Financial Planning

errorsomissionsCommitting a mistake or an error is nothing new as this is essentially part of what makes us humans. Even so, if the mistake committed is part of our job, the liability falls on us as there are usually consequences that results from such errors. If the mistake fall on a professional or business setting which involves finances and investments, the consequences may be huge. Of course, when this happens, the person involved and possibly the colleagues involved will be facing lawsuits from unhappy clients.

Real estate is a very serious industry as professional working in this particular sector has certain duties and obligations and thus faces the risk of error or omission in many of their deals. When such is committed, there is a potential to cause financial harm to another. Their liability towards the mistake they make means they will likely be subjected to lawsuits. Real estate is vulnerable to downfalls and agents working for investors should be knowledgeable of the market. If financial losses are incurred, the agents themselves risk of facing lawsuits.

When you handle or deal with finances, it is vital that you properly insure yourself with Errors and Omissions Insurance. Having errors and omissions insurance coverage means you will be protected from loss due to lawsuits filed against you that is related with a mistake or error you have made relating to your job’s responsibilities. In other words, if you are properly insured and the terms of the lawsuit falls under your E&O Insurance Policy, then the insurance company will pay for all the expenses incurred within the legal actions in your defense.

Of course, the main advantage of properly insuring yourself with Errors and Omissions Insurance is that claims that are filed under error, omission, or neglect of duties of the insured that occurs within the policy period are covered. All expenses involving the legal actions shall receive payments. In real estate, the exclusions to E&O are: claims resulting from dishonest act or possibly criminal act committee by the insured; claims involving polluted property; claims that result from damage to another’s property; and claims by the insured doing bodily harm or death towards another.

As with any other type of insurance policies, Errors and Omissions Insurance coverage has liability limits. Of course, the limitation depends on the E&O insurance policy acquired by the insured from the insurance company. In fact, some insurance companies allow more inclusions than others over certain policies. For this reason, if you are involved in such a profession where Errors and Omission Insurance will prove useful to you, it will be in your best interest to acquire one as this will essentially be your security measure against lawsuits. Lawsuits happen every now and then so surely you would not want to get into a lawsuit without any form of protection.

May 29, 2015

Errors and Omissions Insurance – What is it for?

errorsomissionsCommitting a mistake or an error is nothing new as this is essentially part of what makes us humans. Even so, if the mistake committed is part of our job, the liability falls on us as there are usually consequences that results from such errors. If the mistake fall on a professional or business setting which involves finances and investments, the consequences may be huge. Of course, when this happens, the person involved and possibly the colleagues involved will be facing lawsuits from unhappy clients.

Real estate is a very serious industry as professional working in this particular sector has certain duties and obligations and thus faces the risk of error or omission in many of their deals. When such is committed, there is a potential to cause financial harm to another. Their liability towards the mistake they make means they will likely be subjected to lawsuits. Real estate is vulnerable to downfalls and agents working for investors should be knowledgeable of the market. If financial losses are incurred, the agents themselves risk of facing lawsuits.

When you handle or deal with finances, it is vital that you properly insure yourself with Errors and Omissions Insurance. Having errors and omissions insurance coverage means you will be protected from loss due to lawsuits filed against you that is related with a mistake or error you have made relating to your job’s responsibilities. In other words, if you are properly insured and the terms of the lawsuit falls under your E&O Insurance Policy, then the insurance company will pay for all the expenses incurred within the legal actions in your defense.

Of course, the main advantage of properly insuring yourself with Errors and Omissions Insurance is that claims that are filed under error, omission, or neglect of duties of the insured that occurs within the policy period are covered. All expenses involving the legal actions shall receive payments. In real estate, the exclusions to E&O are: claims resulting from dishonest act or possibly criminal act committee by the insured; claims involving polluted property; claims that result from damage to another’s property; and claims by the insured doing bodily harm or death towards another.

As with any other type of insurance policies, Errors and Omissions Insurance coverage has liability limits. Of course, the limitation depends on the E&O insurance policy acquired by the insured from the insurance company. In fact, some insurance companies allow more inclusions than others over certain policies. For this reason, if you are involved in such a profession where Errors and Omission Insurance will prove useful to you, it will be in your best interest to acquire one as this will essentially be your security measure against lawsuits. Lawsuits happen every now and then so surely you would not want to get into a lawsuit without any form of protection.…

December 24, 2014

Return of Premium on Disability Insurance Policies

Is a Return of Premium (ROP) Rider Worth It?

