Archive for 2012

Here are 10 Reasons Why an Insurance Broker is Your Best Insurance Advice

Choose an insurance broker over a career agent for better insurance planning

If you’re looking for the best insurance advice, you should be speaking with an insurance broker. A life insurance broker has many, many advantages over a career insurance agent. A career agent is a “captive agent”. This means the agent is only allowed to sell life and health insurance products from one insurance company and can’t shop the marketplace to find you the best products and price. It is a one size fits all approach with career agents.

On the other hand, insurance brokers have many advantages that you can benefit from. Below we have listed 10 of the main advantages you get from dealing with a life insurance broker in Canada.

1. Insurance Brokers can shop the market

The first advantage you get is that an insurance broker can shop the entire Canadian marketplace to find you the best deal. Even though it is human nature that brokers will have a few favourite insurance companies they traditionally go to, if those companies can’t solve the problem or if their premiums’ are not competitive, the broker can shop different insurance companies to find a solution. The typical insurance broker in Canada holds contracts with 8-10 life insurance companies that they can deal with. At Life Guard Insurance all our brokers are have access to 15 of Canada’s largest life insurance companies to really give you options when shopping for the best deal.

2. Insurance brokers can design comprehensive risk management plans

An Insurance broker can do more because they have access to more. There are many insurance companies in Canada that specialize in certain markets, like disability insurance for blue collar workers, or joint last-to-die life insurance for estate planning. Your life insurance broker will know where the sweet spots are in the market place when designing your plan. They can also combine different types of benefits from different insurance companies when building your plan. Like life insurance from company A, critical illness insurance from company B and disability insurance from company C. In this way they can find you the best policies at the best price, even if it means more work for the broker.

3. Insurance brokers have extensive training

The amount of ongoing training and development an insurance broker undertakes each year is extensive. They usually have far more hours of training than is required by their provincial licensing body. This is because they need to keep up to date on products and sales strategies from all the different life insurance companies they are contracted with. They typical broker spends 5-10 hours per month in ongoing training sessions from insurance companies and industry experts, honing their craft and keeping their skills sharp to better serve you – the client.

4. Insurance brokers can do full financial planning

Many insurance brokers are dually licensed – so that they can sell mutual funds as well as insurance products. Even those without a mutual fund license have access to a wide range of investment products offered by their insurance companies, including segregated funds, GMWBs and GLWBs, Annuities and GICs. If you’re looking for one financial advisor to take care of all your insurance and investing needs, an experience life insurance broker can do it all for you.

5. Insurance brokers are well connected to complimentary service providers

An insurance broker standing alone does not fulfill all your financial planning needs. Good insurance brokers know this. That is why they have built relationships with complimentary service providers to help you. These could be family and estate lawyers, small business accountants, bookkeeping specialist, investment councillors, mortgage brokers, realtors, etc. A good insurance broker can help you with all your financial planning needs by connecting you with other financial experts to as you need them.

6. Insurance brokers can find you real value in your insurance products

There are hidden gems inside many life and health insurance contracts. A life insurance broker will know about many of these gems and be able to help you find real value in your insurance planning. This could be a highly competitive guaranteed interest rate being offered on certain insurance products, or a refund of premium option making your insurance almost free over time, or many other little nuances that only an experience insurance broker would know.

7. Insurance brokers are independent business owners

When working with an insurance broker you are working with an independent business owner. They are not a corporate employee and do not have to balance the needs of the company against the needs of you, the client. Insurance brokers always act in the best interests of their clients as they have no binding ties with insurance companies or specific loyalties to these companies. As an independent business owner, they take greater care of their clients and build long-lasting relationships.

8. Insurance brokers know their clients are their life-blood

Very similar to point #7, insurance brokers know that their business depends on happy customers. New customers often are referred by satisfied customers the insurance broker already has. The insurance broker’s brand and business is built on the good will of their clients. Happy clients will do more business with the broker in the future and will refer their friends, family and colleagues to the broker. An unhappy client can destroy the broker’s reputation in the community.

