Your First Home is the Largest Debt Your Will Probably Ever Have

Protect yourself and family when buying your first home

If you are in the process of buying your first how, congratulations to you! This is a big step for many Canadians, and a financial rite of passage that most of us go through. The down side is that you just started a long-term and uncomfortable relationship with your bank, paying them large amounts of money each month to pay-off your mortgage.

Your new home has some strings attached – namely a large debt. If you have a mortgage or a home line of credit you are going to have to pay that off then you have put yourself and your family at greater financial risk. Don’t worry – we all do it. Without some risk we would not get rewarded with things like home ownership and portfolios with cash accumulations. But that risk needs to be dealt with, and the best way to do that is with life insurance.

Do not trust the bank’s mortgage insurance

First thing – Number One – Very Important! DON’T BUY THE BANK’S MORTGAGE INSURANCE! It is a terrible policy and I have written extensively on why it is so bad. Just to recap here, it is a policy the bank owns, the bank controls, the bank is the beneficiary of, and they have convinced you to pay the premiums on their behalf. Not good. Here is a list of all the articles and videos we have at Life Guard Insurance about how bad the bank’s mortgage insurance really is:

• The Perils of Mortgage Insurance in Canada
• VIDEO: Get Rid of Bank’s Mortgage Insurance
• Bank’s Mortgage Insurance Just Gets Worse in Canada
• Guide to Affordable Term Life Insurance vs. Bank’s Mortgage Insurance
• VIDEO: CBC Marketplace | In Denial Over Mortgage Life Insurance

Term Life Insurance for your mortgage repayment

A far better solution than using the bank’s mortgage insurance is to purchase term life insurance. You can even configure the length of your term policy to coincide with your mortgage repayment period, like 20, 25 or 30 years. Life insurance companies in Canada usually offer a 20 year term policy, but some offer 25 and 30 year terms. This means your premiums will be set for the full length of your mortgage repayment period and prices will not increase.

Another major benefit of owning personal life insurance over the bank’s mortgage insurance is that your benefit does not decrease as you pay off the mortgage. Your personal life insurance policy is not connected to your home, and so does not decrease as you pay off your mortgage. You get a level amount of life insurance coverage for a level premium over your term number of years. AND, it is often much cheaper than the bank’s mortgage insurance policy too.

Consolidate many risks onto one policy

Now, buying your first home does not constitute all your financial risks, even though it feels like the biggest financial burden hanging over your head. There are many more financial risks that you face, and the greatest of these is long-term loss of income potential. If you are the income earner for your family (or you and your spouse both need to earn money to make the household run), then the loss of your income to the family will be a much greater tragedy to their financial future than just losing the house. The mortgage debt is only one part of the pie. The ability to earn an income, create cash flow, are all part of the package.

You can consolidate but your debt risks and your income replacement risks onto one life insurance policy and save money. This is because there are discounts for owning a larger amount of life insurance, where the insurance company charges you less per $1,000 of coverage as your total amount of life insurance increases (this is called banding – and prices drop as your reach a higher band of total life insurance). So, start with the idea of protecting the debt on your first home, but progress to a more holistic view of your total life insurance needs.

Carry your life insurance from one mortgage to another

Another great thing about owning a life insurance policy is that you can take it with you. It is not attached to your house, like the bank’s mortgage insurance. If you sell and move into another home then your new mortgage is automatically insured by the life insurance policy you have in your back pocket. Only if you take on a much larger mortgage debt would you need to increase your life insurance coverage. Otherwise you will be OK with the life insurance coverage you have.

If your repayment period changes on your new house – as in you will be paying off your mortgage longer than on your first home, you can always send in an application to re-qualify for your term life insurance, and thus reset the term number of years to match your new mortgage. If you can no longer qualify for a new life insurance policy, at least the one you have cannot be taken away, and you have the option to convert it into permanent life insurance.

Health insurance benefits can save your home too

Have you very thought about the risks of getting seriously ill or injured, and not being able to pay the mortgage on your first home? A critical illness or a serious and prolonged injury can really set you back financially and could mean losing the home you worked so hard to buy. If you don’t have proper disability insurance you should get personal coverage to protect your income and cash flow. Critical illness insurance can also help pay-off or pay-down the mortgage is you got cancer, a heart attack, stroke, bypass surgery, or a number of other serious illnesses. It is worth looking into to protect your home and your future.

Life Guard Insurance can help provide protection when buying your first home

Buying your first home is a really big step, and forces you to become very financially mature. We can help you put an insurance plan in place to protect yourself and your family from the financial risks that paying off a mortgage on your first home brings. Contact us today to get a no obligation insurance consultation from one of our many brokers across Canada.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about life stage insurance planning when buying your first home would be very much appreciated.

Video Overview of How Term 100 Life Insurance Works

Term 100: Permanent Life Insurance Simplified

If you are in the market for some permanent life insurance (coverage that will be with you for the rest of your life) but don’t want a complicated product with investments and cash values, then Term 100 Life Insurance might be right for you. Term 100 life insurance is a very simple product, but there are some little nuances or minor complexities you should understand.

Term 100 is very different from normal Term Life Insurance. Term life insurance is a rental product that has a fixed premium for 10, 20 or 30 years and then the price for the insurance increase. Normal term life insurance can onluy be renewed up to a certain age (like age 80 or 85) and if you live to long the policy will cancel. Term 100 life insurance is a permanent policy with a fixed premium now and guaranteed never to increase for the rest of your life. There is no end to the policy. The premiums are payable until age 100. If you happen to life beyond age 100, then premiums cease and the policy remains in force until you pass away, and then it pays out.

