Archive for the ‘Manulife’ Category

2012 Federal Budget Summary from Manulife Investments

Finance Minister Jim Flaherty delivered the Federal Budget on March 29th, 2012. This budget does not change corporate or personal tax rates not does it change Canada Pension Plan contribution rates. As expected it will impact Old Age Security and Guaranteed Income Supplement. There are a few surprises one of which is the elimination of the penny from Canada’s coinage system.

 

Below is the 2012 Federal Budget Summary is now available. Developed by the Tax & Retirement Services Team for your reference, and for use by advisors and clients, this reference piece highlights changes delivered by the Conservative government on March 29, 2012.

 

To access the 2012 Federal Budget Summary, please click on the attached pdf or links below.

• Manulife Investments – Budget 2012. Tax & Retirement Services

 

 

The article was written by Michael Siervo, District VP of Manulife Investments. 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 2012 Federal Budget Summary would be very much appreciated.

Real World Example of Bad Bank Mortgage Insurance

Mortgage Life Insurance from Canadian Banks is a waste of money

Again I want to rant about how bad the bank’s mortgage insurance is. It is a terrible product that is far too costly for consumers and is really just a big money-maker for the bank.

 

Yesterday I had the pleasure of helping a couple get rid of an overly expensive bank mortgage insurance plan and save them over $70 per month. I am not at liberty to say which bank these clients were dealing with or any personal information about my clients. Let’s call them Bob and Mary, and the bank as Big CND Bank. Here is the case:

Shopping for better rates on the internet

My clients found my website, Life Guard Insurance, when shopping for life insurance to replace their expensive mortgage insurance from Big CND Bank. They had recently moved to Calgary, AB from a major Canadian city in the east and had recently moved into a newly built home. Bob and Mary’s mortgage is about $500,000, not unusual for a home in Calgary.

 

Because Bob (mid 40s) and Mary (early 40s) are middle age, they don’t fit into the bank’s prime target age for mortgage life insurance, and so the premiums are starting to rise rapidly. The premiums are based on the oldest person’s age, so in this case it is a middle aged male plus spouse. This could be anyone who is moving houses or upgrading to a new property in their 40s.

 

Bob told me he was paying the mortgage weekly and the bank’s premium for mortgage insurance was about $45 per week. That works out to $2,340 annually, or $195 per month.

What does their $200 per month mortgage insurance cover?

Bob and Mary had their home covered for loss of life. It was a joint first-to-die life insurance policy that would pay out the remaining balance of the mortgage if one of them were to die. Then the policy would end.

 

Currently they are covered for $500,000 but as they pay down their mortgage their life insurance coverage will decline. However, the premiums for the mortgage insurance will remain level – at almost $200 per month.

 

Also, there is no actual cash payout to the family. The bank would be paid the cash from the mortgage insurance death benefit, and then payout the mortgage and give the survivor 100% ownership of the home – mortgage free.

 

I don’t know about you, but I can’t eat the house or pay utilities with a paid off home. The surviving family might have to re-mortgage the home or sell it if they can’t afford the upkeep on the home.

The Solution – personal life insurance with some extras

I was able to provide them with an excellent solution from Manulife Financial. We used a Term 20 policy that locks in the premiums for the next 20 years. After 20 years the mortgage will be very small or paid off and all children will be grown up – so not much financial risk left. If nothing has happened to them they can cancel the policy.

 

The Manulife Combined Term 20 policy was able to cover both Bob and Mary for $500,000 EACH – double coverage. If one person dies the $500,000 is paid out and the survivor still has their $500,000 life insurance policy. In the event of a joint disaster, Manulife will pay out $1 Million to their children.

 

They were also able to afford to add Child Protection riders for their 3 children at a total cost of $7.50 per month extra.

 

The base premium for the $500,000 term 20 coverage was $123. 38 – saving them about $72 per month over their mortgage insurance. The extra $7.50 to give insurance to their children brought the total cost of the policy to $130.88 per month.

 

This life insurance is level coverage for a level premium. That means the premiums stay at $130.88 per month for the next 20 years and the coverage remains at $500,000 each over the next 20 years (plus the children are covered until age 25, when they can take out their own life insurance policy – no medical questions asked).

 

After 20 years Bob and Mary could renew the insurance, but the price does go through the roof. It is designed to cover them while they pay down their mortgage. If they wanted to, they could convert this policy into permanent life insurance coverage for their estate needs sometime down the road.

 

At least with personal life insurance you know what you’re getting. You can save money and make sure that if something happens your family gets the death benefit – not the bank. The death benefit will remain $500,000 each over the full 20 years. Even if the mortgage is only $200,000 in the future the personal life insurance will pay the full covered amount ($500,000), and the family will have extra cash to offset things like income loss and final expenses.

Have your bank’s mortgage insurance re-evaluated

If you are currently insuring your mortgage through the bank, you should get a second opinion. It just makes sense – get something that brings much higher value for a lower cost. Contact Life Guard Insurance today to see if you can save money on your mortgage insurance by switching to personal life insurance.

 

 

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 bank’s mortgage insurance in Canada getting worse would also be very much appreciated.

