Inadequate Life Insurance Leaves Spouse With Less - VIDEO

I came across this short video on YouTube talking about how much and what type of life insurance may make sense for you and your family.

What was very interesting was how much this reporter recommended each family consider insuring themselves for. The key he says is that there is no definitive answer for everyone, but that a true needs analysis be completed and reviewed on a regular basis. After all, how can you know how much coverage you need if you haven’t gone through the process of using a Financial Needs Analysis to help you determine that number.

Take a look at the below video to learn more about how much you need, how much your family could be out if something happened to the primary income earner, and what type of life insurance products are available.

This is a great life insurance summary in only one minute and 46 seconds.

Until next time, have a Magnificent Monday!

Chris

Use Life Insurance to Enhance Your Retirement

Life insurance is typically thought of as something that only benefits your family, not you.

Although the above statement is accurate, it can also benefit you…today. Many Canadians have used life insurance to supplement their retirement income through what’s called an “Insured Retirement Program” (IRP). An IRP is a financial planning strategy that usually offers tax-free supplemental retirement income through tax-exempt life insurance.

Typically with an IRP, the client buys a permanent life insurance policy (for example Universal Life or Whole Life) and deposits monies above and beyond the premium charges associated. The excess annual deposits are invested and benefit from tax-deferred growth. Upon retirement, the insurance policy is used as collateral to secure a loan through the bank, set up much like a Line of Credit. The lender then provides the borrowed funds tax-free to the client to supplement their retirement income.

Your Take-Away: If you are looking for a way to supplement your potential retirement income, have come close to maxing out your RRSP’s or simply don’t like them, and need a place to put some extra cash above and beyond your RRSP savings, this may be the perfect strategy for you.

If you fall into any of the above categories, you could benefit in the following ways:

Again, this is not a one size fits all strategy, but it can be very useful for those in specific situations. After all, it’s always better to save a dollar in tax then to increase your income by a dollar, isn’t it?

Until next time, have a Magnificent Monday.

Chris & Elisseos

What is Critical Illness Insurance?

Recent reports of individuals whose medical costs were not covered through provincial or personal medical insurance plans have caused many to wonder about their financial affairs in the event of a serious illness.

Unlike traditional life insurance that pays a lump sum at the time of death, Critical Illness Insurance (CII) pays a lump sum benefit upon the diagnosis of a critical illness, such as cancer, heart attack, or a stroke. It was designed to help meet the high costs associated with serious illness, and to help you maintain your lifestyle during and after recovery. Upon diagnosis of a critical illness, there is a brief waiting period – often as little as 30 days. Once this expires, the policy pays out a lump sum cash benefit. The choice of how to use the benefit is yours, and it is tax-free.

Your Take-Away: It has been reported that 1 in 4 Canadians will be diagnosed with Cancer prior to their 65th birthday. If you happen to be one of those unlucky Canadians, the last thing you want to have to deal with as a family are the high medical costs that can be associated with getting better. Because your benefit is tax free, you can choose to use your payout in the following ways:

  1. Taking advantage of special treatments, alternative therapies or immediate surgery that may only be available in other countries such as the U.S.
  2. Modifying your home or vehicle to meet any mobility requirements as a result of the illness
  3. Allowing a spouse or family member to take a leave of absence from work
  4. Reducing overall financial stress

This product, although not new, is something that has only recently been gaining significant press in Canada.  I can say without question that this is something you and your family should be looking at in order to protect the financial future of those you care about.

Until next time, have a Terrific Thursday.

Chris

How do Life Insurance Ratings Work?

A fantastic article at Canadian Business Online was posted entitled “Life Insurance: On The Edge”.

The author Dan Bortolotti tells two stories of individuals who applied for life insurance. One applicant was declined for life insurance because of evidence in his medical stating that he may have diabetes which was news to him, that he later confirmed was the case. The other applicant was told he would be heavily rated for life insurance based on his personal hobby of flying planes. The basic premise of the article is that understanding what life insurance companies look for is essential prior to applying for coverage.

Your Take-Away: According to the article, approximately 60% of applicants are provided with standard rates which should be the premium your Advisor or Broker is quoting you. On the flip side, almost 30% of applicants will actually be considered a preferred client and will pay a smaller premium then a standard policy. What’s scary though is that the remaining 10% of applicants will be outright denied coverage or given a rating based on their health.

