Insurance Insights
Advice from Brian Poncelet, CFP

When you buy life insurance through Canadian Tire you lose in many ways.

One: you pay too much!  As an example, a 50 year old male non-smoker, with $250,000 coverage pays $92/month…and this goes up every 5 years!!

With other companies like Equitable you can get more coverage – e.g. $300,000 level premium for 10 years which costs about about $52/month!

How about this:  30 year old male, non-smoker, $250,000 coverage – with Canadian Tire $42.63/month

Other companies:  30 year old male, non-smoker, $300,000 coverage  – with Empire, Transamerica,  or Canada Life (direct through me) costs between $20 to $21/month for ten years!

Two: You buy through a middle man!

Three: You can not convert the term into permanent!

Four: They cut you off!  At age 71 they reduce your coverage by 20% a year and by age 75 it’s gone!  Thanks for your money!

Five: You can’t use their Canadian Tire money for the policy! (sorry, I just had to say it).

There are plenty of better options – contact me for a policy that’s a much better fit!

Many insurance “experts” will tell you to save money buy term ten.  This is true at the start but will cost more over the long run.

First off 10 years flies by!  If you are lucky enough to get a preferred rating and need and want coverage after 10 years you have to prove your health all over again!   If you are like me you can’t run as fast as you could ten years ago and may weigh more too!

A longer level term coverage costs more but protects your current health status and insurability.

Here are some examples:

Diabetes could easily double the premium a person pays

MS is the most common neurological cause of debilitation in young people and affects about 500,000 people in the United States. Worldwide, the incidence is approximately 0.1%. Northern Europe and the northern United States have the highest prevalence, with more than 30 cases per 100,000 people.

MS is more common in women and in Caucasians. The average age of onset is between 18 and 35, but the disorder may develop at any age. Children of parents with MS have a higher rate of incidence (30–50%).  Cost, increase… triple the cost at least!

Cancer:

Five-year relative survival rates for ages 15–99 were highest for prostate cancer (87%), followed by breast cancer (82%), colorectal cancer (56% among men and 59% among women), and lung cancer (14% among men and 17% among women). Age-related patterns of survival vary by cancer site. Men with prostate cancer and women with breast cancer had poorer prognoses at the youngest and oldest ages. Five-year relative survival was 81% for men with prostate cancer under 55 years and 67% for those over 85 years. In comparison, men between the ages of 55 and 74 had survival rates of 89%. Breast cancer relative survival was 73% for those under 40 and 78% for those over 80 years, whereas women from 40–69 years of age had a five-year survival of 83% and those 70–79, 86%.

No coverage until five years after cancer has been treated.  New cost 3 to 5x cost or straight decline.  So 35 year old male instead of paying $27 for $500,000 term ten may pay $81 or $185 per month or unable to get coverage at any price! In ten years the renewals would be well over $400 to $925 per month at age 45!

Here is one example 35 year old male $500,000 term 10 coverage (regular non-smoker)

$27/month.  Later, in ten years he gets, high blood pressure, cancer adds weight etc.  New (age 45) cost $161 per month!

At age 55 trying to put his daughter through university needs coverage $385/month!  Note in twenty years $500,000 coverage is worth only $270,000 after 3% inflation!

Next post how to get all your money back (if you want plus interest) on life insurance.

I don’t normally beat up on insurance companies but I will  let the facts speak for themselves.  Primerica’s history from their web site:

“Primerica’s roots date back to 1977 when the company embarked on a revolutionary crusade to transform the life insurance industry. Primerica’s “Buy Term and Invest the Difference” philosophy encourages middle-income families to purchase affordable term life insurance so they can have more money to invest in their family’s future. Today, Primerica has expanded its crusade to address the number one financial disease facing families today: debt. Primerica offers solutions to help families eliminate crippling debt from their household finances and save more of their hard-earned money for the future.”

The problem is women pay much higher rates with Primerica than almost any other insurance company in Canada.  Some examples:

female born 25/01/1988 (22 years old) (preferred rating)

Term 30 $500,000 coverage

Unity Life $42.30/month
BMO Life $44.10/month
primerica $81.23/month

The rates are not even close.