Most traditional Term 100 policies in Canada have no cash value inside of them. They are simplified versions of permanent life insurance, with a guaranteed level premium for life and a guaranteed death benefit whenever you happen to pass away.

Term 100 Optional Policies

There are some unique options you can get with Term 100 life insurance.

Quick-Pay Term 100: You can get a Term 100 policy that is guaranteed to be paid up in 20 years. This quick pay option allows the policy owner to budget for the maximum amount they will pay for their life insurance, and if they live longer than 20 years, the policy will be fully paid up and no further premiums will be due for the rest of their life.

Cash Value Term 100: Some Term 100 life insurance policies do have a cash value attached. This is a very simple cash value, as it is fully guaranteed and spelled out in the contract when you buy the policy. There is no cash value for the first 5 to 10 years (depending on your insurance company) and then a cash value inside the policy begins to grow. This cash value would belong to you if you ever cancelled the policy ad took out the money, or you can use it to borrow against. When you die, the full death benefit is paid out to your beneficiaries, and the cash value goes back to the insurance company. In effect, the cash value is to represent the equity you have built up inside the plan, and it is designed to equal your total death benefit (say $250,000) when you reach age 100.

Term 100: Simple and Guaranteed

Term 100 life insurance is a very simple and fully guaranteed policy. It has no complexity for you, the policy owner, and is exactly what you purchased. It is what it is – no variables, now risk. If you would like some help looking into Term 100 life insurance, or you want to speak with a broker in your area, please contact us. We can connect you with a qualified life insurance broker across Canada who can help you get the right kind of life insurance for your needs, including Term 100.

The video was produced by Life Guard Insurance and posted by +Mitch Reynolds. If you found the video interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this video about Term 100 Life Insurance explained would be very much appreciated.

Newly Married Couple – You’re No Longer Going It Alone

Getting married means you are now a financial unit with hopes, dreams and goals combined

Getting married is a big step in life – you’re now a newly married couple. Before you were married you had been living only for yourself and set personal goals for your future. Now you are joining together with another personal, to become a family and a single financial unit. Money and resources are shared. Your dreams and goals are a combined vision. Together you plan to face life, and all the challenges it brings, with a united front and be there to support each other along the way.

So your financial planning is of paramount importance as you plan your life together. Yes, you should be saving together for those things you want and need, like a down payment on a home or starting your retirement savings plan. Insurance is also a fundamental piece of the pie, with your life as a couple has only just beginning; there is so much ahead and so much to protect. Let’s look at some of the different types of insurance that can really benefit newly married couples.

Life Insurance for a newly married couple

With insurance planning, life insurance is always the corner stone of your risk management plans. The way I like to phrase it is that, “death is an end-game event, whereas a critical illness or a disability might be survived and life can continue.” A premature death of one member of the new couple can be devastating, both financially and emotionally. What would you want for your partner if you were suddenly gone? How would you like to provide for them?

If you have a good job or a good education with strong future prospects, then you need to have insurance that will replace your financial contribution to the family for the long-term. Would you want there to be extra money for your spouse to do some retraining and upgrading his/her education? Do you want extra funds for children (even if there are no children yet, you can always plan ahead)?

A good solution for newly married couples is a large amount of term life insurance. This is usually very cheap for young couples, because they are still relatively young and healthy (not always, but most often). You can get large amounts of term life insurance for a very reasonable price. For instance, $500,000 for a 28 year old woman who is a non-smoker is only $26.55 (Equitable Life of Canada – standard rates).

If a young couple have good incomes, such as both work and there are no dependents yet, you might want to look at starting some kind of permanent life insurance like whole life or universal life insurance. This would contribute to both you immediate need for risk protection and save money for your retirement and build up your estate (yes, I know that beginning to plan for your estate when you are a newly married couple seems like a long way off, but it is an excellent time to do this to save money and build wealth). And you don’t have to buy all term insurance or all permanent insurance. You can combine two life insurance coverages into one policy to meet your budget and save a lot of money over time.

Critical Illness can be a blessing to your marriage

What would it look like if you were now a middle aged couple with kids and a mortgage, and one of you was diagnosed with cancer or had a heart attack? Would income stop because the ill partner can’t go to work? Who is going to look after the kids and take care of the house? What if the healthy spouse decided to take time off work to be at his partner’s bedside? Could you afford it?

Frankly you can’t answer these questions now. You don’t know what life will look like in the future and how financially well off you will be. On average, though, most Canadians cannot afford to be without income for an extended period of time in their mid-life, when they are paying off debt and have the costs of raising children. Nor do middle aged families have the resources to afford additional in home support workers, like child care, cooking and cleaning services. So, if you are among the majority of Canadians in this same boat, where does the money come from to look after yourself, your family and the lifestyle you have?

The answers are to liquidate (cash in) savings, OR sell assets (or refinance them), OR have insurance to protect you. After the fact, as in after you get diagnosed with cancer, having a critical illness insurance policy suddenly becomes the wisest financial decision you ever made because it saves your family from destroying retirement savings or selling the home. While you are still young and healthy you think of it as another added expense you could live without. But let me caution you that both the price for critical illness insurance and your inability to qualify for the coverage increase quickly as you age. The best time to buy critical illness insurance, and lock in low rates and full coverage, is when you’re young and healthy. Now is the time to consider protecting your financial future by insuring your health – if not for yourself then for your newly married spouse who you want to take care of.

Disability insurance to protect your life together

If you are working without any disability insurance coverage then you need to protect your income, because it is the basis of your lifestyle. Before you were a married couple, you only had to care for yourself. If you became sick or injured you could probably fall back on your parents for support to help you through. Now, you are forming your own family, and you can’t be reliant on parents for financial support any longer.