The long and short is that if you do end up one of the unlucky few that is declined or rated when applying for life insurance, my recommendation is that you shop the market first, and then take your best offer. After all, the insurance company will look at issues such as your own personal health, your personal hobbies and your family history which means they are making a very educated decision. If you’re rated, it’s probably because you need the life insurance coverage more then the average person.

Until next time, have a Terrific Tuesday.

Chris & Elisseos

Life Insurance Explained: How Much is Enough? (Part 5 of 5)

In the final post of our “Life Insurance Explained” series, we want to answer the question “How much is enough?”

There are many different ways to determine how much life insurance is needed, but it is essntial to know that there is no “one size fits all” formula. Each situation is different and it is important that the formula you use to define this all important number is specific to your own situation.

Your Take-Away: Of the different formulas that are available, let’s look specifically at two of them.

The first formula that some of the more experienced generation of Advisor’s use is to simply define the income you would want replaced and then determine how much capital is required to provide that income stream at an assumed interest rate. For example, if you lost your Spouse or Partner and you needed a $100,000 income to properly maintain your lifestyle, you would need approximately $2,000,000 of capital invested at 5% to earn the before tax income you are looking for.

The second, and somewhat more specific formula is to actually take into consideration items such as your assets, liabilities, income needed AND for how many years that income is needed. The best way to use this formula is to work with a life insurance calculator. Most banks, insurance or investment companies all provide this tool for consumers and it is definitely worth referencing when trying to determine what you require. One great calculator for this purpose can be found on the Manulife Financial website.

In the end, it is always best to seek the advice of a qualified Professional, but it definitely doesn’t hurt to learn for yourself how these assumptions are used and how much life insurance actually is enough.

Until next time, have a Terrific Thursday.

Chris & Elisseos

CBC Exposes Bank Mortgage Insurance

VIDEO: The CBC Reports on Mortgage Insurance

The above video was put together by CBC is a tremendous example of the downfalls of purchasing ortgage Insurance through your bank.

As a Mortgage provider, we have done our research and are well versed on the difference between opting for the mortgage insurance provided through your lender and owning personal life insurance for the purpose of your mortgage. In fact, that is why we recommend that each of our mortgage clients purchase personally owned life insurance for this purpose. We know that almost all individuals will save money on the premium, but that is only one part of the many benefits that exist.

Your Take-Away: As a home owner, it is 100% in your best interest to explore your options. If you choose to own personal life insurance for your mortgage over the lenders mortgage insurance, you will benefit in the following ways:

  1. Ownership: You will own the policy and thus choose your beneficiary as opposed to having the bank as your beneficiary
  2. Portability: Your mortgage insurance will go with you whether you buy a new home or change lenders as opposed to having to reapply if you change lenders
  3. Level Benefit: You will receive the benefit you apply for at claim time as opposed to simply having your mortgage paid off at whatever value it is
  4. Underwriting: We underwrite at the time of application which means you are approved once you receive your policy as opposed to doing the bulk of the underwriting at claim time

Enjoy the video, and don’t forget that it is well worth your time to do a bit of research before simply “signing off”.

Until next time, have a Terrific Tueday.

Chris & Elisseos

Life Insurance Explained: Universal Life Insurance (Part 4 of 5)

We have looked at both Term Life Insurance and Whole Life Insurance previously and today we want to better understand how the two of them helped to create Universal Life Insurance.

In some ways, you can look at Universal Life Insurance as a “hybrid” product combining the best of both worlds when it comes to Term and Whole Life. With this type of insurance, the objective is to pay an Estimated Level Premium (ELP) that will stay level for life or the period of time you select. Inside of this policy are two primary components; namely the Cash Surrender Value (CSV) and the Insurance cost. Depending on how you structure this, you can use it to protect you and your family with a level Cost of Insurance option that is guaranteed for life, or you can use it to create wealth for yourself by over funding this policy and by using an Annual Renewable Term cost of insurance.

The reason this is considered a hybrid product is because the insurance industry has combine both a term insurance component with the ability to over fund your policy and thus create a cash value. The difference in this case is that the premium you pay is not guaranteed and is based on the success of your investment choice and of course the market.

Your Take-Away: This type of life insurance can used for someone who wants a level cost of insurance from now until death but who may want to take advantage of the tax shelter it provides or “pay it off” in a certain time period. The level cost of insurance is guaranteed within the policy, however it is important to note that your premiums are not. This can also be used for someone who may or may not have a need for life insurance but who has extra cash flow that are looking to protect their assets from the tax man or creditors.

