with a budget based on actual spending patterns the following example illustrates a cash flow statement drawn up over a period of three months 6.5 Insurance situation of the client first the agent must assess the client's level of risk of disability or other accident and sickness events and is non-insurance income and capital resources to deal with the cost of disability and the need for care this will enable the agent to assess the client's overall need for ANS Insurance protection the next step is to catalog and assess the client's current Insurance protection if any and compare that with his needs 6.5.1 personal and or group coverage in place ANS Insurance can come in many forms individual policies Group insurance coverage and protection associated with debt for example it is not only important for the agent to know the type and amount of coverage that the client currently holds but the character of the coverage as well 6.5.1.1 type of policy slash policies ANS insurance policies can be classified in different ways black small square by Source white small square individual personally owned policies white small square individual corporately owned policies white small square Group Insurance white small square individual lender-owned policies associated with debt obligations such as a mortgage or credit cards black small square by benefits white small square disability income replacement white small square business overhead white small square disability buyout white small square extended health insurance white small square critical illness white small square long-term care insurance depending on the source of the coverage there may be inherent limitations on the coverage provided for example credit card disability coverage usually only covers the monthly minimum required payment in the event of a total disability lasting longer than three months with Group insurance coverage it is important to note whether the source of protection is an employer's group or some other group plan like alumni or Association group an employer's group plan is only available to employees of the company and could terminate without rights of conversion when the plan member leaves the employee of the employer Association coverage on the other hand does not have such restrictions 6.5.1.2 characteristics of coverage it is important for the agent to document the characteristics of each source of coverage and then prepare a spreadsheet coordinating the coverage for each type of risk for each type of coverage slash policy the agent needs to know black small square the risk covered disability critical illness long-term care Etc black small square conditions covered black small square exclusions on coverage black small square the type of benefits available black small square the amount of benefits available black small square the duration or maximum amount of benefits available black small square ancillary benefits waiver of premium death benefits Etc black small square the tax status of premiums paid and benefits received black small square definitions of disability critical illness Etc black small square when coverage terminates black small square is the coverage renewable or convertible only by comparing these factors for all the client's sources of protection can the agent develop a clear picture of the client's current circumstances and assess future needs 6.5.1.3 cost of coverage lastly the cost of the coverage currently provided could be a factor in developing a comprehensive risk management plan particularly if the client has limited resources with which to pay premiums some plans like Association group coverage may be able to provide duplicate benefits to those offered by individual policies but at a lower unit cost others like credit card coverage May provide limited benefits but at a comparatively high price if these coverages are optional premium costs might be better allocated elsewhere and if the client has limited resources to commit to an insurance program triage may be necessary deciding which coverages are most critical and should therefore be retained 6.5.2 government coverage in Canada the federal and provincial governments provide a variety of programs that offer benefits to those participants who are unable to work due to injury or illness the following discussion provides an overview of the benefits available from these various government-sponsored plans the features of government plans may be updated regularly and consequently it is important for agents to stay informed of current contribution and benefit levels as well as eligibility requirements 6.5.2.1 Employment Insurance EI Employment Insurance EI formerly known as unemployment insurance UI is a federal government program that offers temporary financial assistance to unemployed workers this assistance includes providing sickness benefits 40 to people unable to work because of sickness injury or quarantine to qualify for EI sickness benefits the employee must have worked a set number of hours for a set period of time and suffered a minimal reduction in income due to sickness injury or quarantine currently requirements are to have worked at least 600 hours in the previous 52 weeks and suffered at least a 40 reduction in income due to sickness injury or quarantine in 2021 EI paid a maximum benefit of 595 dollars per week based on 55 percent of the average weekly eligible income a benefit of up to 80 of the average weekly eligible income can be payable if the employee is the head of a low-income family EI sickness benefits start on the eighth day of disability after a one-week waiting period and are payable for a maximum of 15 weeks so they will not likely be a major portion of most clients disability program additionally EI is a second payer to most other forms of disability benefit CPP qpp workers compensation Group Insurance except personally owned disability policies there is a dollar for dollar offset for other disability benefits so no benefit would be payable if an amount equal to the maximum benefit was received from other sources except privately owned policies EI contributions are based on the employee's eligible income and are shared between the employer and the employee