If you are working in a company that supplies good employee benefits, then you are probably well covered. If you are without group disability insurance, or only have coverage like Worker’s Compensation, then you need to look at protecting your income from it suddenly stopping when you can’t go to work tomorrow.

Because your income is the source of your financial plans, and the way to reach your financial dreams, it is extremely important to protect. About 45% of working Canadians are not covered by an employer sponsored group insurance plan that includes disability insurance. Many of these people are self-employed, working as contractors or consultants, trades people working for smaller companies that offer only Worker’s Compensation or working for smaller start up companies that can’t afford group insurance premiums yet. If you are among this group, you need to look into personal disability insurance to protect your new family, and provide financially for your new spouse.

If you’re a newly married couple, we can get your insurance planning off on the right foot

Starting your life together as a newly married couple is a great time to look at your life and health insurance planning. Contact us today, and we can connect you with a local life insurance broker anywhere in Canada, who can help you find the right coverage for your new family.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about life stage insurance planning for a newly married couple would be very much appreciated.

Early Life Stage: Entering the Workforce after School

Just starting out on your own as a young, single and newly educated person

You might be just finishing university or trade school, entering the workforce for the first time in your chosen field. Are you going to get that corner office and senior management position? No. Sorry to disappoint, but you are more likely to start at the bottom, and like so many of us, pay your dues in your career before you move up to those higher paying and more prestigious positions.

Let’s assume you are young and single, don’t own a home yet, and have few financial responsibilities besides paying rent and maybe a car payment. Do you need to be looking at buying insurance now? Well, the answer is not a black and white “Yes” or “No”. It all depends on what you want in life and how far ahead you wish to plan. Just to be clear, there are probably not many immediate, pressing financial risks you face today the create urgency to put life insurance in place. Also, the chances of you becoming seriously ill or injured are lower because you are young and healthy.

Even though the need is not so pressing, the opportunity now is great and should not be overlooked. The opportunity to “invest” into your insurance program is at the lowest cost it will ever be in your life, and the very long-term growth potential of money inside certain cash value life insurance plans is astounding. Let’s take a look at insurance programs that might suit your needs at this stage of life.

Life Insurance – Savings Tool and Guaranteed Insurability

Do you need to by a huge amount of life insurance for risk protection? No, you don’t. It would be far better to start a smaller, permanent life insurance plan with tax sheltered investments and a growing cash value, rather than buying term life insurance now. You can easily have your life insurance paid off early in life and have extra investment dollars which can be allowed to compound and grow in a full tax sheltered/deferred environment for many years to come.

There is an optional rider you can place on most life insurance policies, called Guaranteed Insurability Option (or GIO for short) which allows you to add additional top ups to your life insurance policy in the future, as your debts and responsibilities grow, without going through the hassle of being underwritten for the insurance. This is an excellent option for young people to add to their life insurance needs.

Another advantageous life insurance plan would be a guaranteed quick pay life insurance contract. These quick pay plans have guaranteed cash values built in and premiums are only paid for 10, 15 or 20 years. The premiums are a little higher than a life-pay plan, but they are still very low and manageable because you are so young and healthy. You can get a quick pay life insurance policy either as a Whole Life Insurance policy (usually a 20 pay plan) or a Limited Pay Universal Life Insurance policy (either 10, 15 or 20 pay plans).

Example: If a 25 year old male non-smoker bought $100,000 or guaranteed 20-pay universal life, they would pay $62.20 per month for 20 years (total cost of $14,928)*. If that same young man bought a regular universal life insurance policy he would pay $42.09 per month for the rest of his life**. If he lived to age 85 this would be $30,305. These are just the minimum contribution amounts to pay for the life insurance. Since these are both universal life insurance plans, the young man here could invest considerably more into the tax deferred investment accounts inside the life insurance policy if he wished.

* This is a Manulife Limited Pay UL plan for a male non-smoker age 25, health style 3.

** This is a Manulife Innovision UL plan for a male non-smoker age 25, health style 3.

Critical Illness Insurance – Lock in Low Rates for Life

I think critical illness insurance is an excellent plan for young people. Not because they are highly likely to make a claim soon (average claimant age is 48-49). It is because critical illness insurance gets very expensive very early in life, and if you are trying to buy coverage at age 40 or older, you will find the costs to be high. Now is a great time to lock in low premiums for the rest of your life.

With about one third of all Canadians suffering from a critical illness like cancer, heart attack, stroke, bypass surgery, etc. before the age of 65, this is an excellent financial product to own. The protection it affords you will protect your income, your investments, your assets like your house, and your family (if you have a family in the future).

Here is an example of locking in low rates at a young age: Female, age 25 non-smoker. Buying $100,000 of Term-75 critical illness insurance with Return of Premium at age 65 (if she never gets sick she can get back 100% of her premiums starting at age 65) and full return of premium on death; the cost is $62.82 per month.* If that same young woman waited until age 40 to buy the same policy, locking in premiums then, she would now be paying $133.38 per month, or 112% more. Assume now that she is diagnosed with cancer at age 55. Total premiums paid by the 25 year old are $22,615 and for the 40 year old they are $24,008. Also, the 25 year old woman was insured for 15 more years, just in case she was unlucky and had a critical illness earlier in life.

* Both plans are Sun Life Critical Illness Insurance, Term 75 with Return of Premium at 65 and Return of Premium on Death.

Rely on Employer Sponsored Benefits If You Can

When it comes to other types of insurance like your drug and dental plans and disability insurance, it is best to rely on your employer if possible. Hopefully you have a job with employer sponsored benefits. Use these benefits to get the coverage you need for prescription drugs, dental coverage and even disability insurance.

