Flying south for the winter

As the days shorten and temperatures drop into the single digits, the thoughts of many Canadians turn to the idea of spending at least some part of the upcoming Canadian winter somewhere much warmer — most often, in one of the southern US states. And, while the less than robust state of the Canadian dollar relative to US currency has required Canadians to downsize some of those plans, it is still the case that thousands of Canadian “snowbirds” fly south during the worst of the Canadian winter.

Wherever they are going, and however long they are staying, it’s safe to say that the thoughts of those snowbirds are on enjoying the warm weather and the sunshine, and that the potential financial consequences or income tax issues raised by their trip down south are not top-of-mind.

There is, however, one issue which every single person who travels out of the country — to any jurisdiction, for any length of time — must take care of, and that’s the need to obtain travel medical insurance. There are no circumstances in which it makes sense to leave Canada without such insurance in place: it is, in a word, foolish to leave Canada without ensuring that travel medical insurance in securely in place.

A lucky few (and increasingly fewer) individual Canadians may already have the needed coverage through their employer or, for retirees, their former employers. For those who don’t (or those who do but wish to augment such coverage), the solution is to obtain private travel medical insurance coverage. There is no shortage of companies offering such plans and the terms and conditions of different plans vary greatly. Consequently, it’s not really possible to provide one-size-fits-all advice with respect to obtaining such policies, with three exceptions.

  • First, it is critical to determine the extent of the coverage provided, particularly when it comes to pre-existing medical conditions. Coverage exclusions in travel medical insurance policies almost always relate to conditions which the applicant already has — and, of course, those are the conditions which are most likely to give rise to the need for out-of-country medical treatment.
  • Second, it’s important to be very clear on the requirements for information — particularly medical history — which must be disclosed as part of the application, in terms of both detail and time period. It was formerly the case that applicants for travel medical insurance were required to provide details of their medical history for the previous 12 or perhaps 24 months. However, those requirements have changed for some policies or some insurers, and it’s sometimes the case that an applicant is required to provide information ranging across his or her entire lifetime medical history. For any kind of insurance, coverage can be denied where the information provided on the application form is not accurate and complete, and insurers have denied coverage where medical history information was omitted, even if that information wasn’t even known to the applicant. In light of that, and given the potentially ruinous financial consequences of a denial of coverage, it’s not at all a bad idea to have an insurance broker or even a lawyer review one’s application for a travel medical insurance policy to make sure that there will be no unpleasant surprises when and if a claim for coverage is made.
  • Third, anyone applying for travel medical insurance should be clear on whether the issuer of a particular policy will pay out-of-country medical expenses directly, as they are incurred, or will require the insured to make payment upfront, and seek reimbursement after the fact. While the cost of a trip to an emergency department for a few stitches may be within the financial reach of most snowbirds, the cost of medical care for more serious events — like a heart attack or a stroke — can quickly run into the tens or even hundreds of thousands of dollars. Few individuals have the financial means to cover such costs out-of-pocket, even by using available sources of credit.


For snowbirds who are seeking the sun for only a few weeks, obtaining travel medical insurance is likely the biggest item on their to-do list before leaving. For those who are planning extended stays down south for a few months, or even the whole winter, other considerations can come into play.

On a very practical level, such snowbirds need to think about how they will access funds needed to live out of the country for an extended period. Many snowbirds are eligible to receive monthly payments from both the Canada Pension Plan (CPP) and the Old Age Security (OAS). Fortunately, it’s relatively easy to arrange for payment of both while down south, as payments of both CPP and OAS benefits can be made by direct deposit to an account at a US bank where the Canadian recipient is located. Funds deposited in this way are converted to US dollars prior to deposit, and the exchange rate used by the Canadian government will typically be better than most which can be obtained locally.

The other issue which snowbirds who are planning extended stays down south must consider is that of Canadian residency. Canada, unlike the United States, taxes individuals on the basis of residency, and individuals who spend a significant amount of time out of Canada during the year need to consider the effect that might have on their status as Canadian residents.

Fortunately, most snowbirds, even those who spend the whole winter down south, won’t have a problem since most of them will continue to be what’s called “factual residents of Canada”. There is no single test for whether an individual is a factual resident of Canada — rather, the determination is made based on a number of factors which measure the extent to which an individual has continued to maintain “residential ties” to Canada. The most significant of those factors include keeping a residence (whether owned or rented) in Canada, and having a spouse or dependents here. Where any of those three are the case, that’s usually enough for the Canadian tax authorities to conclude that an individual remains a factual resident of Canada. So, for example, in a typical scenario in which a retired couple spends three or four months each winter in Florida, leaving their Canadian home to be looked after by their children, there’s no question but that the retirees are factual residents of Canada, and their annual stay down south has no effect on their Canadian tax rights and obligations.

The vast majority of snowbirds who winter out of the country do maintain sufficient residential ties to Canada to be considered factual residents. Consequently, when they file their tax returns for the year, they follow all the same rules as year-round Canadian residents, reporting all income received during the year from both inside and outside Canada and claiming all available deductions. And, as an added “perk”, travel medical insurance premiums paid to allow the snowbird to winter down south without worry are deductible from income for Canadian tax purposes.

The information presented is only of a general nature, may omit many details and special rules, is current only as of its published date, and accordingly cannot be regarded as legal or tax advice. Please contact our office for more information on this subject and how it pertains to your specific tax or financial situation.

Posted: Friday, November 10th, 2017 | Categories: Individuals.

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