Market volatility focuses clients on risk management

Risk management means examining their insurance needs

There’s nothing like good a dose of market volatility to focus the minds of clients on risk management. While there are limits to the amount of protection you can place on their investment portfolios, the risks in their overall financial plan can be addressed with insurance.

 

The downturn has reminded many investors about the benefits of having a backup plan and as a result we’re seeing a return to products that embrace certainty over speculation.

 

John Novachis, president of IPC Investment and IPC Securities, says he’s seen a recent shift into permanent insurance, particularly whole life, which he believes is likely to continue.

 

“There has been a growing trend back into permanent insurance, though term insurance continues to be the dominant product. There has been a reduction in the amount of universal life sold and that has largely been because many policies were linked more than everyone wanted to market performance,” Novachis says.

 

A large portion of new insurance sold is coming from the offices of advisors who are increasingly being asked by clients to provide them with in-depth risk planning above and beyond the usual portfolio management.

 

“The thing we’re seeing is that more and more of our advisors are performing risk management reviews with their clients,” Novachis says. “The risk that used to be based solely on portfolios has broadened into risk management of an individual’s entire affairs.”

 

Dave Velanoff, CEO of MGI Financial and senior advisor to the president at Desjardins Financial Security, suggests that not only are advisors doing more risk management these days—its a priority.

 

“More and more advisors are getting into full service financial planning as opposed to just selling a product. It’s very difficult right now to get people to invest in the marketplace, so advisors need to look at the risk management side of their client’s portfolio,” Velanoff says.

 

While critical illness insurance has been selling very well since the downturn because of its cheaper price tag, Velanoff warns advisors against focusing too much on niche products at the expense of the bigger insurance picture. After all, if a young executive is killed in a car accident and all he or she had was critical illness, the family gets nothing. Worse, they might even sue the advisor for not having put life insurance into the picture.

 

“What worries me is that people are selling things that are easier to sell; but we have to be careful to not mix up our priorities. People have to take care of their families first, the priority should be life insurance,” Velanoff says.

 

It’s no surprise that during lean times and rocky markets, guaranteed investments are at the top of many investors’ minds, with segregated funds enjoying a renaissance.

 

“Segregated fund sales are booming and a lot of that has to do with the current climate. A lot of clients are looking at the guarantees these funds provide,” Velanoff says. But he believes that boom is unlikely to continue for long because rates are currently undervalued.

 

“I think segregated funds are going to get priced to a point where they’re not as competitive as they are today,” he says. “I don’t think insurers will be able to take the risk.”

 

Allan Bulloch, president of IPG Insurance, says the continued low interest rates in the bond market will push insurance companies to raise rates in general.

 

“The biggest thing right now is the long-range interest rates insurance companies have been dealing with,” he says. “Investment choices for insurance companies are down because of record low bond prices. I expect to see further price increases in products.”

 

Manulife Financial increased their level cost of insurance rates on universal life policies on October 15, and all insurance companies have announced first and second waves of rate increases to compensate for challenging market conditions. As a result, some people have been shifting into permanent insurance to cherry-pick the current low rates.

 

“With the level cost of insurance price increases that went on this year, we’re seeing some more conversions of term insurance to take advantage of the slightly lower prices before the level cost of insurance increases further,” Bulloch says.

 

In any case, Novachis says insurance is definitely becoming a crucial topic for advisors to master because of its growing relevance to their clients’ portfolio strategy.

 

“We’re seeing a trend where insurance is being discussed more by advisors due to risk management becoming more crucial, and if we continue to see financial planning being recognized as a profession, advisors will be a big part of that,” Novachis says.

 

Raf Brusliow is a Toronto-based financial writer.

 

Filed by Raf Brusliow, editor@Advisor.ca

 

Originally published on Advisor.ca

Universal Life Insurance Premiums Set To Rise, Again

If ever there was a time to buy universal life insurance, it’s now!

Another round of price increases for Universal Life Insurance? Here we go again! It was only in December of 2010 that Manulife started the ball rolling by increasing premiums for their universal life insurance new business. And it’s Manulife again that is announcing the first major price increase in round 2 of Canada’s rising cost of life insurance. So far the price increases are limited to universal life insurance policies; those with level cost of insurance. The warning here is that other policies that are sensitive to long term interest rates, like whole life insurance, might be re-priced too.

 

Permanent life insurance policies that have a life-time guaranteed cost of insurance, or level cost of insurance, are the policies that affected. This is bad news for Canadian life insurance shoppers since the guaranteed level cost of insurance for life is the most valuable guarantee you can buy of any financial product today. Insurance companies are frantically trying to design new products that give retirees guaranteed income for life without bankrupting the insurer. A guaranteed cost/income for life is EXTREMELY valuable to the consumer, but if the insurance company can’t make money and goes bankrupt selling it, what is your guarantee worth then?

Why are universal life insurance premiums on the rise?

A good article in the Financial Post called The time to buy insurance is now, written by Garry Marr, helps explain the problem insurance companies are facing. The fundamental problem is poor investment returns and low interest rates. Insurance companies determine pricing for their life insurance products based on what they believe they can earn in interest and growth by reinvesting those premiums. Insurance companies are not allowed to take much risk with the premiums they have to reinvest, and must put them into government bonds, highly rated corporate bonds and other secure investments. With interest rates at an all time low, and seemingly stuck there, insurance companies are losing money on every new level cost universal life insurance policy they sell today.

