Most people do not plan on having a chronic illness. Therefore, they do not put a financial plan in place to cover a chronic illness.
However, if you develop an illness and do not have a plan, there are still steps you can take to prepare for a modified future.
Let’s talk about a few areas where you can focus your attention, whether you are currently sick or not.
Keeping track of your monthly income and expenses is a standard, recommended practice. But it is especially helpful for people who have a chronic illness.
Most people who become sick have not had to think about managing higher medical bills and costs associated with the illness, such as: loss of income if you cannot work or you have to reduce your hours, someone to care for you if you do not have long-term care or disability insurance, and transportation if you cannot drive yourself to doctor appointments. If you are retired, then you may have to depend on some of your social security benefits, savings, or investments to help pay your bills if you become sick.
By establishing a new budget, you can reduce the stress of making sure your bills are covered and build a solid foundation for the future. You may even want to consider setting up automatic bill payment or pay your bills online to ensure you do not miss a payment. If you need help managing your money, then you can set up a power of attorney to authorize someone you trust to act on your behalf.
If you have done any sort of budget or financial planning in the past, then you likely were told about the importance of emergency savings – a reserve of liquid cash for surprise expenses.
Generally, advisors tell you to put away three to six months of your salary, but if you already have a chronic illness then you may want to put away more to cover higher medical expenses and replace the income you lose if you cannot work.
If you are retired and you develop a chronic illness, then you may not want to purchase disability insurance. This is because you must be earning income at the time you get sick, in order to receive disability benefits. However, if you are earning income at the time you get sick and you already have disability insurance, then your policy may provide you with up to 60 percent of your normal income when you cannot work due to an extended illness (although it covers day-to-day expenses, not medical bills).
So for those of you who are employed and not currently dealing with a chronic illness, disability insurance may be right for you.
Long-term Care Insurance
Long-term care insurance can be a blessing if you develop a chronic illness, because it lessens the financial burden of out-of-pocket medical bills. To take advantage of the benefits, though, you need to sign up early enough and before you become ill. Most plans are difficult to qualify for if you are too old or are already sick.
If you already have a chronic illness but you do not have long-term care insurance, then there may be alternatives to help you afford your medical care and day-to-day expenses without emptying your savings or retirement accounts.
Most people think of estate planning as something that you do for after you die, but a living trust can be established to help you while you are alive. A living trust allows you to control your property (this includes finances, homes and investments) and, if you choose, name a co-trustee who can manage the assets if you become unable to do so.
Consider a New Financial Plan
Whether you have a chronic illness or you want to plan for the “just in case”, it is best to speak with a financial advisor before you set up any accounts, enroll in insurance, or assign powers of attorney. An experienced advisor can make sure you understand all your options and help you make sound decisions that give you financial confidence.