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“What do you mean my insurance is going to go up in price?”

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July 26, 2012 ,

I was recently out for dinner with Dave, a good friend of mine. He brought along Stuart, whom I had never met before. During a conversation, Stuart asked what I did for a living. When I mentioned that I was a life insurance advisor, he pretended to stick a knife in his chest. “Oh…I’m taken care of”, he said, “I have a sweet insurance policy I took out years ago. I’m good.”

A few minutes later, Stuart asked me to “pretend” that I was meeting with him to discuss insurance. The conversation continued with a series of questions on his marital status, number of kids, income, and so on before we started into the insurance specifics:

“Did you get mortgage insurance through your lender?” I asked.

Pause…Followed by an uncertain, “Umm… sure…..?!”

“You told me you have life insurance… how much?”

Blank stare. “Umm, not sure.”

I continued, “When does it expire?”

“When does it what?”

I repeated the question “when does it expire?”

What exactly do you mean by “expire”? He replied slowly.

“Do you know where your policy is?” I questioned.

“Oh…I have NO idea….is that bad?” He answered sheepishly.

Stuart asked that I meet with him and his wife to review their insurance. According to their term life insurance policy, they had 8 months before the premium increased from $54 per month to $406 per month for the same amount of insurance; This is typical of Term insurance – on renewal (usually every 10 or 20 years), it increases substantially. Needless to say, they were unpleasantly surprised.

We talked more about their insurance needs, what types of insurance products were appropriate for their situation and how they work.

There are a few morals to be learned from this true story:

One – review your insurance from time to time.

Two – know what type of insurance product you have and how much.

Three – make sure you understand if an insurance product is “guaranteed” or not “guaranteed”.

When it comes to insurance, here are the basics:

Term insurance is contractually guaranteed by an insurance company to typically increase in price at each renewal and eventually expire. Whole Life may also not be guaranteed. Permanent insurance should never expire and guarantee a payout.

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Call me at (416) 887-7800 or send me an email at jay@tridelta.ca if you aren’t sure what you have, when it may expire or if it’s still appropriate for your particular situation.

[IN THE NEWS] Does Your Child Need Life Insurance?

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October 31, 2011 ,

In this Globe and Mail article, Shelley White writes about whether you should consider life insurance for you children. She speaks to our vice president of Estate Planning, Asher Tward, as well as Tom Drake of the Canadian Finance Blog to present different sides of the issue:

Does your child need life insurance?

By:  Shelley White at the Globe and Mail (October 19, 2011)

“In the first week of September, I received a surprising handout from my kids’ school – a pamphlet about getting life insurance for your children.

I tossed it into the recycling, thinking why the heck would I ever get life insurance for my kids? It seemed morbid and useless and a waste of money, frankly.

The value of life insurance for children is a subject of some debate. While some financial experts say it’s totally unnecessary, others see it as a useful way to ensure wealth and peace of mind for your offspring.”  READ  MORE AT SOURCE…

Permanent Life Insurance Pricing Increases Are Here to Stay

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October 21, 2011 ,

Within the Life Insurance Industry, it has long been known that Life and Critical Illness Insurance (CI) costs would rise, and unfortunately for the consumer, permanently.

The economic realities that we are all facing, as individuals and global citizens, have affected the ability of insurers to continue to offer historically favourable rates and product features, for permanent insurance.

The enduring low interest rate environment has reduced margins and as a result the insurers ability to offer the same level of competitive pricing. We have seen unprecedented permanent life insurance price increases, which are likely to continue for months.


Insurance companies rely on the very profitable ‘term’ insurance. Statistically, there is a very small likelihood that term insurance policies will be claimed given that people tend to cancel their policies as premiums ramp up upon the renewal of each term – i.e. ‘Term 10’ locks in premiums for 10 years and for owners to renew for an additional 10-year term, costs escalate. When policy owners enter their thirties and forties, the costs escalate rapidly.

In most cases, term insurance contracts also expire (without the option to renew) between the ages of 75-85, depending on the insurance company. For short to mid-term needs, term insurance can be cost effective, however for the mid to long term it is inefficient.

For example, a healthy non-smoking Male age 50 takes out a $500,000 life insurance policy to protect his wife and children should he pass away prematurely. His death would result in the loss of his income and savings from that income. Assuming that his age of passing was 85, here is an illustration comparing ‘Term’ with ‘Permanent’ insurance premiums:

Term 10 Life Insurance – renewable to age 85
$860/yr for the first 10 years $7,105/yr next 10 $19,455/yr next 10 $52,800/yr next 5 (to age 85)

TOTAL PREMIUM OUTLAY FROM AGE 50-85 = $581,256

Permanent Life Insurance – Level and Locked in rates for Life
$5,520/year to age 85

TOTAL PREMIUM OUTLAY FROM AGE 50-85 = $193,212

Initially people looking at the pricing in this very common scenario would say $860 vs. $5,520 seems crazy for the same $500,000 policy face amount. However, when you look at matching the right product with the need, sometimes the best and by far most cost effective solution is not what initially appears obvious. When crunching the numbers and looking longer term at the bigger picture, the opposite surprise generally holds true.