 

The real problem is the young Canadians who are buying permanent life insurance. Sure it is a good idea to lock in premiums while you are young. There are even products that can give you a guaranteed paid up policy in 10, 15 or 20 years. This is great for the consumer, and something life insurance brokers in Canada have been preaching for years, but I’m not sure the insurance companies really wanted as many sales as they got. Buy locking in a premium for life, or even offering a quick pay policy with premiums for 20 years or less, the insurance company is extending a guarantee that they are uncertain they can make a profit on. With the current low interest rate environment, they definitely can’t make a profit over the life of these policies. Long term interest rate assumptions would have to dramatically increase for these policies to be profitable again, and as we’ve seen, low interest rates seem to be stuck at historical lows.

Does a 10% price increase really make a difference?

Premiums will be going up, that we know. In some cases it could be as much as a 20% increase (for instance a person in their 20’s buying permanent life insurance). The average price increase estimated will be about 12%, but the younger you are the higher the increase. There should be little change at all for clients over 60 buying the same policy as now.

 

If you are affected by this premium increase, will a small 10% increase make a big difference? Let’s look at an example. If you are a 40 years old woman in Canada, non-smoker, looking to buy a simple Term 100 policy for $250,000 (level cost of insurance for life, no cash values), Manulife today has the best price at $1,171 per year. The cost for this policy goes up on Oct 15, 2011. If the new price is 10% higher, that would mean the new price will be $1,288 annually. This is an extra $117 per year. If this woman lived to age 85, and paid these premiums for 45 more years, the extra cost would be $5,265! That is over $5,000 more for exactly the same plan you could get now, and save the $5,000!

 

Even though it seems like a small increase each year, it does add up to a lot of money over time. Why pay more for exactly the same life insurance you can get now for less?

Locking in a premium now is guaranteed for life

Even though Manulife will be increasing rates in the next few days, it took the rest of the Canadian life insurance industry 4-5 months to all make their premium increases. This still leaves a window of opportunity open for many shoppers to lock in low rates today. If you make an application BEFORE the cut-off date, your premium rate will be locked in. Even if your policy is finalized through underwriting after the premium increase date, the fact you made your application before the cut-off will guarantee you keep your low rates for life.

 

If you have been thinking about getting permanent life insurance, the time to act is now! Procrastinating now will cost you thousands.

Getting qualified advice from a life insurance broker on the best rates

At Life Guard Insurance we can help. Our team of brokers across Canada have access to all the top life insurance companies in Canada. We can help you find a policy that will guarantee you the “bargain” universal life insurance premiums that are still available today. Feel free to contact us to speak with a qualified life insurance broker to lock in your guaranteed life insurance premium today.

 

 

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 universal life insurance premiums rising in Canada would be very much appreciated.

Patty Randall is our guest author about long term care insurance. She is the owner of www.longtermcarecanada.com and Canada’s foremost speaker and educator on long term care needs and aging successfully with passion and purpose. You can email her at pattr@telus.net. Please check out her website section on Long Term Care Insurance in Canada.

An Opinion on Long Term Care Insurance

Maybe this is a good time to remind everyone that long-term care truly is ‘a family affair’.

 

In our country, 90% of care is undertaken by family in one’s own home and 1 in 5 caregivers still provide care to their loved ones even when in a care facility. As well, 80% of Alzheimer’s-dementia persons are cared for at home, usually by a spouse.

 

“It upsets me!” “It upsets my family!” These are the two major barriers recently identified for not having a conversation about our future long-term care! Shockingly, the majority of couples have not talked with their spouses yet about the three key aspects pertaining to their future care:

• Their options when they need some care and related costs
• What they expect of their family members
• How their future care is to be paid for

Many people ask me about long-term care insurance (LTCI) as a method of financing some of the costs of our potential future care. I’m not a planner, insurance agent or broker, nor do I work for any insurance company, so I can only express my understandings as a consumer with years of care-related experience.

 

1 in 4 Canadians retire because of a health issue. 1 in 4 of us will have a long-term disability while 8 out of 10 of us when elderly will have a chronic health problem. So, I view my future long-term care like I do any other risk. I own house insurance (the chance being 1 in 1200 that my house might burn down) and I own car insurance (the chance, 1 in 240 that there might be a catastrophic crash). And I own LTC insurance (the chance is 1 in 2 that I will need some care in my future). Long Term Care is the single largest out-of-pocket cost for adults over 60 therefore it is a significant financial risk too.

 

Naturally I won’t be disappointed if I never get to claim against my house insurance after years and years of paying for it. And that’s my attitude toward my long-term care insurance too. (Great, I won’t have needed it!)

 

Long Term Care Insurance is an insurance program designed to help the insured, you/ me, provide for our own care in cases of chronic illness, disability, an accident or as a result of growing older. (Long Term Care Insurance is not just for seniors — care may be required at any age.)

 

It provides coverage for times when we can’t manage the essential physical activities of our daily living (ADLs) on our own, such as feeding, dressing, bathing, toileting and walking, as well as moving from a bed to a chair. However, mental incapacities can be covered as well. It is important to understand the importance of the ADLs since the inability to perform a certain number of these ADLs or to pass certain mental tests is how insurance companies decide if we are eligible to claim and receive the benefits of our policy.

