Dual MF + LI – Page 8 – Adviceon Library

What evidence proves that life insurance is worthwhile?

Life insurance has unlimited tactical financial uses.

Life Insurance includes cash benefit payouts arising from personal life insurance, disability insurance, group life and group disability insurance; and income from annuity payments, which together have risen to approximately 40 billion dollars per year in the first decade of the new millennium.

For a person running a business, a disability insurance policy can replace up to 75% or more of the value of a disabled person’s normal working paycheque.

“Life insurance is the first foundation of wealth preservation.”

Personally owned individual life and/or disability insurance can:

Pay off a home mortgage if the family breadwinner dies.
Pay debts and taxes accrued in larger estates leaving heirs with financial stability.
Help small businesses using agreements pass the baton to new leaders.
Fund key-man insurance to replace a leader in a small business.
Help family businesses and farms stay in the family through succession planning while passing wealth (and paying off liabilities) to the next generation.
Pay off capital gains taxes on second properties such as a cottage.
Cover taxes due when remaining Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) holdings.
Pay off large capital gains on investments at home and abroad.
Equalize estates divided amongst siblings whose parents own significant business assets, where some work outside the firm.

The use of life insurance is increasingly creative the more wealth preservation becomes necessary and can assist in this important strategic area of fiscal protection. It can pass substantial sums of cash to future generations using techniques such as estate bonds.

The time-line of Long-Term Care

The lifetime care time-horizon

Respite care provides temporary relief to those caring for family members who might otherwise require permanent placement in a facility outside of the home. Respite programs provide planned short-term, time-limited breaks for families and other unpaid primary caregivers of adults with intellectual and physical disabilities.

Shared help from loved ones and government part-time home care services help relieve the primary at-home caregivers to enable them to maintain their wellness. It allows an ageing population to move gracefully towards the potential need for 24/7 care and a palliative care program when medical care or treatment concentrates on reducing the severity of the symptoms of diseases relating to aging rather than striving to reverse the progression of the disease. At this final stage of care, the goal is to prevent and relieve suffering for people facing serious, long-term, complex illnesses.

What does Long-term Care Insurance (LTC) offer? Long-term care insurance provides money for the care you both desire and need. With LTC Insurance, you have the following:

Broader choices about the quality and amount of care you receive.
Increase of choices when determining where you receive care and by whom.

You may want to consider Long-term Care Insurance for yourself or your loved ones, which helps pay for services the family members may not be able to provide. Talk to your advisor about the life insurance policies available for these services.

Sources: Canadian Institute for Health Information, Alzheimer Society website, Statistics Canada

Source: Some of the concepts and information are used with the permission of Patty Randall, who is widely considered a leading advocate on the need for care-years planning in our country. Visit her website: “Aging Successfully with Passion and Purpose and Care-Years Planning,” online at www.longtermcarecanada.com for discussions and ideas and to obtain family materials on this issue.

How do I make financial agreements with my fiscal partner?

When establishing a financial strategy involving other stakeholders, such as paying down a mortgage, develop a written plan that all parties agree on. You can create written point-form agreements for each to sign in investing, registered investment planning, debt repayment, etc.

When determining your goals, it is essential to think positively and avoid language such as, “We will never have enough to retire,” “We can’t seem to get ahead,” or “This debt is killing us.” Statements like this often become self-fulfilling.

Instead, it is essential to design an action plan and start working towards it with all the stakeholders, such as your spouse or partner, referred to as your fiscal partner. Write your goals out regarding financial concerns such as:

Reduce or eliminate debt. One of the encumbrances of investing for retirement is that you may be servicing too much credit card debt, much of which is interest. Both fiscal partners may have credit cards doubling the family debt load and vastly reducing your net worth. Thus, paying down the debt on all credit cards makes sense, starting with those with the highest interest rates first. Aim to be 100 % debt-free of abnormal debt-weighting in your net worth statement where possible (mortgages and car payments are typical).

You and your fiscal partner will appreciate the new clarity and increased financial freedom this gives. Slavery to debt repayment is financial bondage and will increase fiscal-related emotional stress on responsible partners.

You can start or maximise your monthly investment plan. Your plan will depend on your income and expenses. If you are young, begin investing now. Any given sum can frequently double depending on time and interest rate growth. At 6 %, it can double every 12 years; at 4 % every 18 years. Divide the interest rate into 72 to get the years until doubling occurs.

