Friday, September 28, 2012

Is mortgage or term life insurance the best choice for you?

Whether you're buying a home for the first time, or refinancing an existing mortgage, someone has probably suggested you purchase mortgage life insurance. But don't rush into buying a policy until you've looked at all the possibilities. You could end up saving money and getting added life insurance coverage at the same time by purchasing a term life insurance policy instead.

What is mortgage life insurance?
Mortgage life insurance, also known as mortgage insurance or creditor insurance, is offered by most banks and lending institutions. It is a life insurance policy that pays the balance of your mortgage to the lending institution if a person listed on the mortgage passes away.

Mortgage life insurance vs. term life insurance

Depending on your age and health, the premiums on mortgage life insurance can be much higher than what you would pay for a term life insurance policy. Take a look at these price comparisons for $250,000 coverage:

For a couple aged Monthly bank mortgage insurance premiums* Term 20 monthly life rates**
30  $    53.68  $   36.70
40  $    84.75  $   55.31
50  $    180.80  $   135.89
* Based on the information available in September 2012 from the website of a major Canadian bank (including HST.)
**Based on the best rates available for joint coverage (male and female non-smokers) in September 2012, from a major Canadian Life Insurance company (including HST)

What do all these numbers mean?
Well, these numbers suggest that a couple buying or refinancing a home can get a better life insurance rate if you chose a term life insurance policy over a mortgage life insurance policy from your lender. While getting mortgage insurance through your lender is convenient, a term life insurance policy might be the way to go if you're looking to save money.

Extra coverage with term life insurance
A term life insurance policy gives you added coverage and flexibility over a mortgage life insurance policy:

  • The beneficiary of a mortgage insurance policy is the bank, whereas your family receives any payout from your term life policy directly. This gives them the flexibility of using the money to pay off debts, or, if they can still carry the mortgage payments, they can use it for investing and securing a future income.
  • Mortgage insurance policies only cover you for the amount of your mortgage you owe to the bank. As you pay down your mortgage, your coverage amount decreases with it. This is called a reducing balance. With a term life insurance policy, you have a constant level of coverage for the whole term and are getting better value for your monthly payments.
Shop, compare and save

When purchasing your new home or refinancing your mortgage, take the time to compare the cost of a term life insurance policy to a mortgage insurance policy. Chances are you'll find a term life insurance policy will have lower yearly premiums and offer more coverage and flexibility than a mortgage insurance policy.  Please e-mail us, call us, or visit 

Thursday, September 20, 2012

Guaranteed Investment Funds or Mutual Funds - what's the difference?

There are several differences between Mutual Funds and Guaranteed Investment Funds.  "GIFs" are are offered through Insurance Companies and offer many features and benefits that Mutual Funds do not, including:

A Maturity Guarantee
The maturity guarantee gives an investor the option to choose a guarantee of 75% or 100% of his or her net investment.  When he or she cashes in the GIF at a specified future date (usually ten years), he or she will receive the greater of the guaranteed amount or the current market value.  This feature provides long term protection from poor market performance while providing the opportunity to participate in the upside of good market performance. It is also useful if money is borrowed to invest.   

A Death benefit Guarantee
Death guarantees are similar to maturity guarantees but do not have a time requirement as the net investment is guaranteed on death. This is a very useful estate planning tool to protect funds to be passed on to loved ones if the investor were to pass away in a down market.

Protection of Market Gains - Resets
Either twice a year or on the investment anniversary date, there is an option to lock in all the gains to date, which resets the guaranteed amount at a higher level. So if the market is down, the investor is still protected by his or her original guarantee.  If it is up, the gains can be locked in.   

Avoiding Probate
Upon the death of the investor, Guaranteed Investment Funds flow to the beneficiaries without going through probate.  By avoiding the probate process, the funds are not tied up for months or longer.  Rather, they pass to the beneficiaries in days or weeks.  In addition, probate tax is avoided.  On a $1 million estate, probate tax would be just under $15,000 in Ontario. 

Creditor Protection
Provided that the investment is made before any creditor issues are apparent and the decision is a sound investment decision, then the creditor protection applies.  This is a particularly useful feature for business owners. 

Competitive Fees
For investors with $250,000 or more, there are offerings that carry significantly lower fees than the average mutual fund.  The MER or Management Expense Ratio, of these funds can be under 2%, including all of the features outlined in this article. 

