Expensive and rising healthcare costs are no secret to financial advisers whose clients are approaching or are in retirement. What usually is planned for and discussed less frequently, however, is how unexpected medical and related expenses in connection with accidents can have a devastating impact on investment accounts, particularly for younger clients.
Most people are aware that an accident can happen, although they rarely think it will happen to them. Yet an estimated 3.14 million Americans were involved in an auto accident in 2016, according to the National Highway Safety Administration, which underscores how common they are.
Consider the case of Sonya, a 35-year-old single professional with more than $600,000 in her investment account.
Sonya was driving home from work one day when an uninsured motorist ran a traffic light and plowed into her new, $50,000 convertible. The car was totaled and Sonya was severely injured. She was rushed to the hospital, required surgery for several broken bones, and then went to a rehab facility for physical therapy after being released.
Fortunately, Sonya’s medical coverage at work covered her hospitalization and rehab stays, as well as at-home visits during her recuperation. And her own auto insurance policy paid for a new car. But Sonya was unable to work for a year. And while her employer-paid short-term disability insurance covered about 65% of her lost income for three months, she had no long-term coverage and had to pay many health-related expenses out of pocket.
In all, she had to forego $120,000 in income, had to pay $10,000 in medical expenses not covered by her plan and spent $65,000 for at-home assistance during her recuperation.