This simple mathematical illustration reveals the importance of beginning to invest while you are young. If you are near retirement, you may ascertain that you need to ramp up your investing, increasingly over the fewer years you have. The average Canadian retires now at age 62. Become aware of your retirement options, choosing agreed strategies with your partner beforehand.

Reallocate assets as you near retirement. A portfolio still invested in nearly 100 % equities near retirement is risky. To reduce stock market risk, a portfolio may have some fixed income (government bonds, corporate bonds, safe mortgages, and real estate)—your partner’s risk tolerance while investing.

Take advantage of tax-saving vehicles. Registered investment vehicles can help you reduce or defer the tax hit. Some plans can offer government grants that supplement your investment contribution to help your children attend post-secondary school. Discuss the viability of tax arrangements using registered investments best suited to both fiscal partners.

Don’t sell suitable investments amidst a volatile market loss. It may be better to stay invested and adjust your portfolio after the market begins to retrace upward, any losses after a market volatility period. If you hold an excellent fund, the stocks within that fund are probably good. Nevertheless, please keep your investment goals in mind, get periodic updates, and review the situation with your fiscal partner. Your financial partner may be unable to handle the stress caused by a volatile market, so plan with this in mind.

Maintain financial accounts with transparency. Total honesty is necessary. Spouses and partners who share mutual financial goals have a right to be aware of the banking and investment accounts and the movement of funds via frequent, transparent discussion. One spouse should only borrow and use credit with the other spouse’s agreement, where funds must be accounted for together in mutual fiscal arrangements.

There should only be personal boundaries where agreed, such as business agreements, risk, or debt and income necessary for solvency. You can set such boundaries in advance, or hard feelings can develop. Business accounts or contracts increasing risk should not co-mingle with personal finance or funds if you are incorporated. Sole proprietors should view business debt as personal debts.

Drug Plan Management Solutions

Drug Plan Management Solutions: There is a wide range of drug plan options that can be fine-tuned to suit your organization’s needs, while allowing you to better manage the rising cost of prescription drugs. Yet you can still provide your plan members with the coverage they need. We can help you keep your drug plan affordable for both you and your plan members, by implementing drug plan cost management solutions.

Two-tiered plans: A two-tiered drug plan design allows you to cover two formularies at two different levels of reimbursement. A tier-one managed formulary with a higher coinsurance can be supplemented by a more comprehensive formulary at a lower coinsurance level. This allows your plan to maintain broad drug coverage, while still lowering overall costs.

Managing your drug plan with formularies: A formulary is a list of drugs the benefits plan will cover, out of the thousands of prescription and non-prescription drugs on the market today. There are many types of formularies, but the overall goal of each one is to control the eligibility of drugs, and therefore help manage drug costs by either: adding new drugs only after their therapeutic value and cost effectiveness have been proven, or allowing only generic drugs, or following the guidelines set by provincial governments.

Formularies may be designed such as:

Managing your drug plan with cost-containment options
We offer a number of plan design options to help you manage your healthcare plan costs. Let us help you determine which of these solutions fit your needs.

Using Generic Substitution
Cost reimbursement is established to the value of the generic equivalent of a drug, regardless of what has been prescribed, unless the physician indicates ‘no substitution’ on the prescription

Per-prescription deductibles: This is the amount the plan member must pay for each prescription drug claimed. It can be set to a specific amount, or equal to the dispensing fee portion of the drug.

Coinsurance: Coinsurance is the determined percentage amount that the plan will pay for eligible prescriptions after any deductibles have been met.

Dispensing fee limits: This is the plan’s coverage up to the maximum amount of the fee pharmacies charge to cover their business expenses.

Drug maximums: This is the maximum amount the plan will reimburse for prescription drug coverage per person, per calendar year; maximums can be set at a specified amount per year, or can be unlimited.

Note: Plan Sponsors in Quebec: The Quebec government has a public drug plan that covers anyone who is not eligible for coverage under a private plan. This plan is administered by the Régie de l’Assurance Maladie du Québec (RAMQ). The law in Quebec also requires private drug plans to provide equivalent or better coverage than the public plan. Plan sponsors in Quebec are limited in how much they can alter their drug coverage, since they must ensure it conforms to RAMQ.

Note: Plans and coverage vary depending on the carrier used.