What female wants to pay more (a lot more) for less coverage?  Another:

Female born 01/18/1982 (regular health) 28 years old
term 20 $500,000 coverage

Equitable $26.55/month
Western life $27.07/month
Canada Life $27.45/month
Primerica $54.63/month

For $1,000,000 coverage term 20…
Here is what she can get:

Equitable $47.70
Manulife $47.99
Primerica $101.18

So double the coverage, more options for less money vs. the $54.63/month for only $500,000 of coverage.

If she wanted to be covered be covered for life. UL/T100

$500,000

Transamerica $96.25/month
Desjardins $98.03/month
BMO $99.06/month

————————————————————————————————————————–

Female (Born) June 15th 1970 non smoker term 30 (regular health) (40 years old)

$500,000 coverage
Unity life $76.95/month
BMO $83.70/month
Primerica $108.30/month

Female (born) 06/15/1985 (25 years old) (regular health) Term 20

$500,000 coverage
Western Life $25.82/month
Equitable life $26.55/month
Primerica $54.63/month

So why promote buy term and invest in the difference when women pay much more?  One primerica representive was quoted was saying “ It doesn’t matter that there may be lower women’s rates out there…”

Many who work for Primerica work part time.  Do you want someone who works part time or full time?  How about selling only one product?

The problem is many in the media like the idea that Primerica promotes, which is buy term and invest the difference, and suggest that those who sell permanent are ripping people off.  Primerica’s term policies are non-convertible.  If one gets cancer (as an example) and wishes to convert it into permanent insurance this is not possible.

Something to think about the next time you hear “buy term and invest the difference.”  There may be merit to the idea but you have to be conscious of who you’re buying from.

Every year accountants, tax preparers and Canadians who do their own personal taxes miss out on millions of dollars of tax refunds and credits. How can you prevent this from happening to you?

My personal story may help your family. I have two boys that were born in 1999. They were born prematurely so my wife and I basically lived at Mount Sinai Hospital for 3 months during what we thought would be the most challenging period in our lives.

Looking back, our experience at Mount Sinai pales in comparison to one day in 2003 when a doctor told us that both of our children have Autism. The mental and physical challenge was only just beginning and would stay with us probably for life.

For the next several years our family trudged along, making use of the many services that are available to special needs children in Ontario. However, like many in our situation, we became very centrally focused with the knowledge that we no longer have anything in common with our friends and their typically developing children. Moving forward to 2007, it was just by chance that my wife mentioned the boy’s diagnosis to our tax preparer and we learned of the Disability Tax Credit (DTC). After completing all of the necessary paper work, our tax preparer revised our tax returns back to 2003 (the date of diagnosis). We received a cheque for over $17,000 and we continue to save on our taxes yearly by making use of the DTC.

Here is what I have learned from all of this. Accountants and tax preparers provide an excellent service based on the documents that you provide them, but they rarely have time to ask questions about your personal situation. And, unless you are aware of your CRA entitlement, you are not likely to mention personal information to your tax preparer.

Likewise, those who do their own taxes may also be missing out.

At a recent seminar we learned of a man whose father had died 3 years ago. Since the CRA allows you go back 10 years, the son was able to claim the DTC and revise his father’s taxes for 7 years. He received over $15,000 for the family.

The following is a list of conditions that may qualify for the Disability Tax Credit. This list is by no means complete and not all individuals will qualify.

