Perspective – Insurance Part 3 : Purchasing Life Insurance

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Perspective – Insurance Part 3 : Purchasing Life Insurance

November, 2020

The topic for the last two columns has been explaining what life insurance is and providing a basic understanding of the product so consumers can make informed decisions. This article will cover a couple of other important points. Insurance provides an essential service and will be the subject of future columns. But next month, we are on to another topic!

There are many ways to purchase life insurance. Some policies seem to cost more than others for the same coverage. The pricing of insurance is calculated after considering statistics from the past and the best projections of the future. Actuaries are trained to determine risks by taking into account the historical cycles while at the same time anticipating future events. The premium for insurance policies also includes the cost of operating the insurance company. Insurance is a calculated cost spread over the risks associated with a large number of policy holders, all of whom are paying premiums.

Applications for insurance go through a process called underwriting in which the expected risks of the desired coverage are calculated into a policy premium. Some of the considerations actuaries look at are general about society as a whole. Then they will consider factors more specific to the application or the person applying. With life insurance, these specific considerations may include the present health and age of applicants, the applicant’s family health history, the risks of their vocation and life style and the risks associated with any future plans the person may have. It stands to reason that the best time to arrange your life insurance coverage is early in life before health issues may arise. The underwriting requirements at the time of application for insurance will help the company determine if they will accept the risk of a potential payout and at what cost to the policy holder. Generally, once coverage is offered by the company and is accepted by the applicant, the contract becomes unilateral. Simply put, the policy holder now has control of the policy as long as they pay the premiums. Changes in health or life situations will not affect this policy in the future. At this point you have peace of mind!!

An important consideration of any life insurance contract is who owns or controls the coverage. As stated above, the policy holder does. In some contracts the policy holder may be someone other than the person insured. For instance, in the case of group insurance through employment, the contract is owned and controlled by the employer. Also, with mortgage insurance the policy ownership is generally with the mortgage company. As insurance professionals we will help you understand these differences so there are no misunderstandings to surprise you later.

One last thing to talk about this time. Have you ever heard someone say that life insurance should really be called death insurance? The word ‘life’ was specifically chosen for this product for one reason. Life insurance is not for the people who die!! Life insurance is for those who live! The tax free proceeds from these policies will help your loved ones. First of all, it will help them remember the significant part you were in their lives by covering final financial obligations and arrangements. Your legacy may help them remain in their home. Perhaps it will provide for the objectives you had for their future financial needs and career development. For certain, it can help them avoid a life where financial hardship
eliminates opportunity. Life insurance provides for the living! There is coverage that fits your needs.
Let us help you be ready.

Perspective – Insurance Part 2 : What Type of Insurance Fits You?

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Perspective – Insurance Part 2 : What Type of Insurance Fits You?

October, 2020

Do you like word pictures? They are a unique way to help explain or understand a concept which seems more
difficult to define by simply using words. Apparently, our long-term memory is best stimulated and utilized with
pictures. Maybe that is why it is often said that ‘a picture is worth a thousand words’! Word pictures provide a basis
for a concept that may also need additional fine tuning with words.

Let’s use some word pictures to help understand the basic options for life insurance.

There are many life insurance companies who between them provide hundreds of policies, each with their own
benefits and characteristics that may appeal to your need and objective of providing for your loved ones when you
are unable to provide for them yourself. However, each of these policies are actually a variation of probably 3 root
types of life insurance products.

Let’s consider Term Insurance. This is a life insurance policy that has been calculated only to be required for an
anticipated period of time. It might be related to the repayment of a loan or mortgage and once the repayment is
complete it may no longer be required. The word picture…term insurance is like renting an apartment. If you pay
the rent, you can live there. If you choose not to pay the rent, your benefits are removed. There is no ownership and
there is no equity building in your favour. You do not have ultimate control of your living arrangements. In the short
term, the cost is very affordable. In the long term, the cost is prohibitive. Term Life Insurance is the right coverage
for certain life objectives.

Then there is Universal Life. This is a policy that combines term insurance with investment options and takes
advantage of some of the tax preferences inherent to life insurance. The word picture…universal life insurance is like
renting to own. A portion of your rent payment is actually being applied to building equity or ownership in the
property. For this reason, the cost is higher than basic rent. Over time and with the ever-increasing equity position, a
higher portion of the monthly rent is applied to property ownership. If you pay the rent, you can stay there. If you
don’t pay the rent, you have the amount of the property you own that can help! Universal Life Insurance is the right
coverage for certain life objectives.