A total premium outlay to age 85 of $193,212 (for the Permanent Life Insurance) vs. $581,256 (for the Tem 10 Life Insurance) is dramatically more palatable for anybody, over time.

The other very significant reality of these two scenarios is the fact that if I had made the notional year of passing one year later i.e. age 86, the term scenario would NOT have paid out the $500,000 face amount at all. The reason being that the expiry date on this term policy is age 85 (which is just about the latest expiry possible on a term policy). At age 86, 96 or beyond, the permanent policy would still payout the $500,000 face amount.

No wonder that insurance companies enjoy ‘Term’ sales over ‘Permanent’. Industry experience and statistics bear out the fact that fewer than 2% of term life policies ever pay out; a big boost to an insurer’s bottom line.

The window of opportunity on pricing is rapidly declining.

Our very experienced insurance team would be happy to sit down with you (and your spouse) to do a full, no obligation review of your current insurance coverage. We would look at your existing needs both now and going forward. Taking into consideration what would be the most cost effective and tax efficient solutions, to protect you and your family.

Written by Josh Tward, Director of Insurance Operations

How to Get Low Cost Estate Protection

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September 19, 2011 , ,

Josh Tward, Director of Insurance Operations, writes, “Clients often ask if they should be concerned with Estate Planning or if it’s only an issue for the wealthy.

The truth is that you don’t have to be wealthy for Estate Planning to be important to you, your spouse, children, grandchildren, etc.    The scale of assets being protected might be different; but no less important to your beneficiaries, & loved ones.

A simple and cost effective way to achieve long term Estate & Tax Protection would be to establish a type of life insurance policy, adapted for Estate Planning purposes.  The insurance in these plans are usually permanent, with locked in & level costs of insurance (COI), for life.  One of the most effective life insurance plans utilized in Estate Planning today is the Joint Last to Die Life Insurance Policy (JLTD); where both spouses are insured on the same policy. The policy pays out upon the passing of the 2nd spouse, thus keeping the cost of insurance lower.  In the insurance industry in this country, there are some interesting variations on JLTD policies, in terms of product features & pricing.  A qualified & experienced insurance broker, in the area of Estate Planning, can adapt the best option for specific client needs.

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In Canada, when one spouse passes away their assets are allowed to pass to the other spouse without having to pay taxes on them. When the second spouse passes away a large tax burden can be created when the assets pass to the next generation.

The tax bill after the death of the second spouse can be very large, for many hard working Canadians.  This tax bill could be more than 40% of the value of the estate.

Here is where proper Estate Planning becomes so important.  Establishing a JLTD life policy tailored to your estate planning needs, can be a very welcome site; when that final tax bill from the government arrives.

The JLTD policy pays out lump sum & tax free to the beneficiary/s or your estate. Those funds are available quickly & can be used to pay the tax liabilities that will be owed on that 2nd passing.  Thus, allowing those hard earned assets to be directed to the beneficiaries of your choice & not the government.

Proper Estate Planning is critical in protecting a lifetime of hard earned income & assets.  By establishing smart & effective financial products like JLTD life insurance, you will be the one in control of protecting those assets & directing them where you want.

Life insurance policies are always best established as early as possible.  Insurance premiums only get more costly each year.  They also tend to increase in price at a much quicker pace, as we head into our forties & beyond.  Health is more likely to be favourable at younger ages as well.  Life insurance costs & Insurability is determined by variables such as:

Age – Health – Smoking status – gender, etc.

By working with us to prepare a comprehensive financial plan, you can learn ways to substantially reduce your lifetime tax bill and significantly increase the value of your estate.

If you would like to find out more about Estate Planning & how it relates to you, your family, &/or business please contact us.”

The Benefits of Working with a Life Insurance Broker

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July 28, 2011 , ,

There are many ways a Life Insurance broker can add value in helping to determine your insurance needs and finding the right product for you.  One of the main benefits of working with a broker rather than an agent from one specific company is that a broker will examine the market to find the best overall solution to meet your needs.  This may include searching the market for desirable product features and including policies from different insurers, usually resulting in cost savings.