• Addictions: illegal or prescriptions
• ADHD: Primarily Hyperactive/impulsive
• Autism (an estimated 190,000 Canadian children)
• Pervasive developmental disorder (PDD)
• Asperger’s syndrome
• Alzheimer’s disease
• Angina: an estimated 6% of Canadians between ages 50-64 have this symptom of heart disease
• Anxiety
• Arthritis
• Auditory syndrome
• Antisocial personality disorder
• ALS (Lou Gehrig’s Disease)
• Bi-polar disorder
• Chronic Fatigue Syndrome
• Chronic pain disorder
• Colitis
• Coronary artery disease
• Fibromyalgia
• Gambling Addiction
• Glaucoma
• Deafness
• Hepatitis C
• Huntington’s Disease
• Learning Disabilites
• Irritable bowel syndrome
• Migraines
• Arthritis
• Multiple Sclerosis: every day 3 more Canadians are diagnosed with MS
• Obsessive-compulsive disorder
• Parkinson’s Disease: nearly 100,000 Canadians have Parkinson’s Disease, 20% are under age 50
• Post traumatic disorder: military, paramedics, front-line nurses and victims of abuse, violent crimes or accidents
• Feeding: unable to feed themselves or take significantly longer to eat than most to do so
• Stroke: more than 50,000 strokes occur in Canada each year, one stroke every 10 minutes
• Vision problems: blind in both eyes or 20/200 or 20 degrees field of vision
• Walking: unable to walk 100 meters or take significantly longer than most to do so
• Sleep disorder
• Fetal alcohol syndrome
• Dressing: unable to dress or takes significantly longer
• Depression
• Down’s syndrome
• Quadriplegia

As an advisor I don’t do my clients’ taxes personally. I use the experts for this.

I am working with a firm which specializes in submitting all the paperwork to start the process. To date, they have collected over $2,000,000 for their clients. This process takes on average 60 to 90 days and a small referral fee is charged by the firm if they collect.

DON’T DELAY!

2009 is coming to a close and you will miss out on the 1999 credit as of 2010…this may mean thousands of dollars lost forever!

Once you have the Disability Tax Credit you can open an RDSP (registered disability savings plan).

In my next article I will discuss the RDSP and how some can get over $164,151 from only $20,000 invested in twenty years, assuming a modest 3% rate of return. Also, find out what most banks are missing in their advice of the new RDSPs and what you need to know.

Phone me at 905 338-7689, or e-mail me at brian@rightinsurance.ca.

Here’s an excerpt from Ann Landers that I considered very relevant!

DEAR ANN LANDERS:  Last year at this time I was a secure, happy wife and mother.  Today, I sit here wondering if I can get together the money to pay my utility bills before they shut off the electricity and gas.  The grocer has been wonderful about credit.  He knows I must feed myself and the five-year-old twins.

Fourteen months ago, I received a phone call from the hospital across town.  My husband was in critical condition.  He had suffered a heart attack while driving home.  By the time I reached the hospital, he was gone.  I couldn’t believe it.  The man had never had a sick day.  The ironic part of this story is that less than one month before he died, I asked him to buy some life insurance.  He refused; saying the smart thing to do is to keep his money in a savings account where he will produce interest. When he died, the bank gave me the $2,200 he had in his savings account.  If he had bought the life insurance policy, I would have received $50,000.

I loved my husband dearly, but I can’t help feeling resentful.  After all, the children were HIS responsibility.  He should have looked out for us.  I hope you will print this letter. Maybe somebody will learn from it. “ HIS WIDOW

DEAR WIDOW:  Your husband made a mistake, which unfortunately you and the children are paying for.  Put aside your resentment and accept the fact that he was not inconsiderate.  He was ignorant.

DEAR ANN LANDERS:  I have read with interest several letters in your column from widows whose husbands had very little life insurance, or in some cases, none at all.  Some of those widows were bitter because their husbands had not planned ahead.  But in my case, I was the guilty party.

Every time our agent suggested that Mel increase his insurance, I came out with that stupid remark We’re insurance poor.  The truth was that I, like so many other wives, thought my husband would live forever.  Widowhood was something that happened to other women. Today, I’m that other women.

Last week, while going through my husband’s desk drawer I came across an insurance proposal for $40,000 of life insurance.  It was dated five months before Mel died.  It was a good plan and we could have afforded it.  Our agent was trying to help and I knew it, but Mel was in perfect health and I figured I could use that $21.57 a month toward a new color TV. Today, I’m working in a steak restaurant trying to keep my family together.  Believe me, it’s tough.  I hope you will print this letter for the benefit of all those wives out there who don’t appreciate life insurance as much as widows do.  Sign me “KICKING MYSELF IN WINSTON-SALEM.