9. Insurance brokers build their reputation on trust and excellent customer service

As a small business owner, an insurance broker does not have a big national brand to stand behind them. They don’t have a customer service department, TV ad campaigns, national brand awareness marketing, etc. What they really have is expert knowledge, a passion to help clients and a dedication to providing better service and solutions to customers than the big guys. Larger financial services companies try and market to the masses by simplifying their product offering to meet the needs of the lowest common denominator – dumbing down their offering to sell more volume. An insurance broker works one-on-one with their clients and provides as much education and analysis as the clients need to solve their unique problems. This is how insurance brokers build their reputation in the community, and build their business.

10. Insurance brokers want to talk to you and help you out

Have you ever felt like you were just a number when dealing with your local bank or phoning into a large financial services company’s call centre? It’s very common. The person on the other end of the phone or across the desk is just an employee, and they get paid regardless of whether or not you buy and how well they serve you. An insurance broker is paid only when they properly solve your insurance and investing needs and you are happy with the product they gave you and the service they provided. Insurance brokers want to talk to you. They want to understand your financial needs and put their minds to work solving your problems. They want to find you the best insurance product that you will be happy with and keep for years to come.

Get the best insurance advice from a local life insurance broker in Canada

So, here are 10 good reasons why dealing with an insurance broker is your best choice. Get the best insurance advice and the best life and health insurance products to solve your financial risks. At Life Guard Insurance we have a network of local life insurance brokers across Canada ready to help you. Contact us today to find the best insurance broker in your area.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about getting the best advice from an insurance broker would be very much appreciated.

The EDGE Fracture Plan Pays Lump Sum Benefits for Broken Bones

Worried about broken bones – there’s insurance for that

Maybe you’ve broken bones before and you know how it can impact your ability to function. Maybe you’re worried about the extra time off work and frustration you would have if one of your children broke a bone. A lump sum, tax free insurance benefit paid out if you or someone in your family broke a bone would be very welcome financial news.

This is why The EDGE Benefits developed EDGE Fracture insurance. They noticed that a large percentage of their disability insurance claims were due to broken bones or fractures due to accidents. These sorts of breaks usually take many weeks, if not months, to properly heal and people can’t work or perform their regular daily activities while recuperating from a broken bone.

For one simple monthly premium you can cover yourself, you and a spouse or the entire family with EDGE Fracture insurance. If an insured person was to break a bone due to an accident, then there would be an immediate lump sum, tax free insurance payout. The EDGE Fracture insurance policy would stay in force because you never know if and when you’ll break another bone. If you purchase Couple coverage, then you and your spouse/partner are both covered for 100% of the benefits listed in the table below. If you select Family coverage then all children are also covered for 25% of the listed benefits below.

How much is your time worth?

The EDGE Fracture insurance plan has been designed to pay out lump sum benefits in accordance with standard recovery times. There are three levels of benefit, the Base Plan, Standard Plan and Master Plan. The more income you earn, the more your time is worth and therefore you should purchase a higher level plan.

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Premium Table for EDGE Fracture Insurance

Premiums for EDGE Fracture insurance are easily calculated. You can either buy Single, Couple or Family coverage. You can also choose from the Base, Standard or Master plans. This gives you 9 different premium options, as listed below:

Enrolment for broken bone insurance is guaranteed

Enrolment into the EDGE Fracture insurance plan is guaranteed; so long as you currently don’t have a broken bone you wish to claim on. From the date of signing the application and paying your first month’s premium, any new broken bones as a result of an accident would be covered for all insured members of the policy. There is no waiting period or need to be underwritten for this insurance protection.