We are here to help if you have any questions as do your investigation. You can request a call at a particular time by sending us an e-mail, or call us at the phone number on our web site and we will answer or get right back to you.  

Friday, September 14, 2012

Building guaranteed income for retirement

Is there a straight-forward, low-risk investment that allows you to convert your retirement savings into a source of dependable income that you can’t outlive?  Whether you’re building for your retirement or are in the retirement stage of your life, you can set up a Personal Pension Plan to supplement existing guaranteed income sources or to create a new income source on which you can rely.

Retirement today
The face of retirement is changing and it’s important to ensure that you’re financially prepared for a long retirement. With Canadians living longer it means you might spend as much time in retirement as you did working. That’s why your retirement income strategy should ensure that you don’t outlive your retirement savings.

There are some people who don’t need to worry about outliving their retirement savings – those fortunate enough to have access to company-sponsored guaranteed pension plans, also known as Defined Benefit Pension Plans. But today, the majority of Canadians no longer belong to these types of plans and therefore, need a retirement solution that offers security and peace of mind for their future.
To learn more about what retirement looks like today and why guaranteed income plays such an important role, watch Canada’s RetirementLandscape.

Personal Pension Plans are designed to provide you with: 
  • A secure income stream that is guaranteed for life to help form the foundation of a retirement income plan
  • A higher level of retirement income the earlier you invest and/or the later you wait to start drawing income
  • Flexibility to choose when to begin taking income, as early as age 50
  • The option of uninterrupted income for life for your surviving spouse
  • A conservative investment in a fixed-income portfolio or a more aggressive approach with full access to your market value, should the need arise
For more details of one such plan watch Understanding Manulife PensionBuilder for an overview of how this retirement income solution works.

Try the Income Calculator to help calculate what your guaranteed income from Manulife PensionBuilder will be in retirement.
A Personal Pension Plan is an attractive income solution, whether you are in the pre-retirement or retirement stage of your life. A complement to other retirement income sources, a Personal Pension Plan supports retirement plans and helps ensure that you will be prepared.

Contact us or visit to help make a Personal Pension Plan part of your retirement income strategy.

Friday, September 7, 2012

Annuities: A good choice for retirement income?

People who save through RRSPs have a choice to make when they retire. They can transfer their RRSP balance to an RRIF and draw it down at their own pace (subject to a minimum) or they can buy an annuity.

Buying an annuity seems like an elegant solution since it removes the risk of outliving one’s assets (what actuaries like to call “longevity risk”).  It eliminates the hassle of making investing decisions after retiring and the income stream it provides is super safe (it really is, at least in Canada).  

A 60-year-old male purchasing a single life annuity for $100,000 would receive an annual income of approximately $5,808. Not great if you live until 67, but by age 77 you would have recovered the original contribution and all of your income after that is in excess of your original purchase amount.  If you live to 101, you make out like a bandit! 

With the recent fall in long-term government bond yields, annuities now return more than 100% return of premiums paid in many cases.  And annuities can come with generous survivor income options, if one is prepared to pay for them.  

Annuities become increasingly attractive later on in your retirement (one of the few things that does).

Apart from money that is earmarked for bequests or the odd big ticket purchase, a sound strategy is to annuitize one’s wealth at about age 72.  To understand why, let’s look at the minimum payout at age 72 under a RRIF.   If the RRIF held $100,000 in assets at age 72, the minimum amount that would have to be withdrawn that year is $7,480. Many retirees are upset about this because they feel the minimum withdrawal rules force them to deplete their assets too quickly, especially in the current low-interest rate environment.

By contrast, an annuity that is purchased at age 72 with a single premium of $100,000 would produce annual income of about $8,382, in spite of low interest rates. Not only is this about $902 more than the minimum RRIF income, the annuity is payable for life and thus removes any chance your money will run out too soon. More income and less worry is a hard combination to beat.

Another reason to annuitize is to simplify your life.  Let’s say your RRIF is invested 50% in equities and 50% in fixed income. Why not buy an annuity with half the money and then invest the remaining portion 100% in equities? The annuity replaces the fixed income investments and provides a perfectly stable income stream at the same time. You can do this at the point of retirement or later on, say at age 72, as a variation on the first strategy.
To explore your retirement income options, e-mail us or visit