Life Insurance

Term Life Insurance

Term life insurance or term insurance is life insurance which provides coverage at a fixed rate of payments for a limited period of time. After that period expires premiums is no longer guaranteed and the client must either forgo coverage or renew their coverage at a higher rate of payments.

If the insured dies during the term, the death benefit will be paid to the named beneficiary. Term insurance is the least expensive way to purchase coverage for temporary or fixed term financial obligations.

Term life insurance is the original form of life insurance and is not generally used for estate planning needs or charitable giving strategies. Term insurance functions in a manner similar to most other types of insurance in that it satisfies claims against what is insured if the premiums are up to date and the contract has not expired, and does not expect a return of premium dollars if no claims are filed.

The primary use is to provide coverage of financial responsibilities, for the insured. Such responsibilities may include, but are not limited to, consumer debt, dependent care, college education for dependents, funeral costs, and mortgages. This is purely risk protection.

Annual Renewable Term

The simplest form of term life insurance is a term of one year. The death benefit would be paid by the insurance company if the insured died during the one year term, while no benefit is paid if the insured dies one day after the last day of the one year term. The premium paid is then based on the expected probability of the insured dying in that one year.

Because the likelihood of dying in the next year is low for anyone that the insurer would accept for the coverage, purchase of only one year of coverage is rare.

A version of this term insurance which is commonly purchased is annual renewable term (ART). In this form, the premium is paid for one year of coverage, but the policy is guaranteed to be able to be continued each year for a given period of years. This period varies from 10 to 30 years, or occasionally until age 95.

As the insured ages, the premiums increase with each renewal period. In this form the premium is slightly higher than for a single year’s coverage, but the chances of the benefit being paid are much higher.

Level Term Life Insurance

Much more common than annual renewable term insurance is guaranteed level premium term life insurance, where the premium is guaranteed to be the same for a given period of years. The most common terms are 10, 15, 20, and 30 years or level term to age 70 or even 100.

In this form, the premium paid each year remains the same for the duration of the contract. Most level term programs include a renewal option and allow the insured to renew for a maximum guaranteed rate if the insured period needs to be extended. It is important to note that the renewal may or may not be guaranteed.

Whole Life Insurance

Like any kind of insurance, Whole Life Insurance is a contract. Whole Life Insurance provides protection for life. As long as the insured person continues paying the premiums, the insurance contract remains in force, regardless of age or health. As opposed to Term Life Insurance, the premiums will never increase. Upon the death of the insured person, the insurer pays a sum of money to the beneficiary of the insured decedent. Whole life insurance policies also maintain a savings component. With that component, the insured person accumulates a cash value. Cash value is a critical and material element of Whole Life Insurance.

Cash Value

With Whole Life Insurance, the premiums that are paid increase the cash value of the policy. Should you wish to increase the death benefit, the premiums will of course cost more, but you will also be increasing the cash value of the policy. Cash value and death benefit don’t decrease unless the insured person either makes cash withdrawals or premiums are no longer paid.

Tax Aspects

Premiums are paid with after-tax money. Because of this, the cash value of the policy grows without tax consequences. Should withdrawals from the policy be in excess of what the insured person paid into it, there is a tax consequence. That can be avoided though by taking a loan against the policy.

Dividends

Whole life policies pay dividends, and the dividends are not taxed. Dividends can be reinvested in the cash value of the policy, or they can be used to pay additional insurance with a larger death benefit.

Limited Pay Universal Life Insurance

The Limited Pay Universal Life (UL) insurance policy is for people who want permanent insurance and who want to finish paying for it within a certain time period (10, 15, or 20 years). Limited pay UL is easy to understand and manage and offers guaranteed insurance costs, guaranteed cash values, choice of cost of insurance periods, and opportunities for tax-deferred growth in a variety of investment account options.

Universal Life Insurance Policies, like Whole Life Insurance policies consists of four parts:

• Mortality Cost:

A percentage of the premium that covers the pure cost of the life insurance death benefit.