Dental Care Benefits

Dental Care Benefits

Whether you and your plan members require basic maintenance or major procedures, group dental care benefits help cover the cost of dental services and supplies offered by licensed dentists. Employees significantly value dental care benefits. Many coverage options are available, and electronic “real-time” claims filing directly from the dentist’s office can save time. Your organization can specify coverage percentages and/or apply a fixed dollar amount per year.

Dental care covers such options as:

Ongoing care and maintenance of teeth, roots and gums
Diagnostic services – exams, radiographs, X-rays and tests
Preventative treatment – polishing, scaling, oral hygiene instruction, it and fissure sealants, and space maintainers
Minor restorations – fillings, prefab crowns for primary teeth, and other services completed in conjunction with minor restorations
Endodontics – root canal therapy
Periodontics – treatment of gums
Denture maintenance – relines and rebases
Oral surgery – removal of teeth
Adjunctive services – anaesthesia, medications and pain relief

Major coverage includes work such as:

Crowns and Onlays
Dentures and bridges
Related items such as posts, pins and denture-related surgery
Replacements when the existing appliance is five or more years old
Appliance maintenance – denture relines and rebases, denture or bridgework repair

Orthodontic coverage includes work (with limitations) such as:

Ortho-exams, X-rays, diagnostic radiographs and casts
Braces and retainers (usually limited to children between certain ages)

Note: Plans and coverage vary depending on the carrier used.

Strategies for individuals and families

An organized strategic financial future should be designed with these areas in mind:

Financial independence at retirement to provide you with a sustainable income.
Disability and Critical Illness Insurance to protect your income by providing replacement income if you are sick or disabled.
Liquidity of your assets in the event that an emergency or opportunity presents itself.
Survivor’s financial and estate protection at death provides immediate cash to meet short-, medium- and long-term living needs.

A balanced plan must also address the needs of elder care as our population ages.

You should address the potential for a long-term illness

Long-Term Care Insurance is designed to provide financial relief and assist with the daily expenses at older ages for personal care required as a result of loss of basic abilities to dress, bathe, transit to or from the bathroom, maneuvering in or out of bed or chairs, or feeding yourself.

Registered Retirement Planning

As we discuss retirement planning, we will look at Canada’s registered plans. For example:

The Registered Retirement Savings Plan (RRSP) while building your nest egg, and a Registered Retirement Income Fund (RRIF) during retirement, offer you the chance to defer tax on your investments and achieve some tax relief.
Tax-Free Savings Plan (TFSA) allows you to save money while deferring investment income on the after-tax monies invested.

We’ll help you create a plan just right for you.

You can enjoy peace of mind knowing you have a financial strategy that provides you with confidence that all of your financial resources are working together toward your long-term financial goals.

Your goals and dreams are as individual as you are.

Whether you’re starting a new family, preparing for retirement, or running a business, we will work with you or your business to build a plan to meet your needs. A customized plan can help you manage risk and bring your goals within achievable foresight.

We can help you devise a plan that addresses objectives such as investment and retirement planning; minimizing income and estate taxes; assessing your life and disability insurance, will, and estate planning needs. A good financial strategy that reflects your changing life needs is unique—that is why we’ll support you with a financial analysis that will help you make wise financial decisions designed to meet your long-term and short-term goals.

Is Mortgage Life Insurance practical?

Mortgage insurance is creditor insurance which financial institutions offer to pay off the indebtedness of a mortgage if the mortgagor died during the term of the mortgage.There is another strategy to achieve this using personally owned life insurance which offers you flexible choices with more freedom as to how you will approach insuring your mortgage liability.

Compare the mortgage insurance your bank or financial institution uses for your mortgage creditor life insurance to buying your own personally owned term insurance.

Mortgage Life Insurance from the financial institution

Premiums can be much higher.
The death benefit replaces only your remaining balance of mortgage indebtedness.
Premiums do not reduce when your mortgage debt is reduced.
The death benefit only pays off your remaining mortgage debt.
The contract stipulates that the financial institution is the only life insurance beneficiary.
You cannot alter the irrevocable beneficiary of the contract.
The entire amount of life insurance is lost upon mortgage repayment, or when in default.
The mortgage life insurance is not transferrable to another financial institution or private lender.
Because so few health questions are required, underwriting is often done at time of claim, resulting in denied claims.
When you move your mortgage to another firm, you generally lose the coverage issued from an existing institution. If you have health concerns you may not be able to buy more coverage.
Creditor insurance may cover two parties who jointly mortgage their property. However, it pays only on the first death, even if the two were to die. When one spouse dies, creditor insurance no longer covers any survivors.
- In contrast, by owning your own insurance policy, two spouses or partners may each own separate life insurance death benefits. In the case where both parties die, double the benefit would be paid, thus adding increased value to the estate. If one survives, the coverage on that life continues.