DEAR FRIEND:  Twenty-Twenty hindsight is easy.  The family that looks ahead and makes provisions for the long shots is the one that sleeps better at night.  I’m sorry your husband didn’t override your veto.  Good luck to you dear.

How Does Assuris Protect You?

If your life insurance company fails, your policies will be transferred to a solvent company. Assuris guarantees that you will retain at least 85% of the insurance benefits you were promised. Insurance benefits include Death, Health Expense, Monthly Income and Cash Value.

Your deposit type products will also be transferred to a solvent company. For these products, Assuris guarantees that you will retain 100% of your Accumulated Value up to $100,000. Deposit type products include accumulation annuities, universal life overflow accounts, premium deposit accounts and dividend deposit accounts.

for more details:
see the Assuris website

Wait times for cancer treatment in Ontario growing longer

The Canadian Press - Wed Apr. 29, 2009

A new report suggests wait times for chemotherapy in Ontario are growing longer as the aging population strains the cancer care system.

The wait time for 90 per cent of patients to start treatment averaged 73 days last year, according to the 2009 Cancer System Quality Index.

That’s up almost 10 per cent from the 2007 average of 67 days, a difference the index attributes in part to a steady rise in cancer patients.

Cancer Care Ontario, which advises the provincial government on cancer services, recommends waiting no longer than 28 days.

The annual report, by the Cancer Quality Council of Ontario and Cancer Care Ontario, found wait times for 90 per cent of patients last year spanned from 55 days to 117 days.

The report found progress in many areas, including five-year survival rates for most cancers and screening programs.

When you put together “the Plan,” what does that mean? Does it mean selling some Investors Group Allegro(TM) aggressive portfolio or some other Investors Group US Large cap Value fund?

Very little talk is about cash flow and how to work with current payments and move them into accumulated money. The talk is about saving more and spending less and generally taking on more risk to reach your goals!

The latest downturn shows that taking on more risk does not work! Being a “budget bulldog” helps, but it does does not address money that is lost by being transferred unknowingly or unnecessarily.

No, “the Plan” means looking at the three money areas that everyone has to consider: Lifestyle money (what you spend on your self and your family, like trips etc.) Transferred money and Accumulated money.

1) Accumulated money (e.g. RRSPs/RESPs). This represents the amount of money you currently have invested and are currently saving. How would you say you are doing in accumulating the dollars necessary to meet your future retirement needs and goals? On a scale of one to ten, where are you? Any answer less than ten would mean that perhaps you should be putting more money away.

2) Lifestyle money. One reason that keeps people from saving is Lifestyle. Lifestyle money represents the dollars that you are spending to maintain your current standard of living – where you live, eat, vacation etc. How much energy would you like to spend towards reducing your present standard of living so that you can save more? We know we need to save more and want to do so, but the only way we know to get the money is from our lifestyle, which is out of the question.

3) Transferred money. This brings us to the third type of money, which is Transferred money and is a problem for some. Transferred money represents the money you may be transferring away unknowingly and unnecessarily. Obviously if you knew where the transfers were taking place you would have already solved those problems. A few possible areas where you may have some money, like mortgages and term life insurance, are examples of money which can be recaptured. I feel it is important to begin focusing on money you may be transferring unnecessarily because this most often has the biggest impact on your Circle of Wealth over time. The interesting thing is that by avoiding unnecessary transfers, dollars are then freed up to put towards accumulation or lifestyle with no additional out of pocket cost.

There is a lot of talk about paying for an objective second opinion or third party to look at a portfolio to see if it is doing as well as it could in these difficult times, and whether it’s tailored to the client’s risk tolerance and retirement goals.

Second opinion (second opinions plural) from (Collins dictionary): if you ask another qualified person for their opinion about something, such as your health. For example, I would like to get a second opinion on my doctor’s diagnosis.

Here is a partial check list to determine whether you are indeed getting good value for your second opinion.