• Administration Cost:

A charge for administering the policy and premium tax.

• Savings or Investment:

The remainder on your deposit after mortality and administrative charges have been deducted that is invested.

• Return on the Savings:

The interest rate that is credited to the cash value in your account each year.

To learn more about the limited pay UL policy and determine if this product is best for you call My Insurance Broker today.

Living Benefits & Critical Illness Insurance

Critical Illness Insurance was developed by Dr. Marius Barnard (the brother of Christian Barnard, the doctor who performed the first successful open heart transplant surgery) in South Africa in 1983. Dr. Barnard saw a need for insurance that paid a ‘living benefit’ to those who survived a major illness to offset lost income and pay for additional expenses.

It is inspiring to hear him tell stories of delivering a Critical Illness benefit check to the wife of a farmer who had a heart attack (they would have lost their farm without the Critical Illness benefit payment), or to a young, single mother who had breast cancer (and couldn’t afford the medical treatment and the after-treatment expenses without the benefits paid from her critical illness policy).

Whereas life insurance has been readily available for literally hundreds of years, critical illness insurance is a relatively recent development in Canada.

Critical Illness is available for purchase online through select partners:

Pleaseholder for Manulife logo for quote

Types of Critical Illness

The terms and conditions will vary from company to company, but the following ailments are insurable by virtually all insurers (Base Coverage):

• Heart Attack
• Coronary Bypass Surgery
• Prostate Cancer
• Stroke
• Breast Cancer
• Other life threatening cancer

In Addition, the following conditions are insured, depending on which insurance company is chosen (Enhanced Coverage):

Multiple Sclerosis • Kidney Failure • Major Organ Transplant • Aorta Graft Surgery • Benign Brain Tumour • Coma • Heart Valve Surgery • Pre Senile Dementia (Alzheimer’s) • HIV Assault with Needle • Loss of Independent Existence • Loss of Speech • Parkinson’s Disease • Paralysis/Paraplegia • Severe Burns • Balloon Angioplasty • Blindness in both eyes • Coronary Artery Disease • HIV through Blood Transfusion • HIV Medical Profession • Loss of Hearing • Loss of Limb • Motor Neurone Disease

Why do I need Critical Illness Insurance?

Almost everyone has a relative or friend who has suffered from a major, possibly fatal, illness. Protect yourself and your family.

The numbers, speak for themselves:

• Of 10 Healthy male adults, 3 will have a critical illness before age 65.
• Of 10 healthy female adults, 2.7 will have a critical illness before age 65.

Heart Attack

• 1 in 4 Canadians will contract some form of heart disease.
• 75,000 Canadians suffer heart attacks each year.
• Heart disease costs the Canadian economy approximately $19 billion every year in medical services, hospitalization expenses, loss of income and loss of productivity.
• The rate of death among patients hospitalized for heart attacks has been decreased by half, from 16 per cent to 8 per cent.
• 1 in 2 heart attack victims are under the age of 65.

Stroke

• 50,000 Canadians suffer a stroke each year.
• 75% survive the initial event.
• Strokes are the leading cause of neurological disability.
• 1/3 of stroke victims are under the age of 65.
• 60% of stroke victims will be left with a disability.

Cancer

• More than 130,000 Canadians will be diagnosed with cancer this year.
• Over 60,000 people in Canada will die this year from the disease.
• 1 in 3 Canadians will develop cancer in their lifetime.
• 1 in 9 women will develop breast cancer.
• 1 in 3 women and 1 in 2.5 men will develop cancer in their lifetime.

Multiple Sclerosis

• More than 50,000 Canadians have Multiple Sclerosis.
• MS is the most common neurological disease among young Canadians.
• Canadians have one of the highest rates of MS in the world.
• Women are twice as likely to develop MS as men.