Finally, there is Whole Life. This is a policy that will provide coverage throughout your entire life. You have control of
this policy. The word picture…whole life insurance is like owning the house. A portion of the mortgage payment is
attributed to interest costs. The more equity you have in your home the less interest you pay. You are on title for the
property and make the decisions concerning the property. The value of your property generally increases over time
and once you have repaid the mortgage you maintain full ownership of the property until you decide otherwise.
Whole Life Insurance is the right coverage for certain life objectives.

Please keep in mind that life insurance in all its various forms provides peace of mind. You and your family can be
assured that should something tragic happen, loved ones will at least have an opportunity to be supported financially
as they rebuild their lives. It is a very loving gift in a time of unanticipated need.

These word pictures will help to understand the simple basics of life insurance options. However, it is best for you to
contact our office and as a qualified Insurance Advisor, I will help you understand the best long-term and short-term
solutions to give you and your family confidence. No one is immortal! Don’t delay to make a decision that will
benefit your whole family. We will help you determine your best life insurance options.

Perspective – Insurance Part 1 : Why Insurance?

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Perspective – Insurance Part 1 : Why Insurance?

September, 2020

Once upon a time…a long time ago…there were people moving to new parts of our country to get some land they
could call their own, a new and better start and to raise their family. They started to build rural communities and
most often one of the first places to be constructed was their place of worship which brought them all together
weekly. They helped each other build homes, barns and clear the land. It was hard work but rewarding as they were
making a place for themselves and their children. It was not always easy! They suffered through many dangers and
from time to time there was tragedy. Someone was injured. A house or barn burned down. There were times when
death raised its untimely face. Yet with each difficulty, the community would come together to help a family recover
and move on with life. Everyone would contribute material, labour and when needed financial resources. Every
community knew that unfortunately, tragedy was going to be a constant, but they did not know when it would occur.
All wanted to help but sometimes when tragedy struck, times were tough. Funds and resources just were not
available. Then someone had the idea that if they all made regular contributions to a community fund, when there
was an unexpected and difficult situation, the needed money would already be available.

What a great idea!! It brought peace of mind to the whole community. This fund re-assured everyone that should
something unforeseen come along they would have the support of their community and they would have the funds
to help pick up the pieces. As the years went by, these community funds became a whole industry and many
professionals were trained to help families find the protection they needed. It became known as insurance. Yet the
general concept of a community pool of money remained. In a nutshell, premium payers who contributed on a
regular basis to insurance funds ensured financial support should there be a loss. At the same time, if other premium
payers experience tragedy, the fund would help provide for their needs.

Insurance now has decades of statistics based on experience that help calculate more accurate premiums anticipated
to cover payouts. Many forms of insurance policies have been developed including, life, income, automobile, house,
liability, critical illness, and others. Each type, including any additional riders available, is specifically designed to help
you cover the risks you may face. Not every citizen or country in the world is as fortunate as Canadians to have
access to the security of insurance products!

When you hear the word ‘insurance’, it may conjure up a variety of thoughts and emotions. If you have been on the
receiving end of the benefits you are, no doubt, very thankful for it. If you haven’t received any payout…good for
you…but you may wonder why you are contributing for something you have never received benefit for. Then there
are those who have bad memories due to high pressure insurance sales tactics.

The Insurance industries are highly regulated. Your Insurance Advisor is trained to consider your situation and your
needs. They have a good understanding of the insurance companies and products that will provide peace of mind for
you and your loved ones. They will put your interests first. If you sense that they are not…you need to find an
advisor who will! There are a lot of advisors who have built their client relationships on helping consumers meet
their insurance needs. Seek referrals from trusted friends or search online for Advisors who subject themselves to
the ethics and compliance demands of industry regulating organizations and associations.

Please do not let a negative experience deter the positive peace of mind that is available to you! It could be the next
best thing to “happily ever after!”