 

The experts tell us that we should own a long-term care policy for the same reason we buy life insurance, because we love our family, and without it, our family could be seriously affected, in some cases devastated. We are going to be taken care of one way or another, but it is our loved ones’ lives that will be changed dramatically without some planning on our part — it’s all about consequences. It is often said that ‘LTCI doesn’t replace a family’s love, it complements it’.

 

We need to consider this type of insurance since many of us couldn’t afford to pay for all our care needs over a long period of time as that care, wherever it may be, could be costly. Because provincial government care-initiatives are limited and can change over time, it isn’t a good idea to put ourselves in a position of dependency on government programs and services.

 

Of course, none of us want to become a burden. We’ll want choices, as one gentleman said, ‘I would like to choose where I go rather than be taken there’. We may also consider Long Term Care Insurance to protect our estate. For me, peace of mind is extremely important since I want to ensure that I have all in place in my retirement and Long Term Care Insurance fits as a piece of that plan.

 

We should buy Long Term Care Insurance ‘sooner rather than later’ (as my best friend who is an insurance agent tells me, ‘better 5 years too early rather than 5 minutes too late’). One must be ‘health eligible’ to qualify, but, and this is an important but, even if you have a certain health problem now, it doesn’t mean you won’t qualify, so always ask.

 

We should buy a policy that allows both ‘home care‘ and ‘facility care‘ — trying to have our bases covered — and don’t forget to ask about spousal discounts and inflation coverage.

 

Long Term Care Insurance polices aren’t one type. Different companies sell policies that combine features and benefits such as benefit periods, 1-2-5 years or lifetime. Also, the amount of daily benefit you can purchase can range ($100-$300).

 

And insurance companies pay differently too. Some pay a lump sum monthly up to your limit; some pay the amount of the care-bills actually incurred monthly upon submission; and there are even income policies. It’s important to ask specifically about the policy’s payment methods as you’ll want the best for your situation.

 

A key question always asked is, ‘What does it cost’ . . . ‘That depends’ I usually respond . . . think of it like buying a house, what features do you want, your Long Term Care Insurance policy is ‘customized’ to fit your circumstance. Since I have been in situations where I’ve had to pay the care bills every month for years, I also discovered that a Long Term Care Insurance premium is less expensive than actual care costs. Of course, it is best to buy prior to age 65 as costs are age-based, the younger you buy the better!

 

Certainly cost is always an obstacle, but I would rather make do without some other big-ticket item in my life than this particular insurance plan given our demography, economy, health system budget concerns, marital status changes and our tendency toward long life.

 

Long Term Care Insurance is a complex product, but we shouldn’t be in denial that we’ll probably need some demanding care in our later years when ‘our biological warranty’ is running out. I recommend you investigate Long Term Care Insurance by calling a qualified insurance agent or financial planner. You may also go to my website and link to the reputable insurance companies that offer this product in order to learn more.

 

Wishing you good decision-making regarding Long Term Care Insurance, Patty

Long Term Disability Insurance is Complex to Design

The many moving parts of long term disability insurance

Long term disability insurance is one of the more complex insurance products to design for people. It has many moving parts and various riders and options that can be added to it. In this article we will cover the fundamental plan design elements to setting up a proper disability insurance plan. Also, we will discuss the three elements of underwriting that take place to get qualified for disability insurance.

 

This is different from group long term disability insurance, which usually has a static plan design and cannot be customized by the policy holder. When you purchase a personal disability insurance policy you can adjust many of these features to make the plan fit your unique needs.

Plan design elements of long term disability insurance

Elimination Period

The elimination period is also called the waiting period for a long term disability insurance plan. In fact, with most disability insurance policies, this elimination period can be as short as 30 days, but that is the most expensive option. The real premium sweet spot is a 90 day elimination period. This means you would be covered for all major illnesses and injuries that would keep you from work after waiting 90 days, and the insurance company is not likely to pay claims for short term events, like sprains, strains, break and cuts.

 

If you have enough money in the bank to afford to wait 3 months before your benefits start, then your long term disability insurance plan will be priced very competitively for your most financially impactful risks. Insurance industry statistics show that if your disability lasts more than 90 days, the average time off work is 2.9 years.

Benefit Period

This is how long you would like your insurance payments to go for if you were disabled. The shortest timeframe is for 2 years, or 24 months of benefit. You can also choose from a 5 year benefit, 10 year benefit or until age 65 benefit. For most people, even though the coverage to age 65 is the most expensive, it provides the best level of protection they are looking for.

 

Even though about 95% of all disability cases are back to work within 5 years, the 5% who don’t go back probably will never return to the workforce. For these people, knowing their disability insurance payments will never end throughout their working career is very valuable. Also, the price difference between a 5 year benefit and a “to age 65” benefit is not that steep, and can usually be managed by the budget.

Coverage Amount

When determining the amount of coverage you can buy for long term disability insurance, you have to look at your actively earned income. Passive income, like collecting rent cheques or interest payments from an investment, is not included in calculating your coverage amount. This is because passive income would continue even after you become disabled. Only a percentage of your actively earned income is insurable. The insurance company doesn’t want to over insure its clients so as to give people a financial incentive to remain on a disability insurance claim. They want to provide enough income for paying day-to-day expenses but give you incentive to go back to work.