Your own Term Insurance

You have full control over the type of life insurance plan.
You can set up multiple beneficiaries, including a fund to pay off some or all of your mortgage debt.
Beneficiaries can choose to not pay off the mortgage if they prefer to pay off higher interest debt.
You can add or revoke beneficiaries.
Your life insurance face benefit amount does not shrink with a reducing mortgage debt, and can actually increase with some plans. Your coverage level is controlled by you.
Many term plans offer level premiums for longer periods or are convertible to Term to Age 100 plans, without a medical exam, even if your health declines.
- In time, in most cases, you can reduce your coverage to have enough for the proceeds to pay your final expenses to take the financial burden from your loved ones.
You needn’t qualify for new mortgage life insurance if you move your mortgage to a new financial institution. You just continue using your existing term plan, which covers you regardless where your mortgage is.
Once your mortgage is repaid or reduced you will have life insurance to cover other liabilities or for other estate planning purposes.
Term insurance allows you to look at your entire capital needs and buy coverage applicable to you total needs, in the event of death.
A custom life insurance plan often offer other optional benefits that you can include, such as riders which can include: life insurance coverage for children, disability coverage, and critical illness coverage.
More control over the cost of premiums which can go up over time if you don’t own and control the life insurance contract.
Your insurer underwrites your policy when you apply for it. Other mortgage life insurance from a financial institution offer you little control and may choose to underwrite your health history at claim time.
Ask your advisor how to shift out of mortgage life insurance into personally owned life insurance to achieve the above advantages.

Why is portfolio strategy important?

Portfolio strategy is a method used for investment planning. Here we look at some of the sub-categories within investment planning:

Having a strategy helps you to understand your tolerance for risk.

Each of us has a personal level of risk tolerance which indicates how much risk one is willing to take while investing in markets that always go up and down. Your advisor can help you establish your own unique governing guideline.

Understand your investment time frame.

You may want to save for your child’s education, your retirement, a vehicle, or a home down payment. Each of these projects can take a certain amount of time, which is a component you apply to your calculations and potential future value with tax considerations and/or registered government tax programs.

Re-evaluation and Re-balance your portfolio holdings.
You also may want to monitor, re-evaluate, and balance your portfolio. When you consider how your assets performed, you will also need to consider any market situations that may be occurring. Some assets may have returns that are greater than their benchmarks, others may not.

While rebalancing your portfolio, you can re-establish original asset allocations. When you are re-balancing assets be cautious of any tax consequences for selling early, or buying and selling too often.

Develop your “Investment Plan”.

Once your investment plan is written down for reference, it will provide a road map to help you attain your investment goals while not getting you off track due to analysis paralysis, or the many distractions that may cause people to procrastinate. If you find that you just can’t get motivated but know time is slipping by, call us and we will be glad to work with you to develop a portfolio strategy, within your overall investment planning. Getting assistance from a professional advisor will ease the stress of thinking about investing and help free your mind to enjoy life?

Don’t become a Chameleon.

Beware of following the investment crowd or chasing last year’s stock or fund winners. Past performance is not an indicator of future gains while investing in securities, or equity funds that invest in stocks and/or bonds.

When should you review your Life Insurance planning?

You may want to replace the income of the life insured—either you or your spouse. Ask your advisor to do a capital needs analysis. It is easy to calculate the capital needed over any short or long period of time in any situation if the life insured were to die. Many professional calculators allow advisors to prepare accurate life insurance assessments.