If you don’t have any group benefits, then you need to speak with an insurance broker about what is most needed and what you can afford. These types of insurances can be rather expensive, and that is why I am recommending using your employer’s group plan if possible.

Life Guard Insurance Can Help You Get Off to a Good Start

Our brokers at Life Guard Insurance can help you develop a beneficial plan that focuses on your future, both for insurance risk protection and building up financial wealth. There really is no better time to start your insurance plans than when you’re young, but so few people actually do this. Contact us today, and we can help you be the proactive planner, ahead or your peers.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about life stage insurance planning when you’re young and single would be very much appreciated.

Overview of Article Series on Life Stages Insurance Planning

What types of insurance do you need throughout your life stages?

Do you purchase life and health insurance products just once in your life? No! For life insurance alone research from LIMRA, Canada’s premier insurance industry think tank, says that Canadians will purchase it an average of 7 times throughout their lives. This shows that as people move through different life stages they need different insurance products to meet their needs.

And today there is so much more than just life insurance to consider. There are excellent health insurance policies, like critical illness insurance and long term care insurance. More and more people are becoming self-employed or working as a consultant to large corporations, meaning they have to look after their own disability insurance and health & dental benefits.

This article is an overview of many upcoming articles going into detail about the types of life and health insurance products you might need as you journey through this adventure called life. Each heading below is going to be a new article (links added as articles are written). I will give a brief summary of what those articles will include below.

Just entering the workforce and single

Being young, independent and generally broker when moving out on your own is a whole new chapter in your life. Getting that first job after school, your first apartment and maybe even a new car. What do you need to think about for financial planning and insurance? This is a great time to lock-in low premiums for the rest of your life, and make your insurance affordable. You should also focus mainly on yourself, as there is probably no spouse or dependents yet. This will be the cheapest time in your life to purchase insurance products, so it’s worth looking into.

Getting married

Often this is the next step on your life journey. Being married means shared financial responsibility and shared goals. Your spouse is dependent on you for financial support, so you need to make sure your life and income are properly insured, not only to protect yourself, but to ensure the financial future of the person you love.

Buying your first home

With home ownership usually comes a mortgage, and long-term debt to your bank. The bank will try and sell you mortgage life insurance, but this is a bad idea. You need to protect this debt against premature death (both you and your spouse) and possibly loss of income due to injury or illness. Looking a proper term life insurance to cover this debt is important and maybe even topping up your disability insurance coverage and adding critical illness insurance to protect your family.

Having children and starting a family

Maybe having children comes next, or maybe it came first? There is no exact order to this list, but having little ones come into your life fundamentally changes your future forever. You are no longer going through life with a focus only on yourself and your dreams, but are now living for your children, and focused on giving them every opportunity to learn and grow. You also need proper insurance to help them financially if you are no longer around to provide. Some permanent life insurance would be good now (if it fits into the budget), to plan for the future when you want to pass on a legacy to your children and future grandchildren.

Peak career years and raising teenagers

As the years go by you are probably growing in your career and getting promotions and higher wages. You debts, like your mortgage, are coming down and your children are growing up. Somewhere in your late 40s and into your 50s you will probably reach the peak of your career, where you are earning the best money you will ever make. Now is the time to think about your long-term goals for your family, your wealth and your estate. You also need to consider retirement and the types of health insurance benefits you will need. Looking at permanent life insurance and things like long term care insurance would be beneficial.

Pre-retirement and being an empty nester

With the children moved out of the house, and the mortgage paid off (hopefully) this is what is often called the peak accumulation years. You no longer have a need to feather the nest with expensive things like furniture and appliances. You have a high wage and not a lot to spend it on. Time to save! Time to also sock money into your insurance plans, and really take advantage of cash value permanent life insurance if you haven’t done so already. You can also more easily afford things like long term care insurance now, even if the price has gone up now that you’re older.

Retirement years and planning your estate

The retirement years can be long. Financial advisors in Canada are trying to prepare Canadians for up to 30 years in retirement – about the same amount of time spent in the workforce. This means you will need a lot of money saved up to last for up to 30 years. It is often too expensive for retirees to afford to start new insurance plans because their advanced age makes the products hugely expensive. That is why you should have looked at these plans earlier. You can, however, look towards government programs for senior support and medical services, and maybe even stop paying some insurance premiums you no longer need. If properly structure, your retirement years are the time to cut back on insurance spending and even reap some of the benefits from your cash value life insurance policies. If you have waited until now to get permanent life insurance, maybe you can afford to invest into a final expense plan, like funeral insurance, so that you are not a burden on your children when you pass away.

We can help, no matter what stage of life you’re in

It doesn’t matter what stage of life you are in, our advisors at Life Guard Insurance can help. Our network of life insurance brokers across Canada are very experienced and have help clients navigate their insurance needs throughout their many different life stages. Contact us today, and let our team help you get the insurance you need at this time in your life.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about insurance planning at different life stages would be very much appreciated.

Combining Term and Whole Life Insurance into One Policy

Have the life insurance protection you need and build an estate plan – 100% paid up in 20 years with this strategy

I don’t think many people realize that they can combine term and whole life insurance onto one policy to give themselves the best of both worlds – immediate risk protection for their financial needs PLUS build cash value life insurance for their future estate. In the following strategy I will show you how you can use Term Life Insurance combined with Whole Life Insurance to achieve both goals with one life insurance policy.

How does a combined whole life plus term life policy work?

When you buy a life insurance policy you can choose either permanent life insurance or term life insurance. If you choose a permanent life insurance policy, like whole life insurance, you can add a term life insurance rider inside the contract. This is like buying your term life insurance without the additional administrative fee of having your policy maintained as a separate contract.

