Personal Insurance

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Life insurance is a means by which we protect the people we love.  More specifically, by depositing premiums into a pool of funds, your beneficiaries receive a tax-free cash benefit upon your passing.  You can use this benefit to cover funeral costs, lifestyle-maintenance, debt repayment, or any other costs that may arise.  Life insurance can be separated into two broad categories: Term Insurance and Permanent Insurance.

Term Insurance

As the name suggests, term insurance is used to insure oneself over a fixed amount of time.  Term insurance is useful in a number of situations including:

  • Mortgage Insurance:  To pay off our mortgage balance if death occurs.
  • Family Income Protection:  Replacement of income earned by the deceased parent.
  • Small business owners:  Insure an employee or pay off creditors, key person insurance, partnership insurance. 

Some of the benefits of term insurance:

Renewable.  There are many options available including renewable coverage, which means that you can renew the term with no additional health assessments.

Guaranteed.  For the duration of the term, your sum insured and premiums will not fluctuate.

Cost.  Term Insurance is the least expensive form of insurance available.

Convertible.  Many term contracts can be converted into permanent insurance.

Flexibility.  You can choose the length of your term.  Common terms include 10 or 20 years.

Permanent Insurance

In contrast to term insurance, permanent insurance is meant to insure an individual for as long as they live.  Permanent insurance can be divided into two subsections:  Whole Life Insurance and Universal Life Insurance.

Whole Life Insurance

Whole life insurance insures an individual for their entire life and also offers a guaranteed cash surrender value including dividends in some cases (an amount that is paid out in cash should the individual decide to cancel their policy before expiration).

Key features and advantages:

  • Premiums, face value, and surrender values are all guaranteed under whole life.  Your cash value and death benefit can never decrease in value unless you start withdrawing the cash value from the policy.
  • Limited Pay Options:  You can choose the duration of the premiums (10, 15, 20, or 30 years, up to 65 or 100 years of age) based on your evolving priorities.
  • You have the ability to insure multiple individuals under the same contract. 

Universal Life Insurance

With Universal Life Insurance, an individual can pay premiums above the original cost of insurance.  The extra premiums are invested into funds of your choice with the assistance of an advisor.  In essence, you have a product that consists of both insurance and investments.

Key features and advantages:

  • A hybrid of permanent insurance policy and a tax-sheltered savings account.
  • You can make partial withdrawals as needed.
  • You have the ability to insure multiple individuals under the same contract.
  • You can temporarily halt premium payments if you unable to make them.
  • Very flexible in terms of amount of insurance, cost, frequency of payments, etc. 

Universal Life insurance is useful for a number of instances including: 

  • Individuals/families wishing to accumulate additional savings (i.e. for retirement).
  • High-income individuals who would like extra tax-sheltered savings or would like to leave an investment to a beneficiary tax-free.
  • Business people wishing to insure specific employees or wishing to finance a shareholders’ agreement. 

Term 100

Term 100 provides coverage for life.  This term policy will cover the life insured for life, even beyond age 100.  This product may have cash values.  Premiums are required on a monthly basis up to age 100.  When the life insured reaches 100 years of age, this policy matures which means that future premiums are not required to keep the policy in force.  Should you stop premium payment prior to age 100, the coverage will cease, and you will no longer be covered.  

  • Term 100 pay adjustable – means that premium can fluctuate.
  • Term 100 guaranteed life pay – means that premium stays constant throughout the life of the policy. 

Additional Policy Options

It is often beneficial to combine two different policies.  For instances, you may need coverage for your entire life and additional coverage only for your mortgage.  In this case, you may choose to put a term rider on the whole life policy.  You benefit by only having one policy to pay for, resulting in overall savings.

There are a handful of companies that still offer participating life insurance policies.  These policies combine guaranteed insurance coverage and strong guaranteed cash values.  The added bonus is a potential to receive dividends every year.

Riders with selected insurance companies include: 

  • Critical Illness Insurance
  • Disability Insurance
  • Disability Waiver of Premium
  • Accidental Death and Dismemberment
  • Guaranteed Insurability
  • Child Life Rider
  • Child’s Critical Illness Rider
  • Hospital Coverage
  • Accidental Fracture 

With increasing life expectancy rates, living benefits should become an important part of your financial plan.  When someone is diagnosed with a critical illness, the financial burden can be substantial.  Critical illness insurance is meant to help alleviate this burden by offering a tax free lump sum payment upon diagnosis.  Protection amounts range from $10,000 to $2,000,000

History of Critical Illness

Critical Illness insurance was founded in 1983 by Dr. Marius Barnard in South Africa.  As a heart surgeon, Dr. Barnard noticed that financial issues often hindered the recovery of his patients.  Since 1983, critical illness insurance has continued to gain acceptance and popularity in several countries including Canada.

Why do I need it?

The good news is that with advances in medical science, more and more people are surviving critical illness.  As such, it has become increasingly important to consider the financial hardships that may occur should you be faced with a critical illness in your lifetime.

