Friday, October 26, 2012

What is your probability of disability or critical illness before age 65?

Statistics show that workers between the ages of 35 and 65 are many times more likely to become disabled for an extended period than they are to die.  For example, for a 45-year-old female the probability of becoming disabled before age 65 is 31%, her probability of being stricken with a critical illness is 17% and her probability of dying before age 65 is 4%*   Try this calculator to find out your risk of disability between now and your age 65. 

Many Canadians have disability insurance through their employers.  Disability insurance provides a replacement income in the event of a serious illness or injury during your working years.  However, disability coverage has limitations and doesn't cover all eventualities.  It doesn't replace your full income but only a portion of it.  Depending on the type of coverage, you may qualify for benefits for only a limited time.  And coverage usually stops at age 65. After you retire, you might no longer be insured.  Self-employed people or people working in small businesses often have no disability insurance. What would happen to you financially if you were to become unable to work?

For those who have disability insurance through work, we suggest that you review your benefits booklet with your Human Resources department to find out just what your disability coverage is. Most people do not know how much income replacement coverage their disability coverage gives them, nor how long they have to wait to collect it, nor how long it will last if they are disabled for an extended time.  Individual disability policies can be purchased from a licensed Life and Health Insurance Broker to provide or supplement disability insurance. 

How is critical illness insurance different from disability insurance?
Critical illness insurance provides a lump sum of tax-free money 30 days after diagnosis of any one of the major illnesses listed in the policy, such as heart attack, stroke, or life-threatening cancer.  Since heart disease and cancer are diseases of aging, these illnesses are more likely to appear after age 65. Disability coverage generally stops by then, but critical illness insurance can go to age 100.

The incidence of these illnesses is rising, but survival rates are also increasing.  The Heart and Stroke Foundation of Canada reports that 92% of patients hospitalized for a heart attack survive.  While disability insurance may cover basic living expenses, critical illness benefits will allow you to pay for whatever extras you choose, such as private nursing care, housing modifications, alternative treatments or even a trip around the world.
While disability insurance is tied to your ability to work, critical illness insurance is not.  You can be eligible for critical illness coverage even if you don't work, don't have an income, and therefore aren't entitled to disability insurance.  And for employed people, if after a diagnosis you return to work and therefore aren't eligible for disability benefits, you can still be entitled to the critical illness lump sum.  In many cases you can receive both.

Here's a summary of the key features of disability and critical illness insurance, and how they complement each other.
Waiting period

Generally between 30 and 180 days for disability insurance;  30 days for critical illness.

A pre-set percentage of income, paid monthly for disability, usually for a limited time; critical illness pays a lump sum from $10,000 to $1 million.

Disability benefits are taxable to employees if they are funded by their employers, and tax-free if self-funded.  Critical illness benefits are tax-free.
Coverage period

Usually to age 65 or until retirement for disability;  up to age 100 for critical illness.
With our professional advice, you can design a comprehensive package to provide income, cover extra costs, and still allow your family to build toward important savings goals.  Visit us at, or e-mail us or call us at 416-230-2703

*Source: InsureRight

Thursday, October 11, 2012

What type of insurance should you buy?

There are two types of life insurance: permanent and term. They are two different types of protection that satisfy many different life insurance needs. Term may be all the life insurance you’ll ever need, or it may be used as an interim step before purchasing permanent insurance.

Possibly, a combination of term and permanent in the same policy may be the best solution for you. We can show you the strengths of each and their differences.
Permanent life insurance

Permanent life insurance – as the name implies – protects you for your lifetime. It can build cash values and provide a death benefit.  Some permanent policies pay policy owner dividends (participating or par), and others don’t (non-participating).
If the permanent policy you are considering has a cash surrender value, you should review the product guide provided by the insurance company to better understand how the assets backing the policy are managed and how these assets are used to accumulate value within the policy.

Universal life
Universal life provides permanent life insurance with a tax-advantaged investment component. As cash values accumulate, they can be used to pay part or all of the cost of your insurance or to increase the death benefit. You select an investment mix that is as individual as you are – taking into account the amount of investment risk you are comfortable with, and your financial goals and circumstances. This type of policy is generally non-participating and is attractive for people who want to actively manage their life insurance policy.

Permanent participating insurance
Permanent participating insurance policies have potential for earning policy owner dividends. Favourable investment returns, mortality and expense experience generate earnings in the par account – a portion of which can then be paid to policy owners in the form of dividends.

You choose how you want your dividends to be used. The most popular dividend options are either to use dividends to buy additional permanent coverage each year or to buy a combination of term and permanent insurance, which can make a larger amount of coverage more affordable. The first option provides an increasing death benefit that can offset the effect of inflation over the longer term. Higher premium options generally provide higher long-term growth (i.e. paying a high premium may mean you will receive higher values over the longer term). The insurance company manages the investment portion of a participating policy, so it doesn’t require hands-on management by the policy owner.
Assets in the participating account are managed in a diversified portfolio and are invested primarily in bonds, mortgages, equities and real estate.