Again, this form of life insurance can be a great vehicle for many Canadians, but it safe to say that this structure will not make sense for everyone. Each situation is different and understanding your options and financial status is key to helping you make the right decision on what “concept” or product is right for you.

Until next time, have a Terrific Tuesday.

 Chris & Elisseos

Life Insurance Explained: Whole Life Insurance (Part 3 of 5)

In the third part of our series, we want to Whole Life Insurance and explain how it works and who it is most suitable for.

Whole Life insurance is one of the oldest forms of life insurance in Canada. In most cases, it provides a guaranteed level premium for life combined with a guaranteed cash value. Depending on the company of choice, Whole Life insurance can also “participate” in the company’s profits in which case the term “Whole Life Par” is used. This participation, in the case of a positive year for the insurance company, is typically paid out in the form of a Dividend and can be used to add to your cash value or simpy purchase “Paid Up Life Insurance”. To use an analogy, it is similar to owning a fixed income or GIC based life insurance policy that provides a number of different guarantees.

Your Take-Away: This form of life insurance is used in a number of different circumstances. For example, if you are looking for a safe, alternative investment vehicle, or simply want to leave money to your heirs without being dependant on the market, this can be a great opportunity. It is also used in some cases for individuals who are looking for basic life insurance that will last a life time and will not fluctuate in terms of premiums or cash value.

Another situation where this may be very suitable is for an individual who has a life insurance need for estate planning purposes but has taken a lot of risk with his other investments such as Real Estate, his own business, or even his overall portfolio. This product can provide the life insurance required based on his needs, but can completely eliminate any risk in terms of market volatility. In other words, it can be considered the fixed income component of this person’s overall investment portfolio.

In the end, knowing your options is essential and do not hesitate to ask your Advisor to explain everything before making a decision.

Until next time, have a Magnificent Monday.

Chris & Elisseos

Life Insurance Explained: Term Insurance Insurance (Part 2 of 5)

Today marks the second installment of our “Life Insurance Explained” series.

 Let’s take a look at how Term Life Insurance works and what situations it is most suitable for.

The basic concept you need to know when it comes to owning Term Life Insurance is that you are in effect “renting” insurance the same way you would rent an apartment or a home. The reason I say this is that your costs are much lower in comparison to other life insurance options, and your primary benefit is the protection and coverage you applied for. There is no cash value or way to “get back” your premiums, but it will be paid out on death assuming it is still in force.

Your Take-Away: Term Life Insurance is most commonly used for short term needs, such as a mortgage or debt requirement, and is also used when monthly cash flow is an issue. In most cases, this is a product that is made for the masses as it is affordable for almost anyone and will provide the protection and coverage needed which is the entire purpose of life insurance.

If you are looking for Mortgage Insurance, this is unqestionably your best option and in some cases it can save you hundreds of dollars a year over the banks offer. Term Life Insurance is a true life insurance policy and will provide exactly what you need when you buy life insurance, protection from an unexpected death.

Until next time, have a Magnifcent Monday!

Chris & Elisseos
 

Life Insurance Explained: Intro (Part 1 of 5)

It seems as though the only thing everyone knows, or at least thinks, is that life insurance is a necessary evil.

It never ceases to amaze me how many Canadians are constantly looking for anwers in respect to Life Insurance, yet struggle to find what they are looking for in an easy to understand manner. Because we want to help our readers learn and grow in respect to their financial IQ, we will attempt to make Life Insurance something that makes sense to Canadians, and thus provide a Life Insurance 101 class of sorts.

Your Take-Away: Throughout the next week or so, I will focus on four specific topics surrounding this very “necessary evil”. I will address both the “how does it work” question and the “what makes the most sense for me” question in respect to the following four topics:

  1. What is Term Life insurance all about?
  2. What is Whole Life insurance all about?
  3. What is Universal Life insurance all about?
  4. How do I know how much Life Insurance I need?

If you have ever asked the above questions or tried to figure out what your various options are, this series is just for you. I am more then willing to answer additional questions in respect to life insurance and would be happy to discuss other topics regarding life insurance if you’re interested. Just let me know.

Until next time, have a Terrific Tuesday!

Chris & Elisseos

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