Life insurance provides financial security to families or business partners when someone dies. Life insurance proceeds are always received tax free. We believe that there are 2 main things to consider when calculating how much insurance is the correct amount to have. First, what debts should be paid off when someone dies? (Example: mortgages, credit card debt, vehicle loans, personal loans, funeral expenses etc.). Second, is there a need to provide some capital that could be used to provide income to the surviving family members? We would be happy to meet with you and assist with calculations.
Life insurance is commonly used in business to cover business loans, and shareholder buy - sell agreements, and several other purposes. Life insurance can be owned by a company for the benefit of the company.
2 types of Life Insurance: Basically, there are 2 types of Life insurance: Term or Permanent.
Term Insurance is economical to purchase initially. Many term plans are "renewable". This means at the end of the term, the policy can renew again. However, it will be significantly more expensive. Common term insurance policies are 10 year, 20 year or 30 year terms. The premium is almost always guaranteed throughout that term and so would the face amount be guaranteed. Renewable policies are usually "non-renewable past a specific age. Frequently this is age 75 or 80 or 85. The policy would simply expire at that time.
Some term policies are "convertible" until a certain age (frequently age 65). This means that you can convert (any or all) of the term insurance policy to a permanent policy without medical evidence, between the issue date and the final conversion date. It is important to note that conversions are usually based on your age at time of conversion.
Permanent Insurance is more costly initially, but much more economical in the long run. Premiums are usually guaranteed to stay level and the face amount is usually guaranteed as well. There are 3 basic types of permanent insurance.
Riders: Most policies have several riders available. These may include disability waiver of premium, child protection rider, spousal rider, accidental death etc. These can be important aspects of the planning process, and are sometimes an economical way of providing financial protection.
- Term to Age 100: Usually has no cash values, and usually has benefits beyond age 100. When we use this product we recommend using one with a guaranteed level premium and guaranteed level face amounts throughout the lifetime of the contract.
- Whole Life: Usually a true whole life policy has cash values. It may have 2 parts to the cash values. The first is guaranteed cash values and the second is usually based on dividends within the policy. There are usually several options for dividends. The most common are used to purchase more life insurance, or are accumulated to grow the cash values, or they are sometimes spent to offset all or part of the premium on the policy.
- Universal Life: This is a flexible product that can have annual renewable term or level term to age 100 as the basis of the policy, but can also have tax sheltered cash values. There are several options on how the cash values can be invested or spent. This product also has `Limited Pay` options offered by a few companies. For example guaranteed paid up in 10, 15 or 20 years.
Mortgage Life Insurance: It is often in a clients' best interest to consider Term Life insurance for mortgage protection versus going through the mortgage provider. There are several key features including:
Oliver Insurance Services represents several reputable life insurance companies. We would be happy to provide you with quotes and assist you with choosing the best product for your needs.
- It is always underwritten in advance, so you know the coverage can't be medically declined at claim time.
- You own and control the policy, versus the bank owning it.
- The face amount stays level unless you choose to decrease it, versus just paying the amount left owing.
- The balance over the mortgaged amount is also paid out and can be used by beneficiaries as they choose.
- You have the option of keeping it for estate planning purposes after the mortgage is paid up.
Disability Insurance (Accident & Sickness)
Disability Income Insurance (D.I.) is a very important part of financial security planning. If your income stopped because of an injury or sickness, how long could you survive financially? The purpose of disability insurance is to supplement the loss of income. Most individual disability policies are arranged so they provide a tax free benefit while you are disabled. The leading cause of home foreclosures is due to a disability.
Definitions are important with disability policies.
These are only a few of the more important terms you should be aware of when looking into disability insurance. It is always wise to review the policy wordings in detail before committing to a policy.
- Elimination Period: This is the number of days or weeks or months after the event happened that caused the disability and prior to when you want benefits to start being paid. Typically the longer the elimination period the more economical the premium.
- Benefit Period: This is the maximum number of months or years that benefits would continue to be paid when you are on claim. Often these are 2 years, 5 years, 10 years, Age 65 or 70.
- Accident (Injury) Benefit: Some policies only cover "injuries". If you fall and break a leg, or are crushed in an accident, the policy would pay out.
- Sickness Benefit: The other way of being disabled is a sickness (Cancer, heart, MS etc.). The better policies will cover both accident and sickness.
- Own Occupation Definition: An "Own Occupation" definition is better. Usually it means "as long as you are unable to perform the important duties of your own occupation, you are eligible to collect. This can be an expensive option and is not always available. Sometimes this definition is limited to the first number of months or years of a claim.
- Regular Occupation Definition: This definition usually means that as long as you are unable to perform the regular duties of the occupation you were working in, you are eligible to collect a benefit. This is a common definition and is sometimes limited to the first number of months or years of a claim.