 

So, there is a maximum you can qualify for. It is usually about 60 – 65% of your gross income before taxes. If you are a high income earner in Canada, this percentage will decrease. Disability insurance companies do allow for high income earners to get a much larger benefit but it is a much small total percentage of their take home income. For instance, if you earned $75,000 per year you could get a month benefit of $4,125 per month tax free benefit (or 66% of gross earnings). If you earned $250,000 per year from all sources of active income, like salary plus bonus, you could get $9,500 per month tax free benefit (or 46% of gross earnings).

 

If you feel you don’t need the maximum amount of monthly benefit, you can always reduce your coverage and thereby reduce your monthly premium. You cannot, however, get more monthly long term disability insurance coverage than your earnings qualify you for.

Regular Occupation vs. Any Occupation

A very common difference between personal long term disability insurance group coverage is the definition of regular occupation vs. own occupation. Regular occupation is defined as the job duties needed to perform the regular occupation under which you were insured. For example, if you are an oilfield consultant, you need to drive to sites, be able to walk around the job site, be able to use a computer, have strong cognitive abilities to write reports and analyze data, etc. And these job duties would be related to the job of oil field consulting, not supervising a manufacturing facility for instance. An inability to do these duties because of injury or sickness would trigger your long term disability insurance claim.

 

Any occupation definition, on the other hand, is defined as being able to perform normal job duties that would qualify you to re-enter the workforce in ANY occupation for which you are suitable trained and/or have experience in. A disability insurance company would also have the right to demand that you engage in retraining so you would become qualified to re-enter the workforce, and thereby get you off a long term claim.

 

With a personally owned long term disability insurance policy you can have the regular occupation benefit through to age 65. With group insurance you have regular occupation definition for 24 months, and then it switches to any occupation definition.

Total, Partial and Residual Disability Definitions

With group benefits disability coverage your only definition of coverage is total disability. This means you must be incapable of returning to work in any capacity and staying home 100% of the time. Even if you return to work part-time you would lose all your disability insurance payments under the total disability definition.

 

With a personally owned long term disability insurance policy you always get the total disability definition, but you also could get partial and/or residual disability definitions. A partially disability definition is if you are away from work about 50% of the time and/or you cannot perform one or more of the major duties of your job. Qualifying for a partial disability benefit would give you 50% of your monthly benefit. Residual disability coverage is defined as percentage of income loss while you are injured or sick and under the supervision of a doctor. If you are losing more than 20% or your prior income you would get that percentage of you monthly benefit. For example, if your benefit is $5,000 per month and you are losing 60% of prior earnings, you would get $3,000 per month and still be able to work part-time.

 

Having total, partial and residual disability definitions gives you a lot more choice and flexibility when on claim. Being bored at home and feeling trapped by a long term disability insurance policy is the last thing you need when trying to re-enter the workforce.

Three underwriting factors to qualify for personal long term disability insurance

Health Underwriting

As with life insurance or critical illness insurance, the insurance company will need to evaluate your health risks. What they are looking at is very different from a life insurance policy though. The insurance company needs to evaluate your likelihood of going on a long term disability insurance claim in the future based on your health today. Things like having prior mental or nervous disorders, like depression or anxiety, would make it hard to get disability insurance (since over 20% of all claims today are related to mental/nervous disorders). Having a prior injury to certain part of your body, like a torn ACL, would usually mean exclusion for that particular body part for any future claims.

 

If you are healthy and without prior injuries or illnesses it is very easy to get disability insurance (or any insurance for that matter). Unfortunately, as we age, it is more and more likely we have at least one thing wrong with us that makes getting a disability insurance policy a problem. Be prepared for certain exclusions and limitations to your long term disability insurance policy if you have any prior conditions.

Income Underwriting

This was referred to above, in that you can only qualify for a certain percentage of your actively earned income. When going through underwriting you need to provide proof of income. This is usually in the form of a T1 income tax statements for the last two years of earnings. If you are on contract, a copy of your contract agreement would also be needed. The insurance company will average your earnings over the last two years and offer maximum coverage based on the aggregate amount. To get more disability insurance coverage, be sure to provide additional evidence of other earnings that might qualify for coverage.

Occupational Risk Underwriting

Occupational risk is a big factor when getting long term disability insurance coverage. Disability insurance companies have many years experience with workers from different industries, and they have a long term history of claims. For instance people in the nursing profession have a higher rate of claims vs. accountants, so the accountant would pay less for the same monthly disability insurance benefit. Be sure to shop around with a broker, as some companies have had poor experience with certain groups and charge them more, while the other company would be able to offer a more competitive premium.

 

Just be prepared that if you are in a more physically intensive job or a blue collar trade you will pay more for disability insurance coverage than someone who works in a white collar professional career like a doctor or lawyer.

Get a Long Term Disability Insurance Quote Now

Designing a quote for long term disability insurance coverage is not quick and easy, and that is why there are no online tools to get a quote instantly. You can either use our Disability Insurance Request a Quote form or feel free to contact Life Guard Insurance directly to be put in touch with a qualified insurance broker who can design you a personalized long term disability insurance plan.

