INSURANCE
Insurance is a form of risk management. Often mis-sold, misunderstood but if properly used it can be a powerful backer to your financial success. Insurance can provide a peace of mind and increase the probabilities of achieving financial planning goals. The insurance industry seems to be more complicated than it should be – we like to help.
The needs to for insurance starts with this question:
Would you, your family or corporation be financially impacted if something happened to you or ability to make an income?
Term Insurance
Has a predetermined time period to be in force for: 5, 10, 20 or 100 year. Usually one of the cheapest forms on insurance because it just expires at a certain point, and only paid upon death. Perfect to cover temporary exposure for risk like a mortgage loan. A must for many corporate loans as well.
Universal Life
The most powerful insurance policy; it can be used as permanent or for a term period with more flexibility. It can have very unique benefits if strategically used. Universal Life can have an investment component that can be accessed while you are still alive. The investment component (Cash Surrender Value) grows tax free just like an RRSP. Very unique benefits for corporate holdings. Biggest mistake with a UL policy is that insurance brokers forget that the investment component needs to be managed like any other investment account. Most insurance brokers, however, have very little investment expertise.
Whole Life
A permanent form of insurance that has an investment component as well. There are two types of whole life policies: participating and non-participating (we would never recommend non-participating). The Cash Surrender Value grows tax free (like in a UL) from a professionally managed pooled account's dividends. The returns are very complex to explain or predict. Due to Canadian insurance laws they have a specific mandate for liquidity and risk, thus the returns will never be high but will always be steady. We look at Whole Life as a fixed income product. Due to holdings correlation with interest rates, we caution ambitious predictions for returns.
Critical Illness
Pays out a predetermined, one time, sum tax free after a survivorship period. This days when people get sick with a critical illness they are more likely to survive it. Critical illness can provide a peace of mind at the most needed time of recovery. Can be just as important to a family's finances or as a key person insurance for a corporation.
Disability
In a case of an injury or inability to do your own or any other occupation you can receive a tax free monthly income for a predetermined amount of time. This form of insurance can be pricey but a very good idea for main earners, professionals and sole proprietors. The saying "protecting the goose that lays the golden eggs" is very fitting here.
Long-Term Care
Pays a tax free weekly or monthly sum if you are unable to perform day to day activities. It seems like an insurance policy you will need when you are very old, but we think it is one of the most overlooked policies out there, and never to early to consider. Long-Term Care insurance offers you the flexibility to take care of yourself however you want, wherever you want. Aging demographics escalate the costs of long term healthcare and will only get more expensive. Proper planning takes a massive financial burden off your family.