Disability is expensive enough – why add return of premium?

return-of-premium-riderFor many people who are self-employed or who don’t have employer sponsored group disability coverage, buying a personal disability insurance policy is a must. This seems like a no-brainer, but most people are surprised at the cost of disability insurance when they purchase it privately.

Yes, disability insurance is more expensive than life insurance. Significantly more! Simply put, the chances of claiming a disability insurance policy for at least one period of long term disability in your working career are about 50%. That means one in two working Canadians will experience at least one period of disability, due to injury or illness, which keeps them off work for 90 days or more. And, if you’re off work for more than 90 days the average amount of time spent on disability claim is 2.9 years! Wow!

The #1 need is income protection

In this article we will discuss the cost/benefit analysis of having a return of premium rider on your disability insurance policy. That being said, the most important thing when buying disability insurance is to have enough income protection in place to ensure that your lifestyle and monthly bills are covered. After that we can look towards building value into a plan with pseudo-equity component which is the ROP rider.

You should never decide not to get disability insurance based on the cost of the ROP rider. This should always be considered an extra feature for those with more than enough disposable income to afford the option. Get income protection first – add value features after.

Is a Return of Premium Rider worth the cost?

There are two main insurance companies that offer a good return of premium rider on their disability insurance policies – Canada Life and Manulife. These riders are very similar. With Canada Life you can get back 50% of all your premiums once every 7 years. With Manulife you can get back 50% or 60% of your premiums once every 8 years.

The rules are simple. You must pay all your premiums over the time period. Secondly, if you have had any claims, the amount of your claim will be deducted from your return of premium amount before payout. So, if you have had a period of long-term claim it is most likely you will no longer qualify for a return of premium payment.

ROP rider on disability insurance is like having “insurance on your insurance”. In case you never get sick and never have a claim a portion of your total premiums will be returned to you, tax free. So, if you never get sick or hurt, and never make a claim, your actual cost for insurance goes down – by a lot!

If you do have a claim then the reality is you paid more for your disability insurance than another person with exactly the same coverage and no ROP rider. So, is it worth it?

ROP Rider Analysis

With just over 50% of Canadian workers NEVER having a long-term disability, then chances are slightly in your favour you will not make a claim (but still the risk is too high not to have disability insurance protection). Let’s take a look at two examples from Manulife’s 60% ROP option (the most expensive rider).

If our client is a 40 year old man, non-smoker with $6,000 of disability insurance, and assuming he is in an office job (class 3A occupation to determine disability insurance costs), his basic premium for a top of the line, professional insurance policy (Proguard from Manulife) would cost $238.41 per month.

If this same man was to take the ROP rider as an option, his premium would increase to $369.54 per month. The rider costs an additional $131.13 per month. No, let’s assume he never has a disability claim during his working career. In this case he would get back $20,530 after every 8 years. His premiums would therefore be reduced by 60%. His actual net premium payable is $155.69 per month. This is a significant decrease over the base premium of $238.41.

Now, let’s assume he did have one period of long term disability, wiping out one of his $20,530 premium returns over the course of him owning this policy. He will still receive back a total of $43,626. His total premium expenditure would be $106,428 (assuming a 2 year disability period where premiums were waived). His net premiums payable are $201.29 per month over a 24 year period. Still a discount!

ROP on Disability Insurance Worthwhile – If you can afford it

For those who have the financial resources to afford this rider, if can be a strong return on investment and protection for your long-term premiums in case you …

December 20, 2014

Manulife Bank: The Best High Interest Rate Savings Account

Make 1.55%1 on your cash savings with the online bank you can count on

Over the past six months, some online banks have changed ownership and dropped interest rates on their personal savings accounts. If this has happened with your bank, it’s an ideal time to review your options to see if there is something better for you. One option is Advantage Account, offered by Manulife Bank.

About Manulife Bank

manulife-bank-advantage-accountManulife Bank is a Schedule 1 bank owned by Manulife Financial. An online bank, it’s been in business for 20 years and is Canada’s eighth-largest domestic bank. Manulife Bank works closely with financial advisors, like our team here at Life Guard Insurance, to help Canadians integrate premium banking products into their financial portfolios.