 

 

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 long term disability insurance would be very much appreciated.

Adding a Child Term Rider to Parent’s Policy is a Basic Life Insurance Plan for Children

A Child Term Rider provides risk protection today and converts to personal insurance tomorrow

Starting a life insurance plan for your children has never been as easy or as cheap as adding a child term rider to your personal life insurance policy. If you are shopping for your own life insurance plan or even if you already have one, you can add a child term rider (CTR) to the policy to cover all your children for one low price.

The most impressive feature of a child term rider is the conversion option when your child becomes an adult. This allows your child to pull the child term rider out of your policy and convert it into a much larger amount of personal life insurance without qualifying medically for the insurance. So, if effect, you are giving your kids the gift of “insurability” for their future – a gift that becomes very valuable if your child developed a health condition that made him/her uninsurable in the future.

How does a child term rider work?

A child term rider is an add-on to a regular adult life insurance policy. By adding the child term rider to their policy, parents can insure ALL their children with a level amount of benefit for one low monthly cost. Most child term riders offered by different insurance companies will allow parents to buy between $5,000 and $30,000 of life insurance coverage for each of their children.

As I said, the policy has one low cost and all children are covered. You need at least one child to be born in order to add the child term rider to your policy. Your children must be between the 15 days old and age 18 to get a child term rider. You must complete a simplified medical questionnaire for each of your children who are already born. The good news is that all NEW children you have will automatically be added to the child term rider without completing the medical questionnaire.

The child term rider doesn’t last forever. After a period of time the rider will terminate. This is different for each company. Most will only insure children until age 25. Some policies automatically cancel the child term rider after 20 years on the parent policy, while others will cancel when the child reaches age 25 or the parent reaches age 65, whichever comes first.

Let’s look at cost (maximum child term rider across a few different insurance companies):

• Sun Life – max benefit of $20,000: $8.10 per month
• Equitable Life – max benefit of $30,000: $13.50 per month
• RBC Insurance – max benefit of $30,000: $16.20 per month
• Canada Life – max benefit of $25,000: $13.50 per month
• BMO Insurance – max benefit $20,000: $16.85 per month

The conversion feature of a child term rider

The most important feature of a child term rider is your child’s ability to take over the rider as a personally owned life insurance policy when they become an adult. The child is allowed to take over the life insurance between the ages of 21 and 25 and convert it into any permanent life insurance policy available from the insurance company at the time.

The amount of life insurance that can be converted varies between companies. Most companies allow five times (5X) the base amount of life insurance to be converted without evidence of insurability. Some, like Canada Life, allow 10 times the child term rider amount to be converted. So, in the case of most companies, you could convert a $30,000 child term rider into $150,000 of personal life insurance. Canada Life would allow you to convert a $25,000 child term rider into $250,000 of personal life insurance that your child owns.

The conversion feature can be one of the most valuable financial plans you could ever give your child. If your child’s health was not good, and they developed a childhood disease like juvenile diabetes of cystic fibrosis, they would be uninsurable for a regular life insurance policy when they became an adult. The child term rider conversion option would allow them to get a large amount of personal life insurance without having to qualify for it medically.

Manulife Financial’s unique child term rider

Manulife has a unique child term rider that is different from all others in Canada. They have a small premium PER child of $2.50 per month. This can make the rider a much cheaper option if you have only one or two children. The child term rider has only one death benefit of $10,000 for each child. This is lower than the competition but the conversion feature is much better.

For each of your children you can convert their $10,000 child term rider into $250,000 of personal life AND critical illness insurance at age 25. The critical illness insurance conversion amount is limited to $100,000, but that would still leave $150,000 available for conversion into life insurance. All these conversions are done without evidence of insurability, even the critical illness insurance! The only stipulation is that your child does not have an illness that would immediately trigger a critical illness insurance claim at the time of conversion – like if he or she was currently dealing with cancer they could not get the critical illness conversion. The life insurance conversion for the full $250,000 would still be available, however.

Life Guard Insurance can set up your life insurance with a child term rider for your kids

If you are shopping for your own life insurance and would like to include your kids, or you would like to add a child term rider to an existing life insurance policy, we can help. Feel free to contact Life Guard Insurance to find out more about how to protect your children with a child term rider.

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 a child term rider would also be very much appreciated.

Life Insurance Can Create a Tax Deferred Insured Investment Plan for Children

Using life insurance to build a flexible, tax efficient investment plan for children

Have you ever thought about building an investment plan for children of yours? The Canadian government offers a great incentive for setting up a Registered Education Savings Plan (RESP) which we will discuss in the next article. A much less known investment plan for children is using Life Insurance to create a tax efficient long-term investment strategy that provides future cash flow and lifetime insurance protection for your kids.

How does life insurance on children work as an investment plan

The first thing we need to understand about this strategy is how permanent life insurance works in regards to taxation. The reason life insurance works as an investment plan for children is because of the tax sheltered growth of money inside a life insurance policy PLUS the no-tax transfer of the policy ownership. Let’s look at these two things separately.