There is an immediate savings of about $50 – $80 per year in admin fees by using the term rider feature. Besides the admin fee savings there isn’t really any more cost savings by combining your insurances, but there is the added simplicity of only having one policy to deal with.

Does it cost more? A small yes and a BIG NO!

The answer to “Does it cost more?” is a little complicated. The immediate cost is higher – yes. But this is just the cost of buying and owning the permanent coverage versus renting all your insurance over time. The really good news is that after 20 years your life insurance will be 100% bought and paid for, and no further premiums will be owing on the plan (only if you want more insurance, and start a new plan would you be required to pay more).

This is all built on a 100%, rock solid, iron clad guarantee that the insurance company can never renege on. There is value in a guarantee, knowing you will only ever have to pay $X.00 and not a penny more. This guarantee isn’t true of all permanent life insurance, but it is true of the strategy I am highlighting in this article (explained in more detail below).

If you rely only on term insurance without any permanent coverage then at the end of your term you will have a renewal, which will be VERY high to keep coverage inforce. Even if you needed a smaller amount of life insurance in the future, the cost for renewing your term life insurance is astronomical compared to having bought and paid for your coverage now.

The 20-pay combined term and whole life insurance strategy

So, in this strategy you must purchase a Whole Life Insurance contract that is eligible for dividends (Manulife calls their dividends Performance Credits). What we’ll do is choose the Paid-Up Additions Dividend Option, so the dividends that are being paid out are used to buy more permanent whole life insurance as the policy ages. We will set up the whole life insurance to have a guaranteed quick-pay option, so that premiums are fully paid up in 20 years (Manulife’s plan has premiums guaranteed paid up in 15 years, but it costs a little more).

Attached to the whole life insurance plan is additional term life insurance as a rider to cover immediate risks. The theory here is that you need lots of risk protection while you’re younger, with a big mortgage, other debts, young children, etc. As you age, your debts decrease and your children grow up, you typically need less and less life insurance for the purpose of financial risk protection. You would benefit, however, from the cash values and permanent coverage to be used by your estate and yourself for taxation and retirement income needs.

For illustration purposes, I will show a policy on a 40 year old man, non-smoker, who is buying $100,000 of whole life insurance and $400,000 of term 20 life insurance. At the age of 60, if he has not died, he will drop the $400,000 of term 20 coverage and just keep his whole life insurance policy, which is now fully paid up. The paid up additions will have increased the base life insurance above the initial $100,000 and future dividends will allow the policy to keep growing throughout his life.

Comparing two leading companies for this strategy: Canada Life and Manulife

Using our fictitious 40 year old man above, let’s take the same scenario and run it through two of Canada’s largest life insurance companies to compare this strategy (Canada Life, owned by Great West Life, and Manulife Financial).

Canada Life Strategy

For the Canada Life policy we have chosen the Estate Achiever version of their whole life insurance. This option has lower cash values and dividends in the early years in exchange for much higher cash values later on in life. Since our client is looking for long term growth of assets inside the policy, this is the best option to choose. The annual premium is $3,463 for 20 years, totalling $69,260 at the end of 20 years. Insurance coverage for the first 20 years will be $500,000 (plus any paid-up additions that have been added through the years). At ages 60, 70, 80 and 90 the following are the policy’s cash values and total amount of life insurance in force:

• Age 60: Cash Value $92,132, Death Benefit $584,547 ($400,000 term ends this year)
• Age 70: Cash Value $172,818, Death Benefit $280,486
• Age 80: Cash Value $293,824, Death Benefit $394,102
• Age 90: Cash Value $462,185, Death Benefit $538,924

Manulife Strategy

The premium for the Manulife Financial Performax Gold plan will be $3,524.28 per year for the first 15 years, and then only $527 for the remaining 5 years. The total premium invested would be $55,499.20. Insurance coverage for the first 20 years will be $500,000 (plus any paid-up additions that have been added through the years). At ages 60, 70, 80 and 90 the following are the policy’s cash values and total amount of life insurance in force:

• Age 60: Cash Value $59,036, Death Benefit $541,503 ($400,000 term ends this year)
• Age 70: Cash Value $135,061, Death Benefit $218,089
• Age 80: Cash Value $260,119, Death Benefit $348,918
• Age 90: Cash Value $441,046, Death Benefit $520,682

In comparing the two companies, we see Manulife has a much lower total premium, but also lower cash values. If you live long enough Manulife’s cash values will catch up with Canada Life’s values somewhat. So, it’s a trade off. Pay $13,760 less in premiums and have a policy that is worth $45,000 less at age 80.  This is a good example of how not every life insurance company designs their policies the same, and how prices and cash values differ. This is why you work with an insurance broker to design the best plan for your needs.

Comparing this to the cost of renewing your term life insurance

What if you just had term life insurance and didn’t buy any permanent coverage? How much would it cost you to continue your coverage after 20 years? In the case of our 40 year old man above, the premium for the first 20 years for his $500,000 of life insurance would only be $57.89 per month (using Manulife Term 20 here). This only costs him $13,894 for the full 20 years of coverage. Then the policy renews, and if he still needs insurance it will cost him $680.82 per month for the next 20 years on his term. That is over 1000% increase in price, and the term life insurance has $0 in cash value, since it is a rental product.

If this man decided to keep only $250,000 of coverage, his renewal would be $345.02 per month, costing him $82,805 for the next 20 years. After investing $96,699 over 40 years our potential client would have nothing to show for his insurance premiums if he livedpast age 80. That is a lot of money for no cash value or permanent insurance for his family.