• Are there follow-up meetings every year after the first meeting after the plan has been delivered? Yes/No
• Do they charge for the new review with the advisor? Yes/No
• If a new plan has to be made six months or two years later because of death of a spouse or a job loss, will the change the plan or will they charge a new fee? Yes/No
• Do they review company benefits? (Disability plans etc.) Yes/No
• Do they review cash flow for transferred money that is going unnecessary or unknowingly to expenses like auto insurance, homeowners insurance, etc? Yes/No
• Can they show you how to save between $200 to $700 per year with the same or better coverage? Yes/No
• Do they review your mortgage can you pay it years faster by doing the above? Yes/No
• Review wills power of attorney? Yes/No
• Review life insurance coverage how they/you come up with the coverage? Yes/No
• Do they recommend primarily term insurance? Yes/No (an example of how term can be the wrong choice is children who are challenged physically or mentally and need life time coverage term is more expensive)
• If you are self-employed, do they review business risk management such as holding companies etc? Yes/No
• Do they review company benefits, how coverage can be modified for key employees such as critical illness insurance, etc. Yes/No

If you answered No to any one of the above questions, make sure you get a discount on the fees…and get another second opinion!

If the fee only company primary focuses on your portfolio and does not review “risk management” then you may consider joining an investors group and do your own investing yourself and save the fees. With an investors group you can learn about markets and what you may be comfortable with, but it takes time.

Risk management is usually not talked about because, let’s face it, it is more fun to talk about Scotia bank or Royal bank stock prices then is to talk about disability insurance short falls with company benefits!

When you buy a car how do you pay for it? Cash? Borrow from the bank. Since the bank takes deposits and loans it out at a higher interest rate this is how they make money.

Suppose you could do the same with your insurance policy? If you set up the insurance policy right, you can pay cash for the car. Then you would pay yourself principal and interest (what you would have paid the bank) back into the insurance policy the money grows at a rate much higher than the bank would offer. You could take it one step further, do you have auto insurance? Do you have a deductible? If you increase your deductible or better still get rid of it you may save $500 or more on your insurance every year (depending on the year and make of the car) Take that $500 of “found money” put it into your tax free sheltered insurance policy (read more below) and watch it grow! Remember, if you where in an accident you would still have to pay the deductible out of pocket! For a newer car just by increasing the deductible by a $1,000 the savings is impressive…just remember is put the “found money” to work not spend it!

If what you thought to be true was not, when would you like to know?

Participating policies (whole life is misunderstood by many people, media, financial planners and insurance agents!)

If you can buy a product that has paid dividends every year for over 100 years grow tax free and earn about over 2% more than a five year GICs over the last 30 years. Access this money tax free without going to a bank. Would that sound good to you? What if there was almost no limit to what you put in?

How does it work? The insurance company invests a pool of money conservatively as an example: about 20% in stocks and 80% in high grade bonds like government and corporate. Mortality rates (when policy owners die). In every decade over 100 years people are living longer. Expenses, taxes, administration fees. Death benefits to beneficiaries. Premiums collected. Policy loans outstanding. All of this is factored in an dividend is paid like it has for over 100 years which of course varies from year to year but is much higher than any 5 year GIC that can be bought.

Why is this generally not talked about? Having consistent returns is boring when you hear someone making a killing in the stock market. The problem is sometimes the returns can disappear in a matter of weeks wiping out gains that took years to build up. What is more important steady positive returns every year no matter what or being exposed to the market like we have had so far? The features of tax sheltered money and pulling money out in a tax free manner is not possible in an open account or a registered account like a RRSP. Even the new TFSA (tax free savings account) while excellent limits you to $5,000 per year plus it offers no death benefit. With life insurance under the tax act money accumulating (within certain limits) can grow tax free.

What if I am uninsurable?

Case study: Father is 50 years old and not insurable or highly rated. He has a daughter who is 23 years old and in good health. Money can go into her policy, but the father is the owner. He would like to have some tax free income starting at age 70. he puts in $20,000 per year for 20 years. At age 70 he pulls out $28,500 per year until his death at age 85. The cash value of the policy which includes the accumulated dividends is $1,110,726 this goes to his daughter at his death. She still a insurance policy on her life of over $1,000,0000 at age 57 no additional premiums need to be paid by here for the rest of her life. Assuming she dies at age 85 the insurance pays out over $2,000,000. Both father and daughter win.

Please call me for your own illustration or situation.