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5 Reasons To Consider Life Insurance

Tim Cestnick is a well respected writer and columnist with the Globe and has recently written a great article entitled “Five Reasons to be Nice to Your Insurance Agent”.

Despite the fact that the title of this article comes across as very “Agent Focused”, Tim actually focuses on five great reasons to consider owning life insurance. The five reasons that Tim discusses include:

  1. Provide for Others
  2. Cover Final Disbursements
  3. Provide Equitable or Larger Bequests
  4. Shelter Income From Tax
  5. Maintain Business Health

I really enjoyed this article because Tim provides a very “birds eye view” of life insurance and some of it’s core and primary uses overall. The one that really sticks out to me however is point four entitled “Shelter Income From Tax”. After all, we live in a country where we can pay up to 50% of our income back to the Government in the form of taxes, so why wouldn’t we want to explore all of our tax shelter opportunities?

Your Take-Away: Life insurance is a topic that is not easily discussed in general conversation, and rarely ever praised. That said, the basic reason people purchase life insurance is love, and if you’ve ever received a life claim as a result of a loved ones passing, you have likely become a big advocate.

The good news however is that whether you want to purchase life insurance for others or not, it is still very much worth your time and effort to understand how it works and more importantly, how it can save you literally thousands of dollars of tax in a year. Most of us really aren’t aware of these kinds of benefits and how to properly structure life insurance for this purpose, but after looking at the facts and the numbers, you may just find that you’ve piqued your own interest!

Until next time, have a wonderful long weekend!

Chris

1 Year Fixed vs. a Variable Rate?

With interest rates holding true based on the Bank of Canada’s recent announcement, a question that people are asking is should I consider a one year fixed rate or a variable rate mortgage?

Here are some things to think about:

  1. Today’s variable-rate mortgages still have higher interest rate premiums relative to those in the past
  2. A 1-year mortgage doesn’t lock you into a rate for 3-5 years which means you can refinance in 12 months when (hopefully) discounts to prime might be back
  3. The rates are comparable: Variable and 1-year mortgages are both based on short-term interest rates, so they move together over time
  4. In some unique cases, rates on 1-year mortgages are better than today’s best variable rates
  5. The most flexible 1-year mortgages are convertible into a fixed OR variable rate at any time, and at no cost
  6. 1-years give you a chance to haggle with your lender again in 12 months which may or may not be a positive for you
  7. If rates go up in the next 12 months, you’re protected for the remainder of the term in a fixed-rate mortgage
  8. If rates steadily climb over the course of five years, 1-year terms could help you come out further ahead because 1-year rates reset slower than variable rates—which is helpful when rates are rising
  9. 1-year payments are fixed for a longer period of time than variable payments which makes budgeting easier

Your Take-Away: Any time you are making a decision regarding the term and structure of your mortgage, it is imperative to take into account all of your options along with the pros and cons of each. The truth is, there is no “one size fits all” solution which is why a proper consultation can prove to be so beneficial and necessary.

After all, the only way to truly know which term or structure is best for you is to a number of different variables including your epected time in your existing home, your current cash flow needs and flexibility, your overall goals and objectives in terms of your mortgage, and so on. Don’t think that just because one option may have a better rate then the other that your answer is easy…there is far more to this decision then just looking at the rates.

As always, have a Terrific Thursday!

Chris and Elisseos

Canadians are Behind on Their Credit Payments

Equifax Canada recently released information stating that more then half a million Canadians are continuing to fall behind on their credit payments.

In their report, they went on to say “The average delinquency rate for Canada rose by approximately 19% over a one-year span from May 31, 2008 to May 31, 2009…This means that over a half a million Canadians are now more than 90 days behind on their credit payments.”

What’s even scarier to me is that Equifax claims “The sharpest increase has resulted from Credit Card and Sales Finance purchases, which have increased by 38% and 58%, respectively, since May 2008. Such transactions typically represent the purchase of durable goods, such as furniture or electronics, and consumers appear to be willing to fall behind on them first before they miss payments on their Bank Loans and Lines of Credit.”

You’re Take-Away: This information may not be news to you, nor may it make any difference to you if you’re one of those lucky few who are able to live debt free or at least manage your debt payments. The one lesson that stands out to me however is that we need to be learn to manage our cash flow better, for the sake of our financial futures and credit ratings.

After all, the reality is that those falling behind aren’t doing so in terms of their mortgages or lines of credits mainly. In fact, they’re falling behind on payments that have resulted largely from consumer purchases, which I like to call, consumer wants. The financial companies that offer no interest or payments for a year or more are still making money or they wouldn’t offer the program in the first place. Read the fine print. If you miss your payment by a day, they will back charge you for the entire period of time that you haven’t paid anything with interest rates as high as 24% and more.

The long and short, if you’re going to purchase anything using a store issued credit card, make sure to make a note and pay that purchase off at least one week prior to the deadline. If you don’t, you will see your bill jump dramatically and possibly join the Canadians mentioned above in the Equifax report.

Until next time, happy spending and have a Terrific Tuesday!

Chris