Life Guard Insurance can help you set up a life-long combined insurance plan

If you have only term life insurance or are thinking about getting some permanent coverage, Life Guard Insurance can help. Contact us today and we can show you how a strategy like this can add value to your financial plans and give you the life insurance protection you need.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about combining term and whole life insurance into one policy would be very much appreciated.

The Best Time to Buy Long Term Care Insurance

Planning ahead and buying LTCI when you’re younger can save you money

The common sense wisdom about buying insurance when you’re young and healthy has never been more true than with Long Term Care Insurance. In this article I will show you some price breakdown comparisons of the increasing cost of buying long term care insurance as you age.

There is another complication to overcome with long term care insurance (LTCI), and that is the ability to qualify for the insurance. The insurance companies offering LTCI are not concerned about things like smoking, as smokers are more likely to get cancer or a heart disease and die early, making them less likely to claim on a long term care need. Actually, the healthier you are today, and keeping yourself in good shape, the greater the likelihood you will live into old age, needing some form of care as you age. Insurance companies are looking for early warning signs that a person might need care as they age. Things like early signs of dementia, osteoporosis (brittle bones), unexplained falls, and other signs of potential care needs.

If your younger, like under age 65, many of these things are absolutely foreign to you. But as you age, these conditions can creep up. A long term care insurance policy is either fully accepted or totally declined. There is no middle ground. So, once you have symptoms of early care related conditions, you will be declined coverage. That is why between the ages of 70 – 80 the decline rate for LTCI is over 50%.

Besides being able to qualify for coverage, let’s consider the cost. When does it make sense to spend the money for the benefit you will get out of the plan?

Age and Price Comparisons for Long Term Care Insurance

Before giving you the cost comparisons base on age, we have to lay out the basic assumptions. Just to help you understand how I compared the following prices, here are the assumptions I made.

All plans quoted are Comprehensive Benefit plans – including both home care and facility care coverage. All have just a 30 day waiting period from onset of need to receiving your first claim check. All are for $1,000 per week in benefits, or $52,000 per year in tax free income for long term care expenses. There are no additional riders or benefits attached to these base policies. I have also researched only one company, Sun Life Financial, for price quotes since they sell about three quarters of all long term care insurance in Canada.

What is different between the plans is that for the ages of 35, 45 and 50, both male and female, I have assumed the client wants to take the 20-pay option. This means their premiums are fully guaranteed to be paid up in 20 years, and then no further premiums are due. For the age 60 and 70 comparisons I took the Lifetime payment option, but assumed the 60 year old would pay for 20 years and then claim benefits at age 80. The 70 year old I assumed would pay for 15 years and claim benefits at age 85 (being healthy enough to qualify for LTCI at age 70 probably means they will live longer and claim at a later age).

Male LTCI price comparison

• Age 35 – $112.50 per month. Total of $27,000 paid up at age 55.
• Age 45 – $154.89 per month. Total of $37,174 paid up at age 65.
• Age 50 – $181.44 per month. Total of $43,546 paid up at age 70.
• Age 60 – $245.97 per month. Total of $59,033 paid when benefits claimed at age 80.
• Age 70 – $617.04 per month. Total of $111,067 paid when benefits claimed at age 85.

Female LTCI price comparison

• Age 35 – $153.36 per month. Total of $36,806 paid up at age 55.
• Age 45 – $255.27 per month. Total of $61,265 paid up at age 65.
• Age 50 – $274.41 per month. Total of $65,858 paid up at age 70.
• Age 60 – $372.15 per month. Total of $91,716 paid when benefits claimed at age 80.
• Age 70 – $892.08 per month. Total of $160,574 paid when benefits claimed at age 85.

The first thing you will notice is that the price for long term care insurance for women is much higher than for men. This is true because women outlive men by over 3 years on average, and their need for long term care assistance is much higher than for men. Women need care more often and spend longer in home care or facility care. Some would say that wives take care of their husbands first and then are so worn out that they need someone to take care of them.

The best age to buy Long Term Care Insurance

Looking at the numbers, I would have to say that about age 45 looks like the best time to buy LTCI. Yes, if you buy it younger it would cost less. However there are a couple factors playing against a very early age purchase of the product. 1) Inflation will erode the purchasing power of the benefits you buy, so the earlier you buy them, the less they will be worth at claim time. 2) Most young people in their 30’s are financially challenged, with a mortgage, kids, a career that is still growing, etc. A person is typically in a more stable financial position into their 40’s and 50’s and can more easily afford the premiums.

Even the 5 years between age 45 and 50 there is about a 10% increase in premiums (17% for men). Assuming there would be no claim by age 70, the 50 year old just paid more premium for simply acting late. With a Lifetime payment option, which is more affordable at later ages, what happens if you live and live and live, into your 90’s without claiming? This is called longevity risk, and it’s the risk of living too long and having to keep paying on your insurance when you thought you would be done years before.

So, getting a 20-pay plan about 20 years before retirement makes the most sense financially. It is still very affordable. The benefit has less time to erode due to inflation. You can afford the premiums. The cost for the insurance will be finished when you enter retirement on a fixed income. It all makes good sense to look at long term care insurance earlier in life, in your mid-forties would be best.

Life Guard Insurance can get you LTCI quotes and solutions

If you would like help getting a long term care insurance quote and take a look at buying the insurance, please contact us. We will have a broker who is experienced with long term care insurance contact you and offer assistance.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about the best time to buy log term care insurance would be very much appreciated.

Understanding the Named Beneficiary of a Life Insurance Policy

Who should you name as your life insurance beneficiary?

Sometimes it is an easy question to answer whom you should name as your life insurance beneficiary – like your spouse. Other times the answer is not so straight forward. You have to remember that a named beneficiary of a life insurance policy is entitled to the death benefit claim (their percentage portion of it) if you die, and there is little or no recourse for other family members or creditors to have a claim on that money. So, the named beneficiary of a life insurance policy is a powerful legal designation for benefits, and should be chosen carefully.