Tax sheltered growth of money inside life insurance

One of the most efficient investment products in Canada today is a life insurance policy that allows tax sheltered growth. These permanent life insurance policies, often a universal life insurance policy, allow the owner to fund the plan over and above the pure cost of insurance risk protection. The excess dollars above the cost of pure insurance are invested into a portfolio of funds of your choice. Based on market returns, these funds can grow over time and create positive investment growth.

The investment portion of the universal life insurance policy falls under tax rules governing life insurance contracts. These rules allow the money inside the life insurance policy to grow and compound over time in a fully tax sheltered environment. When money is withdrawn from the policy during the life of the insured person (i.e. this is not a death claim), the growth portion of the money being withdrawn is taxed as income. If the money is left inside the policy to grow forever, the funds convert from a tax sheltered investment account into a non-taxable death benefit at the end of life.

Non-taxable transfer of a life insurance policy to a child

This is a very special tax rule in Canada allowing a “parent” (who can be a biological parent, grand-parent, adopted parent, step-parent, etc.) to buy a life insurance policy on a minor child and later transfer ownership of that policy to the child with no negative tax event to the parent.

So, it works like this: a parent buys life insurance on their child. They invest money into the policy over time. At some point in the future when the child is responsible enough and at least the age of majority (age 18) they transfer the policy to the child. All tax sheltered growth inside the universal life insurance policy is then transferred to the child and there is no deemed disposition of assets or tax on the investment gain attributed back to the parent. This creates an excellent intergeneration wealth transfer from parent to child. See the tax report below:

Manulife Tax Topic – Intergenerational Transfer of Life Insurance

Benefits of life insurance as an investment plan

• The parent owns and control the investment portion of the life insurance until such time as THEY chose to hand over ownership to their children
• Funds can be used for any reason – not limited to educational funding
• If your child does not attend post-secondary school there is no negative consequences to investing in life insurance like there are with an RESP
• Only the growth portion of money withdrawn from an universal life insurance policy is taxable as the initial investment was made with after-tax dollars
• Money being withdrawn by children after the policy is transferred are taxed at the child’s marginal tax rate, which is usually much lower than the parent’s and can have many tax credits for continuing education
• A life insurance policy will provide life-time protection for the child when they need it, like when buying a house, getting married or having children

Example of how a life insurance policy as an investment plan for children works

Here is an example of how a plan like this will create value for your child. We need to make a few assumptions for our case:

• Universal life insurance policy bought for 1 year old child (boy) by their parents
• They plan to invest $300 per month into the plan for 20 years
• They also invest a lump sum $1,000 when they open the investment plan
• The plan has an annual investment growth rate of 6%
• They buy the minimum amount of life insurance needed to tax shelter their planned investment (in this case it is $382,000 of life insurance)
• Total investment = $73,000
• The child’s marginal tax rate when taking out money is 30%
• At age 19, 20, 21 and 22 the child needs $10,000 after taxes to help fund school.
• At age 28 the child gets married and takes out $15,000 after tax to help fund the wedding
• At age 30 the child withdraws $30,000 after tax to put a down payment of his first home

Here is how this life insurance plan will work:

• By age 18 this policy will have $92,700 in the tax sheltered policy fund
• The child will have to take out about $11,500 per year in taxable dollars in order to have a net $10,000 in hand for education funding
• For the wedding he will have to take out a lump-sum $18,400 to net $15,000 after taxes
• For his down payment on the home he will have to withdraw $37,350 in order to net $30,000 after taxes
• By age 31, the life insurance policy is still in force and has $46,261 in the tax sheltered policy fund.
• If left alone from here on in, this policy will have $195,000 in the account by age 65 and $437,000 by age 80.
• If he died at age 80, the total death benefit to his family would be $818,500.
• Total investment = $73,000
• Before tax withdrawals = $101,607 to net out $85,000 after taxes
• Final estate value payout of $818,500

This is not bad for an initial investment of $300 per month for 20 years for your child. I will attach the Manulife universal life illustration below which shows the numbers quoted above.

Manulife Wealth Transfer Strategy Illustration

Manulife Wealth Transfer Brochure

Life Guard Insurance can help design a life insurance investment plan for children of yours

If getting a life insurance policy for your children’s future seems like a good investment, please feel free to contact Life Guard Insurance. We can help you design a life insurance investment plan that will meet your budget and help plan for your child’s future

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 insurance as an investment plan for children would also be very much appreciated.

New Insurance in Canada

New Insurance: Manulife Synergy Blends Life, Critical Illness and Disability Insurance Into One Policy

Manulife today announced its new insurance product, Synergy, which combines life insurance, critical illness insurance and disability insurance in one package—with one application, one payment and one plan to manage.

“For many of us, the combined risk of disability, illness or death before age 65 is significant and the financial impact can be devastating,” said Michael Doughty, executive vice president, Individual Insurance. “While insurance products for these risks are available, up until now consumers have had to make separate buying decisions and purchase stand-alone policies, and the cost was often too expensive. Synergy changes that.”

Synergy provides a “pool of money” for critical illness claims, disability insurance claims and a death claim. Any benefits paid out of the pools for critical illness or disability will reduce the amount of the pool available for the death benefit. This new insurance idea is revolutionary as no insurance company in North America is combining benefits and pooling claims.