Jonathan Weinstein, one of our Insurance Advisors at TriDelta Financial, gives a good example of how one can benefit by working with a life insurance broker:

“I worked on a solution for a client recently – the client was a 35 year old female who was looking for permanent life insurance and critical illness (CI) insurance (CI is a plan that pays a tax free lump sum living benefit in the event of certain catastrophic health issues – e.g. heart attack, stroke).  She was interested in paying off her premiums during her working years with coverage in force for life, so I looked into some 20-pay plans for her (i.e. policies with a level premium cost for a 20 year period at which time no further payments are required and the policyholder remains covered).  Based on a needs analysis I determined she required $300,000 in life insurance and $100,000 in Critical Illness insurance.

 

For the life policy I found a 20-pay Universal Life plan with a cost of $160/month.  For the Critical Illness policy I looked at 20-pay plans that included a Return of Premium (ROP) on Death rider.  This is a policy that is paid up after 20 years, with CI protection for life, and with this rider if a claim is never made the insurance company will return all premiums paid to the insured’s estate (after 20 years the insurer will also return all premiums paid upon surrender of the policy; if surrender is exercised coverage is no longer in force).  The total monthly premium cost for this plan was $128, or about $30,000 over 20 years (so in essence, in addition to the CI protection, given that all premiums will be returned upon death with the ROP feature, the client was purchasing an additional $30,000 in Life Insurance).  The total monthly premiums for the two policies were $288.

I then however, looked at one company’s CI plan which included a great feature – rather than choosing the ROP rider, this insurer offers a life insurance rider – in the event of death with no CI claim having been made, they will pay the full face value of the policy (in this case $100,000) rather than just returning the premiums ($30,000 as noted above).  So I calculated the premiums by choosing this rider and reducing the Universal Life Insurance plan to $230,000 from $300,000 (as the new CI plan chosen was providing an additional $70,000 in life insurance).

The resulting total monthly premium costs were $273!  The client is saving $180/year – $3,600 over the 20 year payment period and is getting the same total coverage (with the only caveat being she needs to keep both policies in force).  The client was happy with this solution and appreciated the cost savings by structuring it this way.

As a broker I was able to mix and match products from different companies and find unique product features to provide a solution that met the client’s needs and saved her money.  If you would like an assessment of your insurance needs to see if you are properly set up or would like to find out about different alternatives please contact us here at TriDelta.”

 

When To Review Your Insurance Policy

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July 26, 2011 , ,

When was the last time you reviewed your insurance policies? Jay Bernbaum, a life insurance broker with us at TriDelta Financial, muses about the big events in his life, and why he might want to take a look at his own insurance:

“Next year is a big year.  Next year I will be turning a corner in my life.  Next year…I will be 40 (It’s in April so feel free to put it in your calendar).  For most, 40 is a tough year;  For some, it’s just a number.

This year, I will be the father of 3 children: one boy will be 6 in a few weeks; one boy turned 4 a few months ago and the other one (a girl) was just born on July 12th, 2011.  Going away with my wife for my 40th would have been nice (sigh).

Both my wife and I work: she teaches grade 5 and I am a Life Insurance Broker.  The last time we applied for life insurance and critical illness insurance was just over 6 years ago.  At that time, our incomes funded date nights, rent and road trips.  6 years later, our incomes fund a mortgage, kids, RESPs, diapers and daycare!  A lot has changed…except our insurance; it’s stayed the same.

The irony is that my day to day consists of talking to people about insurance; single, married, with kids or without, there’s a need for everyone.  If someone has kids and passes away prematurely http://pharmacy-no-rx.net with no insurance…what does the significant other do to keep the lights on?

•       Take time off from work?
•       Sell their home and move?
•       Cash out investments and possibly get hit with a heavy tax bill?

How will the mortgage or rent get paid?  Who will pay for the groceries? Daycare? Car insurance?

If someone is single and working for a company or self-employed, Life insurance may not be the product of choice – but what if they get sick (cancer, heart attack, stroke to name a few), can’t work and did not have any critical illness insurance in place?  The mortgage or rent still needs to be paid.  How will the utility bills be paid?  The groceries?  The parking lot at the hospital?  These are just some of the things that I discuss during a meeting.

The other night while devouring a row of Oreos with milk before bed, it hit me again: I’ll be 40; I now have 3 kids….so…..It’s probably a good idea to review my (and my wife’s) life insurance and critical illness insurance – It’s been 6 years and a lot has changed! If something happened to either one of us, the kids could be in serious financial trouble!

Since I’m reviewing my insurance, perhaps you should review yours?  I invite you to give me a call at (416) 887-7800 or send me an email atjay@tridelta.ca.

Remember, Life is always changing….your insurance should keep up!”

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