It may be time to review your Life Insurance at these life junctures:

After you have finished your career training and begin a new job, you will want to buy life insurance as you start the foundation of your goal-setting strategy to gain financial independence. Life Insurance proceeds can pay off any OSAP or car loans so that the family has no financial burden should you predecease them.
If you have recently married or are engaged, your finances take on a new scope of responsibility for spouses jointly planning to protect one another’s financial security. Also, review your Life Insurance needs together to protect your income if one of you die or become disabled. This is a key foundation for developing a sound financial strategy when you are young and newly married.
- If either of you had a will, it might be revoked upon marriage unless it specifically states it was created in contemplation of marriage. When planning your Life Insurance together, consider how to set up your beneficiaries carefully. Often it is best to do so outside of a will.
If you work at a trade, make sure that you have Disability Insurance. This insurance is also called Income Replacement Insurance because it provides a paycheque if you become disabled. Your children and spouse are dependent upon your income. What if you became disabled – will that source of income dry up or become minimal?
When you have children, Life insurance is purchased to provide capital if one of the parents should die. A young mother would not be forced to work, reduce her lifestyle, or leave her children cared for by others.
When children go to college, many of us tap into our savings to help meet their tuition and housing expenses. We may purchase a child’s first car or provide an income for one or more years. If you die without providing continuing support, your young adult child may need to quit seeking a higher education due to a shortage of funds.
Suppose you have a change of executor, lawyer, accountant, or guardian. If one of these key people dies or becomes incapacitated, or is replaced regarding your estate plan, it is wise to review that aspect of your plan, which may include an entire rewriting of your will as you appoint new people.
If you want to establish planned giving, Life Insurance works well. If you desire to leave money, for example, to a charity, church or religious organization, an art gallery, or a school, you will need to do some estate planning. Consider using advanced life insurance planning. Life insurance can assign a beneficiary, allowing the monies to go directly to the charity or foundation. Consider that your will may need to be changed if you use Life Insurance to circumvent your will.
If you have grandchildren, you may want to ensure that they are provided for, perhaps through life insurance planning.
If you have experienced a significant change in your level of wealth, replanning may be important. If you inherit money or inherit Life Insurance proceeds, you may want to talk to your advisor about implementing Life Insurance in your own estate planning. Also, look at Disability Insurance and Long-term Care Insurance to see if financial risks can be insured to protect or enhance your wealth. If your assets decline, consider altering your bequests and newly establish this in your will.
If special care is needed for a loved one, make sure to plan. When a spouse, parent, or child has become disabled and needs future care, consider: Long-term Care costs are very high if you want a private room or special personal attention (such as defining when you want to take a nap or go to the washroom or bath, versus a strict schedule), for yourself, your parent, or another.
If you personally anticipate requiring costly long-term health care, you may want to alter the specific bequests in your will to reflect this new reality.
If you appoint a new or revoke a previous beneficiary, review your beneficiary designations with your Life Insurance representative and your beneficiaries.
If you have sold or will sell a business, your Life Insurance will need a review. If your assets become more liquid upon the sale of a business, you may want to pass that benefit along to beneficiaries or charities; or enhance your retirement. If a partner has bought or is buying your business previously bequeathed in your will, you may need to adjust your estate planning while using advanced life insurance planning for business-related solutions.
Replanning your Life Insurance may be necessary when you want to use or change a trustee or trust institution. You may, at some point, want to assign others to be in charge of investments within a testamentary trust directive.
A change of legislation can affect your plan. Changed government legislation can affect your estate planning. The validity of your will may be affected by changes such as estate taxation or probate laws.
Capital gains taxation on a major asset will eventually come due. When you own an asset that has appreciated, such as a cottage or business, or equity investment, make sure the tax payable will not harm the estate. Affordable Life Insurance solutions can pay off your estate liabilities after death.

What makes investing in mutual funds simple?

The following advantages, make investing in mutual funds simple:

· Simplified investing You can select an industry or sector or country and/or currency within which a mutual fund trades securities. You do not have to to hand-pick each security. The mutual fund manager does this security selection process for you. You don’t have to be assessing which stock or bond may or may not be a winner. A fund manager is trained to weigh out all the market contingencies which can affect investor performance.

· Low-cost diversification A small monthly purchase plan can have you moving forward in your mutual fund investments in a day. Your money can buy a piece of many different investments held within one or more funds.

· Dollar-cost averaging Dollar-cost averaging allows you to buy more fund units when the unit values are down, less when they are high, giving you some benefit from downward volatility.

· Flexible access to your money You can sell your fund shares in one day. Your proceeds are available the next day if your money is needed in the short term.

· Portfolio balancing Choices include the full range of fund types, and strategies are available to use such as strategic balancing of your fund holdings.

· Automatically invest You can automatically invest more in mutual funds at any time or use dollar-cost-averaging.

· Professional management Mutual funds have active professional management watching over your investment.

Source: Adviceon