A word on exclusions – when EDGE Fracture won’t pay

Most policies have some sorts of exclusions or circumstances where the insurance company will not pay out a benefit. This is also true of the EDGE Fracture insurance plan. If your broken bones were caused by any of the following your claim for benefits would be denied:

• A self inflicted injury or suicide attempt.
• Being in a war zone or caused as an act or war.
• Accident occurring while the insured person is serving on full-time active duty in the Armed Forces of any country. Basically while you are on active duty in the military this insurance is not in effect and all premiums for that period of time will be refunded to you.
• Flying in any type of aircraft other than as a regular passenger on a commercial airline.
• Accident while committing a criminal act.
• Accident while under the influence of narcotics or a controlled substance, unless administered by a physician.
• Accident while driving a vehicle with a blood alcohol content of more than 0.08 mg of alcohol per 100 ml of blood.
• Fractures associated with osteoporosis.
• Any fracture cause by a sickness or disease.
• Participation in sports as a professional athlete or engaging in the following high risk sports or hobbies: mountaineering, rock climbing, caving, parachuting, sky diving, hang gliding, bungee jumping, racing (for example automobile, motorcycle or horse racing) or racing of any water device (e.g. seadoo).

I know that is a long list, but so long as you are not driving drunk, in the military, or participating in high risk sports where broken bones are more common, you are covered.

Just this last weekend the youngest son of some friendly neighbors broke his arm while bicycling down a hill with his brother and two other friends. He looked behind him and accidentally turned the wheel, causing the bike to flip. His right arm is in a cast from shoulder to wrist, and he will miss 6 weeks of spring and summer hockey. Obviously this has a financial impact on the family. If they had the Standard Family coverage for EDGE Fracture insurance, the parents would receive $937.50 for their son’s injury. That money would help.

Talk to a broker today about getting the EDGE Fracture insurance to protect your bones

If you are interested in getting the EDGE Fracture insurance for yourself or your family, please contact us today. We can help you connect with a local life insurance broker who can make sure all your broken bones are properly insured.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about EDGE Fracture Insurance for broken bones would be very much appreciated.

Eurozone’s Debt Crisis Hits World Financial Markets – Again!

Can you safeguard your investments against Europe’s ongoing financial crisis?

The economic crisis in Europe continues. Here in Canada, thousands of kilometers away from the carnage, we might have thought things were OK. It seemed like France and Germany had brokered austerity deals with Greece and the rest of the P.I.G.S. (Portugal, Italy, Greece and Spain) that are all struggling to repay their crushing debts.

But no. Very much no. The crisis has only been simmering for that last year, as the populations in Greece and even France have rebelled against their governments. Elections held in Greece have now brought in a splintered government with no one party holding power. The diverse parties can’t seem to form a coalition government, and so there is no one steering the ship at present.

Greece has been awarded a second round of bailout money, totalling 130 Billion Euro, but so far the Greek government has not ratified the deal. Because the government is in disarray after the elections, there is no majority leadership to accept or decline the conditions attached to the bailout money. Greece must implement huge spending cuts, increase revenues with higher taxes, cut public sector jobs, reduce benefits, etc., etc. But the average person on the street who is suffering from the economic crisis also has a say. In the May 6 elections Greeks ousted the 2 main ruling parties – New Democracy and Pasok – because they were seen as brokering the austerity deals that have hurt the average person in Greece. More radical extremist parties have now been elected, promising to reject the austerity measures.

What does this mean for Europe. It’s not very good news. It could mean Greece leaves the Eurozone after defaulting on its debt. It could also mean that Germany and the European Central Bank (ECB) come to the aid of Greece to prevent a collapse, even if it means propping up an economy that refuses to bring its financial house in order. Both outcomes mean that Europe is in for more destabilizing financial crises and a prolonged super debt cycle.

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Debt is not just a Greek problem. France, Italy and Spain are the next on the chopping block with bloated government and household debts that need to be brought back in line. France has just elected a new socialist President, Francois Hollande, who campaigned on an alternative to French austerity measures passed by ex-President Sarkozy. Will France continue to rack up unsustainable debts under their new president? Will Germany and the ECB be forced to bailout France as well?