Consider the following statistics related to the three major illnesses covered:

  • 50,000 Canadians suffer a stroke each year, and 75% survive a first stroke.
  • 82% of victims survive a first heart attack, and 50% of victims are younger than age 65.
  • 1 in 3 Canadians will develop cancer in their lifetime.*

Aside from stroke, heart attack and cancer, there are a number of illnesses that may be covered under a critical illness policy, including but not limited to: 

  • Alzheimers’s Disease
  • Paralysis
  • Severe burns
  • Coma
  • Multiple Sclerosis
  • Kidney Failure 

Benefits and Features

With most policies, you choose how you spend your lump sum.  There are a number of costs that may be associated with critical illness including: 

  • Cost of treatment
  • Lost income after time off from work
  • Home modifications to improve accessibility
  • Medical services not provided by public health plans
  • Debt incurred during illness
  • In-home assistance  

Critical Illness benefit will be paid in a lump sum of up to $2,000,000 tax free for any of the illnesses or conditions covered by your policy.  Each insurer has specific definitions and waiting periods (often between 30-90 days) that will have to be satisfied.

Added Benefits

Return of premiums benefit provides a refund of all the premiums you have paid under the policy at maturity.  With most policies, should you choose to cancel your coverage, you will receive a partial refund of the premiums paid up to that point.

Return of premiums upon death benefit pays your beneficiary a refund of all the premiums paid under the policy if you die while covered by your policy.

With Critical Illness Insurance, financial worries can take a backseat while you focus on making a full, speedy recovery.  Contact an S.I.G. representative and make Critical Illness Insurance a part of your financial plan today.

*Sources:  Canadian Cancer Society, Heart and Stroke Foundation of Canada

What would you do if you were faced with an accident?  In 2006, 4.4 million (14.3%) Canadians reported activity limitations due to health conditions – an increase from 2001 where the reported rate was 3.6 million (12.4%) of Canadians.*

What is Disability Insurance?

With disability insurance, you can ensure that you protect the portion of your income should you be faced with an illness or injury.  Depending on your policy, a tax free benefit will be paid out weekly or monthly, and usually up to 2/3 of your income prior to disability.

Partial Disability/Residual Benefits

Consider the idea that you are injured but are unable to perform lighter duties at a lower paying job than you previously held.  Some policies will help you split the difference between your new wage and your previous wage.

Presumptive Benefits

This benefit is a feature that allows the insured to receive a benefit if any of the following occurs:  loss of sight in both eyes, loss of hearing in both ears, loss of speech, loss of use of both hands, both fee, or the hand and foot on the same side of the body.

Elimination Period

Also known as the waiting period, the elimination period is the amount of time you must be considered disabled before receiving your disability pay.  Lasting anywhere from 30 days to 120 days, long period generally result in less expensive premiums.

Own Occupation vs. Any Occupation

Policies differ in that some specify that the insured is only covered if they cannot perform the duties of their own occupation.  This means that they will receive benefit if they become employed in another occupation.  In contrast, other policies specify that the insured is considered disability only if they cannot perform the duties of any occupation that they are qualified to perform.

Benefit Period

How long will you receive benefit if you become disabled?  Common duration periods include 2 years, 5 years, or up until age 65.  Premiums vary with the option that you choose.

Who can get it?

Disability insurance is available to: 

  • Professionals
  • Business Owners
  • Executives
  • Home-based workers
  • Full-time or part-time employees 

Like critical illnesses, having a disability can add major financial stress.  With disability insurance, you can ensure that you maintain a steady flow of income while you focus on recuperating.

*Sources:  Statistics Canada

What is Long-Term Care Insurance?

Like disability, long-term care insurance pays a monthly tax-free benefit after a waiting period of anywhere between 30 days and 180 days.  In order to qualify, you must be unable to perform two or more of the following daily living activities:  Bathing, Dressing, Toileting, Transferring, Continence and Eating.

Did you know that……

  • 25% of elderly caregivers are also seniors?
  • 57% of caregivers are employed?
  • 78% of care receivers continue to live at home?* 

As we age, our need for care changes.  The cost of this care can be staggering and public healthcare plans only provide limited coverage, subsidies being decreased over time.

Long-Term care insurance covers the costs associated with services such as: 

  • Rehabilitation
  • Nursing care
  • At-home assistance 

Features of Long-Term Care

Duration.  Depending on the plan, benefits may be paid for 2 years, 5 years, or the rest of your life.

20-Pay Option.  With this payment option, an insured individual can be free of premium payments after 20 years while still receiving coverage for a lifetime.

Why should you get Long-Term care? 

  • Provincial health plans won’t cover the entire cost of long-term care.
  • Many individuals will need several hours of care per day, which cannot be provided by a loved one.
  • Benefits can be used as the individual wishes, whether they choose to stay at home or enter a long-term care facility.

Source:  Statistics Canada General Social Survey

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