Parkinson’s

• 30% of all Parkinson’s patients are under 50.
• 20% of all Parkinson’s patients are under 40.
• There are approximately 80,000 – 100,000 Canadians suffering from Parkinson’s.

Paralysis

• An estimated 900 Canadians who sustain a spinal cord injury each year.
• More than 30,000 Canadians suffer from paralysis of 2 or more limbs.
• Most who suffer spinal cord injury are between 16 and 30 years of age.
• The most common causes of spinal cord injury are car collisions and falls.

Alzheimer’s disease

• Alzheimer Disease is the fourth leading cause of death in Canada.
• Every year approximately 10,000 Canadians die from Alzheimer’s.
• Approximately 1 in 100 Canadians suffer from Alzheimer’s disease.
• There are approximately 22,000 people in Metro Toronto with Alzheimer’s.
• The disease occurs in 8% of the general population over 60.

Kidney Failure

• Kidney disease ranks sixth among diseases causing death in Canada.
• Each day, an average of 8 Canadians learn that their kidneys have failed.
• Approximately 2000 Canadians are on a waiting list for kidney transplant.
• 351 kidney transplants were performed in Ontario in 1995.
• 1 in 10 will develop kidney stones at some point in their lives.

Options and Riders

Lump Sum Payment

This is the traditional type of critical illness insurance where one typically gets a lump sum payment 30 days after the diagnosis of a covered illness. These funds can then be used to pay for treatment outside the country or any other purpose you choose. There are however limitations to some policies and you need to review them with a licensed professional carefully before deciding which would be best suited for you.

Return of Premium

Upon death, most policies will return all premiums to the named beneficiary as part of the policy – no additional charge.

Payback of Premium Rider

Many policies offer this option on the policies that have a level premium to age 65, 70, or 75. For an extra premium, if you do not have a claim, you will get all your premiums back at the policy ending age 65, 70 or 75, depending on the insurance company and policy purchased.

Children’s Rider

Coverage is offered to children ages 2-17 and, in some cases for children that you have in the future starting at birth. It will pay a lump sum, usually $25,000 on the diagnosis of a critical illness and the one premium frequently covers all children in the family.

Disability Insurance

As a professional, you have invested considerable time and money to make yourself a success. If you were suddenly disabled, how long could you sustain your current lifestyle? How could you save for your retirement? Disability insurance can assure that you have the money to continue your lifestyle without compromise.

By purchasing disability insurance, you are buying a tax-free monthly benefit, which will be paid to you, if you become disabled. The size of your benefit will depend on your level of income when you buy the plan.

You will receive the first monthly payment after the elimination period. The elimination period (usually 30, 60 or 90 days) is the time, either consecutively or cumulatively which must elapse for you to qualify for benefits. You decide how long your elimination period will be.

What is the definition of ‘Disability’?

This is the most important point to consider. The strength of a disability contract is in its definition of disability. If you can work in any occupation, are you still going to receive a benefit? Can you work in another occupation and still receive benefits? If you can still work part time, is there a partial disability benefit provision?

Information Updates

How knowledgeable is your agent in the disability insurance marketplace? There have been numerous changes in this area. Are you up to date?

How much do you qualify for?

Most insurers ask for financial evidence at the time of application (Personal Tax Returns, usually the most recent 2 years completed, Financial Statements for Incorporated Individuals, etc.) This eliminates many problems if there is ever a claim.

Example: Generally, as a consultant, your net income is much lower than the total revenue you have generated. If you did not submit financial statements showing your net income and a statement of earnings and expenses, you may be paying for a policy and benefit amount you will not receive.

A complete and thoroughly documented underwriting job by the agent must be done in order for you to receive your benefit. We have been specializing in the disability marketplace for many years. Our knowledge and no nonsense approach will make your purchase easy as we keep you informed during the entire process.

Questions You Should Ask Your broker

What are some of the core, built in benefits of your contract? Has it been integrated with government and spousal benefits? Are you getting the best value for your money?