All this uncertainty is causing havoc on world financial markets. As European economies shrink, the demand for energy is going down, which means a drop in the price oil. This is bad for Canada. The Euro currency is also falling, which means European countries cannot afford Canadian finished goods and services. Also bad for Canada. And the retaliation against widespread austerity measures that is spreading across Europe could mean a decade or more in which Eurozone countries struggle to bring their financial houses back in order. This will continue to depress world financial markets and investment growth for a long time to come.

So, how can you as an investor protect yourself against the economic crisis in Europe? The Canadian insurance industry might have some answers to your investment woes.

GICs are no place to hide

Firstly, let’s look at Canada’s traditional safe haven for money; the Guaranteed Investment Certificate. Currently the 5 year fixed GIC rate in Canada is hovering around 2.5%. The Canadian inflation rate is running at about 2 – 2.5% at present, depending on the month. So, if you lock your money away to earn 2.5% and inflation is also averaging 2.5%, then at the end of your 5 year GIC the growth has merely kept up with inflation. At least you didn’t lose any money over the last 5 years. But you certainly didn’t gain anything either.

A Premium for Guarantees is a Small Price to Pay

If you still like the idea of investing is equities and funds, then you should really look into a segregated fund portfolio. Segregated or seg funds have guarantees attached to them so that you are protected from losing the principle of your investment. The maturity date, or length of time you must remain invested to benefit from the guarantee, is 10 years. Many segregated funds guarantee 75% of your investment will be there after 10 years, but some will offer a 100% guarantee.

And that’s not all. If you have a longer time horizon to invest than just the next 10 years, you can reset any gains you might have in the policy. If your investments do well in a given year, you can re-lock those gains and reset your 10 year maturity clock. Now your 75% or 100% guarantee of principle invested is set at the new, higher account value of your segregated fund portfolio.

You will pay more for these guarantees, in the form of a higher management fee, but it really might be worth it. Wouldn’t you like to sleep soundly at night knowing that no matter what happens to world stock markets, or how bad things get in Europe, you will never lose the money you invested.

Whole Life Insurance is a New, Stable Asset Class

For those investors who also need to buy life insurance to protect their loved ones and/or business from financial risk, a permanent whole life insurance policy can really make a lot of sense. Many investment planners in Canada and the US are looking at whole life insurance as a new asset class. The long term history (over 100 years of consistent performance of strong and stable returns) of paying excellent dividends to policy holders has made whole life insurance and extremely attractive financial product purely from an investment perspective. Coupled with your need for life insurance, and you have a product that does double duty – provides risk protection and gives you a strong investment return.

So what is the investment return of a whole life insurance policy made of? It is a dividend being paid out from the participating (par) fund. Both the par fund and the dividend payment have been explained in these two videos:

• What is the Whole Life Insurance Participating (Par) Fund?
• What are Dividends of Whole Life Insurance?

Also see an older article on Permanent Life Insurance as an Asset Class for more detail on using life insurance as an investment product.

Innovative new investment plans inside Universal Life protect against downside risk

Canada’s most loved life insurance policy that has been used for investment purposes over the last 25 years has been universal life insurance. Universal life allows policy holders to build a self directed investment portfolio inside their life insurance policy, with similar investment market returns to a mutual fund inside a tax sheltered insurance policy. This works really well when you are getting strong returns on your investment inside the universal life insurance policy, because the investment gains are not taxed and can compound more quickly.

Universal life doesn’t work very well when your investments are losing money, because the insurance company continues to extract the required premium to keep the life insurance inforce, and this can eat away at your investment account even more quickly as it is losing value. What universal life really needs is an investment account that has guarantees against downside risk – meaning you can make gains on the up markets but won’t take losses when the market declines.