- Any Occupation Definition: This is the least desirable definition to have in a disability policy. However, it is the only one available in some occupations. Typically this means as long as you are unable to work in any occupation you are reasonably educated for, you are eligible to collect a benefit. This is a very common definition in economical plans.
- Occupational Class: Some occupations are at a higher risk of claim than others (example loggers versus accountants). Insurance companies have different rates for different occupations. It is important that you are aware if you change occupations, does your policy continue to cover you as expected?
Some disability policies are "guaranteed renewable". This means that the policy is guaranteed to renew but the premium is not guaranteed in future years. Other policies are "non-cancellable". They cannot be cancelled by the insurer. These policies are fully guaranteed throughout the lifetime of the contract which is often age 65. "Non-can" policies tend to be a little more expensive than guaranteed renewable policies.
These are only a few of the things to consider when looking into disability income protection. We would be happy to discuss this with you further. You may request a meeting with us at a mutually convenient time.
Oliver Insurance Services represents several companies offering disability insurance products.
Critical Illness Insurance
Critical Illness insurance came to Canada in the early 1990's. With modern science, people are surviving much more frequently when a major medical event happens. The problem is that these peoples' finances are not surviving!
Critical Illness pays a tax free lump sum benefit (in most cases) 30 days after surviving the diagnosis of a life threatening illness such as cancer, heart attack, stroke etc.. There are no strings attached to how this money can be spent. Some people are paying off debts, some are going to the USA for medical referral and quicker access to diagnostics and treatments, and others are investing in their future. Most of these policies have built in or available as an option that 100% of premiums will be refunded if the insured dies without having made a claim or at the maturity of the policy. This is very economical protection when you consider you get all of your premiums back.
Although it varies slightly among companies, there are about 20 illnesses that are covered. Some policies have "Loss of Independence" as an optional coverage. This covers things that may not be an illness, but may be better described as an injury, such as severe burns, loss of an eye etc.
A well planned insurance portfolio would have Critical Illness complimenting a Disability insurance plan.
Long Term Care Insurance
Long Term Care is an insurance product that provides cash to cover expenses involving the need for professional care to stay in your home and / or to cover the cost of a long term care facility. Most of us think about seniors when we think of Long Term Care, but the reality is there are many younger people who have had strokes, car accidents etc. and who also need long term care.
This is an innovative product that provides the cash to keep people in their homes longer, and will also pay for the cost of a Long Term Care facility.
What is Estate Planning? It is the effort of putting a plan in place that will effectively distribute your assets after you die in a tax efficient manner. Some people think they need to be wealthy to get involved in Estate Planning. That is not true. A good Estate Plan should address 4 key goals:
In our experience, we feel that the best estate plans have taken a team approach. During the process it is important to have the accountant involved to assist with valuations, and then the lawyer to make sure the Wills and any trust agreements are properly drafted, and we will work with you all the way through to assist with strategies regarding estate equalization, and efficient funding of future tax liabilities.
- Provide adequate protection for the premature death or disability of a family member
- Provide arrangements to minimize taxes during your lifetime and at death
- Provide a plan to meet retirement income needs
- Provide a plan for the orderly distribution of your estate
What is Executive Compensation? Often the senior person in a corporation is also a major shareholder or the only shareholder. Executive Compensation is a method of calculating an (income tax) efficient method of paying an executive (or multiple executives) for their services. There are several strategies that can be considered, and the best way to get started is simply with a discussion to figure out what the important issues are. What is best for the executive, and what is best for the company. Some of the strategies that we will review with you include:
Oliver Insurance Services has had vast experience with many forms of Executive Compensation and we would be willing to have this discussion without obligation.
- Registered Retirement Savings Plan (RRSP)
- Tax Free Savings Accounts (TFSA)
- Individual Pension Plan (IPP)
- Estate Bond
- Life Insurance Leveraging Account
- Retirement Compensation Arrangement (RCA)
Why invest with a Life Insurance Company? Federal Legislation rules are in place that allows insurance companies to do some unique things for our clients. When someone dies, all investments with insurance companies can pass to the named beneficiaries without going through the Will or be subject to Probate. Beneficiaries receive their money quickly in most cases. Also, investments with the proper beneficiary designation are not available to creditors in most cases.
Life Insurance companies offer a broad range of investment products including Guaranteed Interest Deposits, Daily Interest Accounts, and a wide variety of Segregated Funds. Segregated Funds are similar in structure to a Mutual Fund, but fall under Life Insurance legislation and enjoy the features that are afforded under this legislation. Most Segregated Funds have Maturity guarantees and Death Benefit guarantees that make these attractive to many clients.
Oliver Insurance Services would be happy to arrange a mutually convenient time to meet and discuss these products with you.
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