You will also need to update your beneficiary information if your situation changes, like death of a spouse, birth of a child, divorce, remarriage, wanting to give to charity or grand-children, etc. Keeping on top of your named beneficiary designation is not difficult, and changes can easily be made by the policy owner with simple forms (need wet signatures for life insurance contracts). So, let’s take a closer look at how to designate a beneficiary(s) on your life insurance policy.

Primary and Contingent Beneficiaries

Your life insurance contract comes with a primary and a contingent beneficiary designation section. The most common mistake is that people assign one person to the primary beneficiary and then a second person to the contingent beneficiary, but their intention was these two people would share the death claim when it is paid out.

The Primary Beneficiary section of your contract is for all named beneficiaries (more than one can be designated) who are first in line to receive benefits. If, for instance, you wanted to name two adult children as your primary beneficiaries, each getting 50% of the death claim, you would add them both in under the primary beneficiary section.

The Contingent Beneficiary section are those people who are second in line to receive benefits, only if the primary beneficiary(s) has pre-deceased the insured person (died before the person on the life insurance contract dies). Because life insurance policies are very long-term financial products, things can happen along the way. If you named your spouse as the primary beneficiary and he/she dies before you, then benefits will flow to the contingent beneficiary(s) automatically. Without designating a contingent beneficiary, your death claim will flow to your estate if the primary beneficiary has already died.

If you want to make sure your life insurance benefit goes to your family, and avoids taxes, probate and creditors of your estate, make sure you name a contingent beneficiary(s) along with your primary beneficiary(s).

Multiple Beneficiaries

As described above, you can designate multiple people in each beneficiary section (primary or contingent). For example, the policy owner has 3 adult children and no spouse to leave the money to; he/she can designate all three children as primary beneficiaries. He/she can assign all equal amounts of the death claim, or break it up into different portions.

For example, let’s say a widow has 3 adult children and she is leaving them the money. One of her children is a single mother with a couple of kids and she is struggling financially. The widow decides to give 50% of her life insurance policy to her daughter who is a single mom, and 25% to each of the other children, who are much more secure financially. When the widow dies, the life insurance policy will be divided up accordingly.

What happens if one of the beneficiaries dies before the life insurance is paid out? When there are multiple beneficiaries it is best to complete a new beneficiary designation form to make sure the division of the claim is done according to your wishes. If the death claim is to be split up equally between all beneficiaries, this will flow through accordingly – i.e. with three beneficiaries they would each get 33.3% of the claim, but if one dies, the remaining two would each get 50%. When the death claim is not split equally, it must be redone to indicate how much the remaining beneficiaries are entitled to, or the excess could flow downwards to the contingent beneficiaries.

Minor Beneficiaries

If you name a minor as your beneficiary (either primary or contingent) and a death claim is to be paid out to them, the life insurance company cannot pay money to a minor. A minor in Canada is anyone who is under the age of 18. This is where a Trustee would come in (see next section below). Without a Trustee assigned, the life insurance company would hold onto the money until the minor child reaches age of majority and then give them their portion of the money from the life insurance claim.

It might not be the best idea to name minor children as beneficiaries, since they will be entitled to the money as soon as they are 18. Some 18 year olds are responsible with large sums of money, but many are not. One way to control how your children will receive the money is to pay it into your estate, and let the death benefit proceeds fund a trust set up through your Will for the ongoing benefit of your children while they finish their education and get established in life.

Assigning a Trustee

If you do have minor beneficiaries designated you should also chose a trustee. A trustee should be someone you trust with the loving care of your children and will use the money for their ongoing care, education and living expenses. The trustee will have access to the funds to be used for the benefit of minor children.

Again, when the child reaches 18, their portion of the life insurance benefit, minus what the trustee has spent for the child’s care, is paid out to them. If the trustee has used the funds inappropriately, it will be the responsibility of the now adult child to pursue legal action against the trustee to recoup wasted money. This is not something you want your children to go through, so choose the trustee wisely.

Naming your Estate as the Beneficiary

In some cases it is wise to choose the Estate as the beneficiary. Life insurance money can be paid into the estate tax free, and then be controlled through your wishes spelled out in the Will. This is how you can make sure young adults get only enough money to pay for post-secondary education, for instance, and then have the remainder paid out at a later age when they are more financially responsible.

There is one major draw-back to having life insurance money flow into the estate. Once the money lands in the estate, it can be accessed by creditors who your estate might owe money to. Also, the funds are up for dispute if your will is challenged by other family members who think they have a claim on a portion of your estate. These funds would also increase the amount paid out in probate, executor and legal fees, thus shrinking the total amount of life insurance proceeds left over for those you want to give the money to. If you think your estate could be complex and get tied up in court, maybe you should leave the money as a named beneficiary designation. If your estate is easily processed, then it might be wise to control the funds through your Will, which is more versatile than the beneficiary designation on your life insurance policy.

Life Guard Insurance can help set up your life insurance with well thought-out beneficiary designations

It is important to discuss who and how the life insurance money is paid to when applying for life insurance. Even though you can easily change your beneficiary designations later on, many people just forget about this and don’t update things, leaving holes in their life insurance plans. Talk to one of our qualified life insurance brokers to make sure you set up your beneficiary(s) properly on your life insurance policy(s).

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about naming your life insurance beneficiary would be very much appreciated.

Term Insurance to Protect You and Your Business

How your business can benefit from insuring key players with term insurance

For many Canadian business owners today, they face many day-to-day challenges in managing their business. Dealing with staff, administration, customers, creditors, inventory, contracts, etc., etc., etc. For many business owners they feel like they are constantly either working on the next great idea or putting out the most recent fire.