Sound too good to be true? Well it’s not. One life insurance company in Canada (an soon more will follow I’m sure) has developed a unique and secure investment account as an option inside their universal life insurance policy. The company is BMO Insurance and they have a new Guaranteed Market Index Account (GMIA). This new account lets you participate in the growth of the equity markets (you get 60% of the market gains) and there is no chance of loss. So, when the equity markets are losing money, your portfolio has a 0% growth rate, but never a loss. When your investments again return to positive growth, the GMIA gives you 60% of the gains on the way up.

Again, not a bad investment option with economic uncertainty and volatile markets staying with us for the foreseeable future. And, you never lose money from your investment account, so the premiums for the life insurance protection never eat away at your investment fund as it is sliding down hill. This is excellent investment protection, and a much needed option for universal life insurance policies.

Get advanced investment advice from a life insurance broker

If you’re an investor who is sitting on the sidelines because you can’t find a safe place to put your money, maybe we can help. Contact Life Guard Insurance today to speak with a life insurance broker in your area who has access to all these products and can recommend solutions to protect your investments. The insurance industry is all about risk management, and we can protect your investments from economic risks like the Eurozone debt crisis.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about the European debt crisis and investment risk would be very much appreciated.

Qualifying for Life Insurance When You Play Dangerous Sports

How dangerous sport are viewed by life insurance companies

In the eyes of a life insurance company, what is a dangerous sport? Insurance companies usually refer to this category of risk as “dangerous avocations” which include spots and recreational hobbies, like learning to fly an airplane, automobile racing, hot air ballooning, and other dangerous hobbies. We will describe each sport and avocation below that is considered risky and describe the activities an insurance company will probably find too risky to insure.

This article is really to help those people who have been decline or had exclusions placed on their life insurance policy because of dangerous sports or avocations. There is a partial solution below that does provide some form of coverage while engaging in such dangerous sports. If you like to live life “extreme” then you need to control your financial risks. Getting life insurance can be a problem, but as with any problem, there is usually a solution. We will show you how to get coverage.

What types of sports are considered dangerous?

Here is a list of dangerous sports and avocations that most life insurance companies are wary about insuring. We will describe the types of activities that might be insurable and those activities that would probably cause an exclusion on your life insurance policy (described below).

• Motor Vehicle Racing: Includes any type of motorized vehicle, like a car, motorbike, go-cart, dune buggy, powerboat, etc. that is being raced for sport or recreation. You might still be insurable if you race at a sanctioned racetrack, under the supervision of a racing organization, with full medical aid services on site. A life insurance company would usually apply a rating of between $2.50 to $5.00 per thousand per year to be covered for automobile racing under these conditions. Is you have a driving record with traffic violations for racing and stunting on public roads, you are probably going to declined for life insurance.

• Aviation: Being a pilot or learning to fly is a big risk for a life insurance company. The highest rates of death among pilots is when they are first learning to fly or they have very little experience in the air. A pilot who logs less than 40 hours per year flight time is considered high risk. If you are an experienced pilot who flies a lot in a year, and who has a very clean flying record, you might be able to qualify for standard rates for insurance. Any dangerous types of flying, like crop dusting, water bombing, surveying in remote terrains, etc. would usually cause a high rating or be a flat decline for life insurance.

• Ballooning/Hand Gliding/Ultralite: Flying in these types of aircraft can also be a problem for getting life insurance. Most of these activities would be uninsurable unless you were highly experienced and could prove you are a professional at this dangerous sport/avocation and have all the best training and safety certifications. Even then you would most likely have a high rating on your policy, making it much more expensive.