Term life insurance
Term life insurance is well suited to meeting high, short-term protection needs for the lowest initial cost. For example, a couple with young children and/or a mortgage might select term insurance as an affordable way to obtain the full coverage they need today. Many term insurance plans do a good job of meeting immediate needs and provide the freedom to later move, or convert to a permanent product without providing proof of health. However, this ability to convert to permanent insurance often expires around age 65 or 70.

When purchasing term insurance, it’s important to understand what conversion options you have. Some companies impose significant restrictions or have a very limited choice of permanent plans for conversion.
Many term plans are renewable after five, 10 or 20 years without providing proof of health. The price will increase to be appropriate for your age at renewal, and the increase in premium can become substantial in later years. Coverage ceases for the majority of term contracts once you reach the age of 75 or 80.

When reflecting on the cost of term insurance, be sure to consider the following factors impacting your total cost:
  • the initial premium
  • the renewal rate and whether evidence of insurability is required at time of renewal
  • how long you’ll need the protection
  • how much flexibility you want in case your needs change in the future
Other types of term insurance

Decreasing term (also known as creditor insurance or mortgage life insurance)
Most lending institutions offer creditor or mortgage life insurance as part of their lending or mortgage packaging.  Its primary purpose is to protect the lender. Creditor or mortgage insurance from a lending institution is generally non-convertible term insurance (you can’t move to a permanent insurance plan if your needs change) – there are no cash surrender values and no premium flexibility. A personal life insurance policy has distinct advantages over typical creditor or mortgage insurance such as:

• you can control the amount of coverage, because it’s not tied to the balance of your loan or mortgage.
• your beneficiaries can choose how to use the funds – to pay off the loan or mortgage, provide a monthly income or take care of other immediate needs. It’s their choice, not the lender’s.

• you choose the type of insurance that best suits your needs with premiums to suit your budget – the cost may be lower than creditor or mortgage insurance from a lender.
• you own the policy, not your lender. You have the freedom to switch your loan or mortgage to another lending institution without jeopardizing your life insurance coverage.

It pays to compare. Insure yourself, not the lender.
Group insurance

If you’re working, there is a good chance your employer offers group life insurance. You may also obtain life insurance coverage as a member of an association, professional body, union or club.
Group coverage provides simple, low-cost insurance protection; however, it can have some drawbacks when compared to an individual life insurance policy.

Group coverage doesn’t offer the level of control, portability or choices that can be obtained with your personal life insurance policy. With many group or association plans, you are insured only as long as you remain part of the group. Employment related group coverage is owned by your employer and is subject to change at their discretion based on an annual review. With a group life insurance plan, you have the right to convert to an individual plan when you leave the group or retire, but this is not always practical. Depending on your age when you retire or leave the company, converting to personally-owned permanent life insurance could be expensive or may not be possible.
The right insurance for your needs – value for your money

Life insurance is one of your most personal and important buying decisions. A carefully considered purchase today can benefit you and those you care about for the rest of your life. There are several variables affecting the cost of life insurance and that’s why value doesn’t necessarily rest with the lowest-priced policy. It’s important to understand the factors that affect the cost of your life insurance policy.
• Gender – women pay less than men because statistics show that on average they live longer
• Age – the younger you are, the lower the premium you’ll pay
• Health and lifestyle – good health and sound lifestyle habits usually mean you qualify for the best rates. Non-smokers get a discount.
• Type of policy
• you pay less initially for term insurance
• you pay more for a policy that builds cash surrender values because it provides benefits beyond the basic insurance protection
• Method of payment – you’ll pay less if you choose to pay your premium on an annual basis rather than monthly

Other factors that may impact the premium you’ll pay
• Occupation or avocation – some occupations or hobbies/sports are riskier than others from both a health and accident standpoint which may impact the premium you’ll pay

• Foreign residence – Canadian insurance policies are based on Canadian mortality experience. If you live outside of Canada, you may be exposed to an increased mortality risk which may impact the premium you’ll pay
Your best buy is a policy with features that suit your situation today with flexibility to meet changing needs in the future.

Get professional advice
Purchasing life insurance that meets your needs now and in the future can be complex. That’s why it’s essential to get professional advice from a knowledgeable advisor, supported by a team of experts.

Life insurance is definitely not a one-size-fits-all product. We will take the time to understand your financial goals and insurance needs, your risk tolerance, and the control you want in managing your policy. Then we will help you to consider your options and ensure your life insurance is a good fit for you now, and in the future.  Call us or e-mail us or visit

Why buy Life Insurance anyway?

The advantages of life insurance

An instant estate
Few individuals, particularly those with the responsibility of a young family, have sufficient savings to adequately protect their loved ones should the main income earner die.  Life insurance can help create an estate at a time when funds may be needed most. This is a low-cost way to ensure your family’s continued financial well-being.

Money in hand – quickly
Your beneficiary, the person(s) you name to receive the insurance money, will be paid within a few days of the insurance company receiving the required information. By contrast, savings and other assets may be tied up legally for some time after death.