With this new insurance design, Synergy offers the potential for savings when compared to purchasing three stand-alone policies. For example, a non-smoking, 30-year-old male purchasing $250,000 in Synergy insurance may save as much as 34% over three stand-alone policies.

“With Synergy, we’re helping families address their life insurance needs as well as protect their income should they be unable to work,” said Paul Smith, vice-president, marketing and product development, individual insurance. “We saw a gap in the market and wanted to provide Canadians with a simple, money-saving solution to cover the real, everyday risks they face.”

Research points to need for new insurance plans

A recent survey conducted by Manulife Financial showed that:

• Almost 6 in 10 respondents said they were concerned about providing for their family if they were to die.
• Seven in 10 were very or somewhat concerned about the financial impact of being unable to work for an extended period of time because of injury or illness.
• Less than 60% of respondents said they have an individual life insurance plan, only 21% have individual disability insurance, and only 13% indicated that they have individual critical illness protection.
• Altogether, 92% of surveyed Canadians do not have a plan that includes all three products—individual life, disability and critical illness insurance.

“Synergy is easy to understand and talk about for both consumers and advisors,” said Smith. “By introducing Synergy to their clients, advisors can discuss and address three important risk areas together, helping them build a comprehensive protection plan. In that way, Synergy will help spark a whole new conversation about insurance.”

To find out about this new insurance product from Manulife, contact Life Guard Insurance today.

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 a new insurance plan in Canada would also be very much appreciated.

Manulife Combined Term Life: A Great Deal for Couples

If you are a couple looking for life insurance, you might want to take a good look at Manulife’s Combined Term Life Insurance policy. Offered on Manulife’s Family Term product, this special rate for term life insurance is presently the best deal in Canada today.

Now, this plan doesn’t work for everyone. There are a few requirements that you need to meet in order for this deal to work for you. Firstly, you have to have two people getting life insurance together (usually a husband and wife or other couple in a family unit). Secondly, you must be buying the same amount of life insurance. Different amounts of coverage, say $500,000 on the wife and $250,000 on the husband, would not qualify for the combined plan. Thirdly, you must apply at the same time and be both listed on the same contract.

What Makes Manulife Combined Term Life Insurance So Cheap?

If you were to quote a Manulife term product (either Term 10 or Term 20 life insurance), you might find that their premiums seem higher than the competition. This is because Manulife has one of the highest administration fees on their term insurance in the insurance industry. This is a bit misleading, since you are allowed to have multi-life policies with many different related people all covered under the same insurance policy, all with individual coverages, but only paying one policy fee. So, when buying a combined plan, firstly you  save $5.10 per month because you are only paying one policy fee, not two. Secondly, once you have already saved $5.10 per month, you have a total discount of 3% off the full premium. To most of us, 3% doesn’t sound like a lot of money. In the term life insurance business, 3% is a big discount. The market is so competitive and pricing so tight between the major players that a small discount like this can push you into first place for lowest premium in Canada.

Let’s also look at the savings that a small 3% premium can give you over time. If you were paying $1,000 per year for your life insurance premium, a 3% discount would be $30 per year savings. If this was a 20 year term life insurance plan, you just saved $600 over the life of the policy. This is more than half the premium of a full year’s cost of insurance! It becomes a worthwhile savings over time.

Now, if one of the people in the combined plan dies, the survivor retains their insurance policy, but the premium is adjusted upwards by 3%. The savings is lost in the event of a death or the policy is broken into two separate plans. Just to clarify, the survivor is not paying the total premium for both people originally covered. If one person dies, their death benefit pays out, and the cost of insurance attached to the deceased is cancelled. Only the cost of insurance for the survivor remains, with the discount removed.

When analyzing how competitive this plan is, I compared the pricing to a Joint First-to-Die (FTD) plan to the Manulife Combined plan. Joint FTD is supposed to be the lower cost option for a couple buying life insurance when they both need the same amount of coverage. If one of them were to die, the total death benefit is paid to the survivor and the policy ends. The survivor would have 30 days to purchase their own life insurance policy without providing medical evidence, but it would be like starting a new policy when you are older, and the premium is much more expensive. With the Manulife Combined Term Life Insurance policy, the survivor continues their coverage without interruption and without a premium increase for being older.

Here is a comparison of the best Joint FTD term life insurance pricing in Canada to the Manulife Combined Term Life Insurance policy

• Husband and wife, both age 35, non-smokers, $500,000 coverage, 20 year term: Joint FTD price, $63.90 per month (Equitable Life); Manulife Combined Term 20, $67.21per month.
• Husband and wife, both age 40, smokers, $500,000 coverage, 10 year term: Joint FTD price, $202.05 per month (BMO Insurance); Manulife Combined Term 20, $210.75 per month.
• Couple aged 50 (man) and 47 (woman), non-smokers, $1,000,000 coverage, 20 year term: Joint FTD price, $423.90 per month (Industrial Alliance); Manulife Combined Term 20, $435.41 per month.

If you are looking for the best price and lowest premium for term life insurance in Canada, you should look at the Manulife combined term plan. At Life Guard Insurance, we can show you how much you can save by using a Manulife combined term policy and retain the highest value term life insurance product in Canada today.

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 Manulife combined term insurance would also be very much appreciated.