• Mountaineering: This would include mountain trail hikes, rock climbing, snow and ice climbing, scrambling, and other climbing activities on mountains, canyons, cliffs and such terrain. Insurance companies are very concerned with people who climb alone, climb without safety equipment (freestyle climbers), climb to very high heights, attempt to summit dangerous mountains, etc. More minor recreational climbing, with a climbing club or school is much more acceptable. Having taken all the required safety training and using safety equipment, including avalanche beacons and a way to contact emergency responders is also more favourable. Doing some mountaineering as a recreation from time to time and not being extreme about it shouldn’t cause a problem with your life insurance. Serious climbers, taking greater and greater risks are uninsurable for these activities.

• Parachuting and Sky Diving: If you want to jump out of a plane or do B.A.S.E. jumping you might not be able to get life insurance for these activities. Insurance companies are looking at how experienced you are – how many jumps you have logged. Are you jumping from legally sanctioned jump schools that is properly monitored, or are you jumping from a private plane, alone or in small groups? B.A.S.E. jumping – buildings, antennas, spans (bridges) and earth (cliffs) – is considered one of the most dangerous sports in the world with a very high death rate. This is not insurable. You can expect an exclusion for parachuting and sky diving unless you are a real professional at the sport.

• Scuba Diving: Scuba diving can also be very dangerous, not only with the chance of drowning but with the dangers of decompression sickness. Insurance companies know there is a big difference between people going on holidays in Mexico, getting a quickie PADI license and doing a 25 foot dive in a group and those who like to do deep water dives on the weekends in cold Canadian lakes, looking at old shipwrecks. Which one sounds more dangerous? The serious diver doing it all the time is at much more risk than the person who has only done it once or twice in their life in a group/tourist setting. If you are a serious diver, insurance companies want to know what type of license you hold, how often do you dive, do you dive alone, how much training have you had, how deep do you go, what equipment do you use, etc. People who regularly do dangerous dives will be declined insurance, while others will probably be rated.

• Back country skiing, snowboarding and snowmobiling: If you like to ski, snowboard and snowmobile these activities are not a problem for life insurance companies, so long as you stick to managed ski hills and groomed trails. It is only once you go “out of bounds” and into the back country that skiing and snowmobiling are considered dangerous. It is very hard to get life insurance coverage for these activities because they are so remote, dangerous, and have high incidences of injury and death. You can expect an exclusion on your life insurance if you’re an avid back country skier/snowboarder or snowmobiler.

Getting a life insurance policy with an exclusion

One solution to the problem of being declined or highly rated on a life insurance policy is to ask for or to accept an exclusion. An exclusion is an amendment to the policy that clearly states the insurance company will not pay out a death benefit in the case of death cause by the dangerous sport or avocation. This would include immediate death from an accident or death at a future time with the root cause being an injury sustained while engaged in the excluded activity.

By having an exclusion added to the policy you are still covered for all normal life risks, like car accidents, cancer, heart disease, and simple old age. It is only the “extreme” sports you chose to add to your life, as an extra level of risk that gives you a thrill and makes you feel really alive, that life insurance companies don’t like to insure. The exclusion will bring your premiums to the normal or standard range so you won’t be paying extra for your life insurance.

Covering your risk with an accidental death policy

So, if you accept an exclusion you are still exposed to a high level of risk and have no financial protection from it. Well, here is a solution. The EDGE Encore policy from The EDGE Benefits can provide $300,000 or $500,000 of accidental death coverage with no questions asked about dangerous sports or avocations. You can be insured for up to half a million dollars while skiing down the side of a mountain, alone, hip deep in powder that no one else has ever touched.

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This accidental death insurance has a simple monthly premium structure:

Think of this extra premium on top of your life insurance coverage as another added cost of your sport or avocation. A “entry fee” to participate, if you will.

Be smart when you play – take all safety precautions

The only advice we have for you “extreme” sports participants is be careful out there. Take the best training and complete all safety courses offered. Make sure your equipment is kept in good working order and is the best you can get. Always go in a group – going off alone into the mountains or woods is very dangerous. And always let someone know where you are and what you’re doing in case there is an accident. If you need a good reminder, watch the movie 127 Hours. Just take every precaution to come home alive and keep enjoying life the way you want to live it.