Financial benefits you enjoy
Some people have the impression that insurance pays only if you die.  That’s not the case. Many permanent insurance policies (i.e. participating and universal life) build cash values that you can access during your lifetime. The cash value is the equity you have built up in your policy. Cash values can accumulate within your policy on a tax-advantaged basis. The growth in the cash value is generally only subject to income tax when it is withdrawn from the policy. Your policy’s cash surrender value can be used to:
  • provide funds in an emergency
  • finance a down payment on a home or cottage
  • launch or expand a business
  • act as collateral for a loan from a third-party lending institution
  • supplement your retirement income
  • provide income for long-term care or home care for you or your spouse
How you use the money is really up to you.

Other advantages
  • the death benefit is not subject to income taxes
  • probate costs can be avoided if you name a beneficiary other than your estate
  • unlike a will, information regarding your life insurance can remain private
  • in many instances, life insurance may be protected against creditors.
Who needs life insurance?

People with responsibility for others

For people who depend on you for support, a spouse, children or dependent adults, life insurance can play a fundamental role in their continued financial well-being.  In addition to making up for the loss of your income, the proceeds from a life insurance policy can be used to take care of funeral expenses and other costs such as a mortgage, loans or credit card payments. If you’re a stay-at-home parent, the role you play also needs to be covered because of the additional expenses associated with childcare if something happens to you.
People without family ties

Over the course of a lifetime, situations and responsibilities change.  Even if you are single, or you and your partner both work but don’t have a family, life insurance can still play an important role in your financial security plans.
A life insurance policy can provide an efficient and cost-effective way to take care of any expenses or unpaid bills you might leave behind, such as legal fees and taxes, medical expenses, funeral costs, mortgage debt or car loans. It can also be used to leave a gift to a loved one or a favourite charity or to provide a supplemental income while you are alive.

People with estates to protect
Many people believe as they get older and become more financially independent, their need for life insurance decreases. However, over a lifetime, estate values tend to rise. Life insurance can help pay the inevitable taxes that are due on an estate upon death. This can ensure as much of your estate as possible is passed on to your beneficiaries.

Business owners  If you’re a business owner, either on your own or with a partner, you may have personal liability for the debts of your business. In fact, the vast majority of your wealth is likely tied up in the business. You have a greater need to protect what you have built against unforeseen circumstances such as death and disability or to ensure liquidity for a variety of reasons including funds for retirement.
In case of death, it is important that you have adequate insurance.  Otherwise, the claims of business creditors could significantly reduce your personal estate and leave your beneficiaries without the financial security you had intended.  Equally important is the smooth transition of ownership of the business to a family member, partners or a key employee. A life insurance policy can make this possible.

Your business is an asset that provides income for your family, both while you are alive and after your death. It is also likely your largest asset and will provide you with a retirement income. Life insurance can ensure your family receives fair value for this asset at your death. 
People who want to leave a legacy

You may wish to leave money to family or a favourite charity. Life insurance coverage allows you to leave a lasting personal legacy and provide your favourite charity with stable funding over the long term without reducing the estate available to your family or jeopardizing your future financial independence. A carefully arranged planned gift can be tax effective, and at the same time balance your final needs and the needs of your family.
People starting a child’s or grandchild’s insurance program

Life insurance provides a powerful foundation for building your child’s or grandchild’s financial security plan.  Insurance can work as a flexible asset that grows along with your child.  Premiums are relatively low for children and this low premium can be maintained throughout their lives.

To learn more, please visit, or e-mail us or give us a call at 416-230-2703


Friday, October 5, 2012

A painless way to cut back on expenses

With the current economic uncertainty, many people are looking for ways to reduce expenses.  A relatively painless way to reduce your monthly expenses is to have a second look at the way you’re managing your debt.

Over time, most of us take out a variety of loans for different purposes.  These can include things like credit card debt, car loans, home renovation loans and, of course, the mortgage.  And if you have more than one loan, you’re most likely paying a different interest rate on each loan.  One of the easiest ways to reduce your monthly interest costs is to consolidate your debt at the lowest rate.  Typically, your lowest-rate debt will be a loan that is secured by an asset, such as your home. 

If you have sufficient equity built up in your home, consider switching from a traditional mortgage to a product that allows you to access your equity, such as a home-equity line-of-credit.  Then, use this line of credit to repay your higher-interest loans. In this way, you’ll be bringing all of your debts together into a single account, at a single rate. Some line-of-credit products even allow you to track debts separately within the account so you can continue to keep track of interest costs and repayment separately.  And there is one product that even combines your debt with your bank account so that every dollar you have is used to reduce your debt and minimize the interest you pay.  Not only will debt-consolidation save you interest but it will make it easier for you to keep track of what you owe and how you’re progressing in paying it down.

Reducing your monthly expenses is one way to deal with economic uncertainty – and it doesn’t have to be painful.  By borrowing smarter you can reduce your interest costs and increase your cash flow each month. 

If you’d like to learn how to reduce your monthly interest costs, give me a call or send me an e-mail and I can discuss some options with you.  Visit