Perspective – Getting to the Finish Line

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Perspective – Getting to the Finish Line

August, 2020

One of the dangers of planning for financial objectives is that in certain economic conditions, a person can sense an ungrounded need to chase what appears to be an opportunity or a direction outside of their chosen strategy. Sometimes these impulses turn out to be more destructive to the long term plan and can cause someone to veer off a good path. I am reminded of a proverb given to us by King Solomon who had been given great wisdom. He said in the book of Proverbs, “steady plodding brings prosperity”. A number of years later, Aesop who lived in ancient Greece and was skilled at telling stories related a fable about the Tortoise and the Hare. The moral was recorded as, ‘Slow and steady wins the race!’ You might want to read that inspired account again.

Maybe there are times as we rush through life trying to reach a goal faster than others when we are distracted and pushed off our set direction. Like the Hare who saw a scrumptious patch of grass and a beautiful place to take a nap, we make the assumption that there is no problem since, of course, we are fast and can catch up anyway…right? Most advisors will help to develop a diversified mix of products in your investment portfolio. Each product makes specific contributions to your long (or short) term goals based on its specific advantages.

For instance, fixed income products and GIC’s offer a higher level of security with guaranteed income while equity investments offer potentially higher growth rates yet with probable fluctuations in value. It is not whether one is more right then another. It is the balance of these in your portfolio which fits your investor profile and objectives that allows it to work for you. Impulse adjustments based on speculation and presumptions can have significantly damaging effects on the outcome of your plan.

If interest rates are very low, you might want to adjust the duration of the terms chosen for fixed income and GIC’s. If markets have corrected significantly you might want to consider directing your additional plan contributions into your equity investments that are ‘on sale’ for a time. Those consistent deposits to your investments are vital for the success of your plan! Whatever the economic conditions, you and your advisor should regularly review your plan, your investment diversification and your acceptable balance of security and risk to ensure your comfort level is maintained.

It may not be exciting or exotic…but the truth is…the steady plodding will have demonstrated how effective it really is once you get to the finish line! In the meantime it is a lot like work!

Perspective – Changes

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Perspective – Changes

July 23, 2020

Who would have thought that things could change so abruptly for every human being on the earth! To say that this pandemic is unprecedented is somewhat of an understatement!

The media keeps talking about the ‘new normal’ and we all wonder what that means…really. Will it be different for everyone? What about our investments and retirement plans? Will we need to adjust the variable estimates for return and inflation in our plan? Of course, as with any other time, there is no way for anyone…skilled and professional as they might be…to forecast or accurately project these things.

When the pandemic began, many economists suggested that it would be a ‘V’ shaped recession and it certainly started out that way on the down side. However, the ‘V’ is not looking symmetrical from this side! They also said at the time that the downturn in the market was not due to fundamentals as company balance sheets were generally solid. The downside was caused mostly by fear! True as that was, with the length of time it is taking for the economy to be opened up, the fundamentals are definitely being affected.

The other variable, the effect of which is difficult to project, is consumer perspective. In a recent news cast it was reported that a survey was conducted of Canadians with some interesting, but not surprising, results. It was reported that 45% of Canadians regret they did not save more! Having liquid savings for these unforeseen times and circumstances is certainly a smart move.

The survey also reported that 56% of Canadians realize that they are spending too many dollars on things they do not really need! Will that change in perspective affect the daily lives of families in the months and years ahead? There would be some impact on the economy if retail sales are reduced because consumers…56% of them…become more discretionary in their spending habits. The survey also indicated that many of the respondents are currently holding on to cash due to uncertainty with jobs, government support and future needs. That factor is having a meaningful impact on today’s lower interest rates.

What does all this mean for us? Be assured that money managers have been factoring in these and many other considerations. They are actively analyzing opportunities available to them as they choose the most appropriate investments for the funds under their management. Although it is always a good idea to review your investment plan in relation to your anticipated future financial needs, there may be few reasons to make drastic changes to your strategy. Your advisor will be able to analyze and suggest any adjustments needed to continue your forward movement while at the same time helping to manage volatility. Call them if you have concerns.

As Canada’s economy begins to move forward, economists seem somewhat surprised at the growth and momentum building within markets and consumer confidence. Let’s keep that going by doing our part to control the spread of this pandemic. We all know what to do! And let’s not be afraid of these changes to our perspectives on saving, spending and family life! These adjustments could very well build long term strength in our economy and your financial future!