Having trouble getting life insurance when you do a dangerous sport? We can help.

If you have had difficulty getting proper life insurance coverage in the past, let us help. Our life insurance brokers across Canada can find you the life insurance coverage you need, and combined with some accidental death insurance, you will be full covered in whatever dangerous sport you choose to do. Contact us today.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about dangerous sports and avocations and buying life insurance would be very much appreciated.

Getting Travel Medical Insurance for a Super Visa

What are the requirements for travel medical insurance for a Super Visa and where to get it?

If your immediate family lives outside of Canada, in a country that requires an entry Visa when travelling to Canada, then the new Super Visa has made reuniting families a lot easier. Citizenship and Immigration Canada has introduced a new, faster way to qualify for a visitor visa into Canada. The Super Visa has reduced wait times when sponsoring parents or grandparents for a Visa to an amazing 8 weeks. In the past it could take up to eight years to sponsor parents or grandparents to come to Canada.

What is the new Canadian Super Visa?

The new Super Visa is a 10-year multiple entry visa for parents and grandparents of a Canadian citizen or permanent resident. Family members may stay in Canada up to 2 years at a time. The Super Visa is only allowed for parents and grandparents, not for siblings, aunts, uncles, nieces, nephews or any other family members. Those family members would have to apply for a regular visitor visa to Canada.

What is different from a normal visitor visa?

The main difference is that the Super Visa is a 10-year multiple entry visa with up to 2 year visits at a time. A normal visitor visa only allows up to 6 month visits and then the visitor would have to reapply for an extension to their visa. Even a multiple entry visitor visa (not the Super Visa) allows only 6 month visits at a time, unlike the 2 year visits you get with the Super Visa.

How do you qualify for the Super Visa?

Parents or grandparents of Canadian citizens or permanent residents have to meet certain conditions to be deemed admissible to Canada. There are many factors that Immigration Canada considers when evaluating an application. These include things like the purpose of the visit, the person’s ties to their home country, their financial situation, and the economic and political stability of the home country. There are 3 things that are required to be in place to be approved for a Super Visa:

• Written commitment of financial support from the child or grandchild in Canada who meets a minimum income threshold.
• Complete an Immigration Medical Examination (IME).
• Prove that they have bought Canadian medical insurance for at least one year to cover the period of time that they will be in Canada.

What travel medical insurance is required to get a Super Visa?

One of the three major requirements is to have medical insurance for the parents and grandparents in Canada. This insurance must be purchased from a Canadian insurance company. There are two requirements that the medical insurance must meet in order to be acceptable for the Super Visa application:

• Minimum of 1 year of coverage
• Minimum of $100,000 of medical insurance coverage

You can purchase travel medical insurance from any insurance company that offers a Visitor to Canada Travel Medical Insurance plan, and can meet the two requirements above.

Life Guard Insurance recommends Manulife Visitor to Canada Travel Medical Insurance

We have successfully used the Manulife Visitor to Canada (VTC) Travel Medical Insurance policy many times for Super Visa applications and have been very impressed with the service provided. Manulife have one of the best travel medical insurance policies in Canada and has an award winning claims department, helping people get the medical coverage they need quickly, and handling the payment of medical bills all behind the scenes for you.

When applying for the Super Visa, we use the Manulife VTC Single-Trip Emergency Medical plan. You can purchase insurance up to 90 days in advance of travel, so we make the effective date of the policy (the date when coverage starts) 90 days ahead. You apply for 365 days of coverage (that is the maximum length of time for a single policy, and meets the Super Visa 1 year coverage requirement). You can choose from either $100,000 or $150,000 of emergency medical coverage.