based on provincial annual contribution rates residents of Quebec have a lower contribution rate since a provincial parental insurance plan is in place qpip self-employed individuals may voluntarily choose to participate in the plan they must pay 100 of the employee contribution but do not have to pay the employer contribution 6.5.2.2 Canada pension plan CPP Quebec pension plan qpp in addition to paying retirement benefits the Canada Pension Plan CPP and Quebec Pension Plan qpp also offer disability benefits to plan members under the age of 65. CPP is a contributory plan operated by the federal government for the benefit of all Canadians residents outside the province of Quebec the qpp is a Quebec provincial plan operated exclusively for the benefit of Quebec residence point 41. these plans disability benefit is payable to plan participants who have a disability injury or illness that qualifies as severe and prolonged a severe disability is one that prevents the plan member from working in any capacity not just the capacity in which he was working prior to the disability a prolonged disability is one which will be long-term usually permanent and or which is likely to ultimately result in death evidence of the disability must be supported by a doctor's report example Tim and Tom are twin brothers age 45 working in the logging industry in Alberta until last year they both worked in the field trimming and cutting down trees unfortunately the two were involved in a serious automobile accident last year while on their way to a job site Tim suffered severe and permanent nerve and muscle damage to his right arm and is no longer able to work in the field fortunately he was able to secure an administrative position in the logging company's head office albeit at a lower salary because he is still able to work Tim would not qualify for CPP disability benefits Tom was more severely injured in the accident suffering permanent debilitating spinal damage due to reduced mobility and chronic pain Tom is unable to work in any capacity and unlikely to recover Tom would qualify for CPP disability benefits contributions to the plans are based on qualifying income and are shared 50 50ths by an employer and employee or paid 100 by the self-employed where payment of disability benefits is approved the benefits are payable for each month commencing with the fourth following month in which the plan member became disabled they are payable until the earlier of black small square recovery of the disabled plan member black small square disabled plan member reaches age 65 or black small square death of the plan member at age 65 the disability benefit is automatically converted into a retirement benefit the CPP and qpp determine a maximum disability benefit and a maximum retirement benefit 6.5.2.3 workers compensation workers compensation is provided mainly by provincially operated plans providing disability benefits to those qualifying employees who suffer a loss of employment income due to an injury incurred on the job or a workplace related illness such as asbestos or chemical poisoning contributions are paid 100 by the employer as a payroll tax benefits vary by province but average 80 to 90 percent of pre-disability net income 6.5.2.4 tax treatment of contributions paid and benefits received under government programs the tax treatment of contributions paid and benefits received under the three public insurance and pension plans varies by type of plan and with who is the payer of the contributions table 6.1 and 6.2 provide a brief summary of the tax rules 6.6 client profile finalized once the agent has developed a clear picture of the risks that a client May face in the resources including insurance that he currently has to meet those risks the process can begin of prioritizing needs and drafting recommendations to meet those needs it is important that the recommendation take into consideration the various types of client needs black small square needs based on personal factors such as age and gender occupation and advocation as well as health black small square needs based on financial situation including the availability of financial resources to meet health-related risks such as disability illness and need for medical care black small square needs based on existing coverage prioritization of coverage needs is firstly based on the client's personal circumstances factors associated with the client such as age medical history occupation avocation and health that are likely to make him more prone to what types of risk all of these issues must be explored and taken into consideration when an agent is developing a personal accident and sickness risk management program for the client once the client's risk factors have been identified and assessed the next step is to assess the client's Current financial ability to cope with those risks it must be determined whether the client has the financial resources to deal with the consequences of risk without resorting to ANS insurance if the answer to this question is either no or not entirely consideration must be given to appropriate insurance coverage assuming that the client has some form of existing insurance coverage the nature and extent of coverage provided must be compared to the risks identified and appropriate recommendations made there are four possible scenarios the existing coverage is complete adequate and entirely appropriate in this case there is no need for an additional coverage it is always more prudent to leave current coverage in place if it fully meets the client's needs there is an unnecessary surplus of existing coverage Surplus coverages by definition unnecessary and an unproductive expense it should be avoided by modifying existing coverage the existing coverage is adequate but there is overlap among sources most sources of insurance protection have an all-source maximum provision in their contracts that limit the amount of benefits that the insured can receive from all sources if existing coverage exceeds those limits then the insured's attention should be drawn to the fact that benefits may be scaled back ingly black small square there are gaps between needs and the existing covera