About Advantage Account – 1.55%

Are you looking for a savings account with a proven history of strong rate performance? Look no further. You can count on Manulife Bank to provide you with market-leading rates on your personal savings.

Here’s how Advantage Account compares to some other online banks:

  • Manulife Bank Advantage Account 1.55%1
  • Ally High Interest Savings Account 1.20%2
  • ING Investment Savings Account 1.35%3

What about fees?

With Advantage Account, you can transfer your money online or over the phone and make deposits with no fees. Plus, a number of other transaction types are available for a small fee. Visit manulifebank.ca for a full fee schedule.

How do I make the switch?

Whether your have your savings with another bank or just want to start saving, I can help you get market-leading rates with an Advantage Account. Simply contact us and we can help you get started.…

December 18, 2014

Mortgage! Does the Word Mean Debt or Lifestyle to You?

What Does Your Mortgage Mean To You?

What are you protecting when you insure your mortgage?

personal-life-insurance-vs-banks-mortgage-life-insuranceWhen a family or individual borrows money from the bank to finance a home, be it a traditional mortgage or home line of credit, they are going into significant debt for their home ownership. It would be nice if we could all save up the $300,000 to $500,000 to buy a home in Canada, but that would take too long. We Canadians want it all right now – the big house, nice cars, all our electronic toys, etc. This has led to a culture of debt – we borrow to have the things we want today.

There is Good Debt and Bad Debt

When borrowing money, we’ve all heard the term good debt and bad debt. This basically means that the purpose of our borrowing will either create value or create additional cost. For instance, if you borrow money to buy a car, and that car allows you to accept a higher paying job further away from home because you can now commute to work, this is good debt. If you borrow money to buy a very expensive sports car or big truck which has no practical purpose (just for fun or show) this is bad debt, because the interest on the loan has no real purpose. It just adds cost.

Generally home buying and mortgages are good debt. So long as you can afford the mortgage payments now and in the long-term, a home not only retains its value, it increases its value over time. The interest you are paying on the mortgage can be very costly, but you are also paying off the principle in the home, and building value. Considering that you would need a place to live anyway, you have three choices: 1) Rent; 2) Buy with a Mortgage; 3) Buy with all Cash Down. Since most people can’t afford to buy a house for cash, they really have only two choices. Renting is a pure cost and brings no long-term value. It only provides the home and shelter you need. A mortgage gives you the home and shelter PLUS builds value, in exchange for paying an interest rate on the money loaned to buy the house.

Are you Insuring your Mortgage?

When taking out a mortgage with a bank or other lender, they will invariably offer you a mortgage life insurance policy. Firstly, insuring the very large debt of a mortgage is a good idea, and everyone should have their debts covered in case a bread-winner or caregiver in the family dies prematurely. That being said, there is good life insurance and bad life insurance! The bank’s mortgage life insurance policy falls into the Bad Life Insurance category. And here’s why:

  • The bank owns the policy.
  • The bank controls the policy and will cancel coverage if you leave them for another lender.
  • The bank is the 100% beneficiary of the policy – your family gets $0 cash.
  • It’s the bank’s risk that needs to be insured – they lent you the money.
  • The policy is a declining benefit with a constant premium – as you pay off your mortgage you have less and less life insurance but your payments remain the same.
  • You’re paying the premium for the bank’s life insurance plan!

There is a far better option to having the bank’s mortgage life insurance policy – personal life insurance. Owning a personal life insurance policy is far better for the following reasons:

  • The cost of term life insurance is usually cheaper than the bank’s premium rates.
  • You can cover off more than just your mortgage – you can protect your family’s lifestyle too.
  • You can lock in premiums for a long time, like 20 or 30 years or even for life.
  • The life insurance benefit does not decrease as you pay off your mortgage.
  • Your family receives 100% of the death benefit as a tax free cash payout, which gives them options.
  • You can take your personal life insurance with you where-ever you go, even if you leave Canada.
  • You can choose to have a policy that is similar to buying a home, with a cash value and eventual ownership of the full life insurance benefit.

Are you insuring a debt or protecting your family’s lifestyle?

The question to me is what are you protecting? If you’re only focused on a debt, and making sure the debt is paid off, then I guess you can stick with the bank’s mortgage life insurance policy. It might be a little more expensive than personal life insurance, but it is convenient to buy. But, if your home represents more than just a debt; if it represents your family’s life, a place of love, a place to build a future …