It is important to stop for a second and consider the financial needs of the business. Is your business exposed to risk if you or any other key employee were to die? Would your business be able to continue on without you? And how would your family realize the financial value you have invested into the business after your passing?

This is where life insurance, and particularly term life insurance, comes in to protect what you have worked so hard to build. Let’s look at how term life insurance can be used by Canadian business owners for risk management and future financial planning.

Cost effective risk management for you and your business

• Term life insurance is the most cost effective, or cheapest, life insurance policy in Canada. Can be bought on a 10, 20 or even 30 year term, where premiums are locked in for that number of years. The longer you lock in premiums today, the more expensive it is.
• Provides immediate tax-free cash to the business and the surviving shareholders if you or another key employee were to die.
• Save money by incorporating all business partners and key employees under one life insurance contract (only on administrative fee).
• Ensure the business has the funds it needs to continue operations, find replacement personnel, or efficiently wind up operations without a loss of value.

Flexible life insurance to change as your business grows

• As your business grows and becomes more successful, you will need both temporary life insurance protection and permanent life insurance with the opportunity to tax shelter your businesses retained earnings.
• Additional term life insurance can be added to your plan as the business grows and more risk protection is needed (can add an option to guarantee your ability to add more term life insurance no matter what the future health of business owners or key employees are).
• Term life insurance is guaranteed convertible into permanent life insurance coverage in the future, when you need it.
• Permanent life insurance can be used for the business owner(s) or key employees as part of a Retirement Compensation Agreement (RCA).

Easy for the business owners and their accountants to understand

• Term life insurance is a very basic product with a “rental” cost for the life insurance coverage and guaranteed death benefit payouts if and when needed.
• Little accounting and administrative work for the business to pay fees and account for the policy’s valuation on the company records.
• Payment of any death benefit is easily and quickly processed, with tax-free funds being delivered to the business within days of the claim forms being submitted.

Accounting for life insurance proceeds inside a business

• If a death claim is made, the tax-free cash from the term life insurance policy flows into the business’s Capital Dividend Account.
• The Capital Dividend Account then has special tax credits in the amount of the entire death claim paid into the business.
• The funds can be used by the business in any way that it wants for continued business operations.
• Business funds, or the proceeds of the term life insurance policy, can be used to pay a “special” tax-free dividend from the Capital Dividend Account credits to shareholders.
• Can be used as part of a Buy-Sell Agreement to redeem shares of surviving family members so the remaining business partners can buy-out the shares of their deceased partner.

Term life insurance is an excellent plan to protect your business and the value you have created in it. It is also the cheapest way you can buy life insurance for your risk management needs. It is really worth investigating your needs for life insurance protection for yourself, as the business owner, or for your key employees who would cause a serious financial loss if they died.

Life Guard Insurance can help protect you and your business with term life insurance

Contact us today to speak with a licensed and experienced life insurance broker in your area. They will be able to show you how your business can benefit from having the right amount of term life insurance protection in place.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about term life insurance for Canadian businesses would be very much appreciated.

Desjardins Financial Security has an Excellent Guaranteed Lifetime Withdrawal Benefit Plan

Helios is Desjardins’ GLWB with very competitive features

!!Desjardins to Suspend Sales of New GLWBs as of 4:00 pm EDT, 27 April 2012!!

If you’re interested in how a Guaranteed Lifetime Withdrawal Benefit (GLWB) plan works, then take some time to review the information below in regards to the Helios Contract’s Core Guarantee 75/100 i and Guaranteed Lifetime Withdrawal Benefit (GLWB) Optional Guarantee, offered by Desjardins Financial Security.

Given the current low interest rate environment and extremely volatile markets, GLWB’s certainly present Canadian investors and retirees with a secure place to invest their retirement savings with peace of mind. Taking advantage of a 5% annual bonus, providing no withdrawals are made, and participating in the equity markets with the ability to lock in potential gains through the GLWB tri-annual reset feature has become very attractive in recent years.

Below you will find some of the highlights of the Helios Contract.

A Death Benefit that resets annually

Guarantee 75/100i

• 75% maturity guarantee after 10 years, 100% maturity guarantee after 20 years
• 100% Death Benefit that includes an ANNUAL, AUTOMATIC Death Benefit reset on the Contract Anniversary Date to the higher of inflation or Market Value until the Annuitant turns 75 years old.

This is for information purposes only and is not indicative of future results.

One of the most flexible Guaranteed Lifetime Withdrawal Benefits

GLWB Optional Guarantee Highlights

• Guaranteed and predictable income for life
• Minimum Deposit is $5000.00 (great for TFSAs)
• 5% bonus* for LIFE annually, provided no withdrawals are made in that year
• Resets of the protected value every three years
• Income for Life as early as age 50
• Fees are based on Market Value (not the protected value – especially important during the income phase and volatile markets)
• A variety of GLWB Eligible Funds to meet your client’s needs (with up to 75% equity available)

* Bonus is prorated in the first year.

Helios Guaranteed Lifetime Withdrawal Benefit Payout Percentages

Please refer to the Contract and Information Folder for further information on the GLWB Optional Guarantee.

Unit Prices and Performance of Desjardins Helios GLWB Investment Funds

Life Guard Insurance can show you how the Desjardins Helios GLWB can fit into your retirement plans

Contact us now if you would like more information about how the Desjardins Helios GLWB plan might fit into your retirement income plans. We can design custom illustrations of how your investments could perform over time and the income guarantees you will be entitled to.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about Desjardins’ Helios GLWB plan for retirement income would be very much appreciated.