There are two plan types:

• Plan A: does not provide coverage for any pre-existing medical conditions. This plan is cheaper than Plan B and is good for people who are in very good health, not taking any regular medications, and have not had any medical investigations, treatments or hospital visits in the last 6 months.
• Plan B: provides coverage for pre-existing medical conditions so long as they have been stable for the past 180 days before the coverage starts. This is a little more expensive but is better for people taking regular medications and dealing with ongoing medical conditions. Stable means you have not changed medications, been advised to have any tests or investigations done, or had to see a specialist or go to the hospital in the last 180 days.

If you have need of medical services it is important to phone the Manulife Travel Medical claims office immediately and advise them of your need for medical care. They will open a case file and make any and all arrangements to pay the Canadian doctor, hospital, clinic, etc. directly so you don’t have to pay out of pocket and then submit claim forms to be reimbursed.

Adjusting the effective date of the policy after the Super Visa has been issued

You must purchase the medical insurance BEFORE the Super Visa is issued as proof of insurance. You will most probably have to change the effective dates of the policy because the Super Visa has not yet been issued, and you don’t know when your family will travel. People generally don’t buy plane tickets until their visa is issued.

Because the effective date of the policy is 90 days after the date you purchase coverage you have ample time to make changes. Once the Super Visa is issued, and travel dates have been fixed, contact your insurance broker to change the start date of the coverage. The first day of insurance coverage should be the day that parents or grandparents arrive in Canada. The full year of coverage will continue from that date on.

If your parents or grandparents return to their home country early (less than 1 year visiting in Canada) you can get a partial refund on the VTC Emergency Medical Insurance policy. Just inform your broker or Manulife directly of the dates your parents or grandparents are returning to their home country and the policy will end coverage on the day they leave Canada. The portion of the VTC medical insurance that has not been used will be credited back to you as a refund of premium.

Get your Super Visa travel insurance quotes now!

Contact Life Guard Insurance today to speak with an insurance broker in your area who can quote you medical insurance rates for your parents or grandparents who you would like to sponsor for a Super Visa. We would be happy to help you secure the required travel medical insurance.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about travel medical insurance for the new Super Visa would be very much appreciated.

Longevity Risk is the Risk of Living Too Long

Outliving your retirement savings is called longevity risk

Have you ever considered the financial risk of living too long? Most people haven’t, as they plan on having a long and healthy life. However, with a very long life come certain financial risks that need to be considered, or else they can overwhelm during a time you will not be able to financially recover.

This risk is called longevity risk – meaning the risk of outliving your retirement savings and being unable to afford your daily living and care needs. With an extended life comes common health challenges that the majority of Canadians will face; long term care needs. The very old usually spend a lot more time in long term care facilities or at home with in-home care support than Canadians who live to the average age (age 80 for men and 83 for women).

This all adds up, and the costs for care and the rising cost of living are not cheap. Here are some important things to consider when building your retirement plan so that it is protected from the risk of living too long.

Living too long has the following risks:

Combining the risks of outliving the retirement nest egg you saved and the rising cost of long term care, and you have a financial crisis that can leave you broke at an age when you can’t financially recover. You then become the financial burden of your adult children, or are left to the social welfare system to care for you. Both are undesirable fates. Let’s look at these risks in more detail.

Outliving your retirement nest egg

Planning on living to age 85 or even 90 seems like a financially sound retirement plan, right? Not today. Did you know that for aging couples, almost half of the time, either the husband or the wife (or both) will live to age 90 and beyond? The number of centenarians in Canada (people over age 100) has been steadily rising – never shrinking. Today there are about 4,650 centenarians in Canada, and by 2031 there is expected to be over 14,000! * Source: CARP, Canadians Living Longer Than Ever.

It is very likely you will outlive your retirement plans if you have a certain life expectancy. It is much more common for women to have very long lives compared to men. Two thirds of all seniors over the age of 80 are women. Look at your family history. Did you parents and grand-parents live very long lives? How about uncles and aunts? Longevity can be predicted very often by generics, so pay attention to your family history and plan accordingly.

Needing many years of long term care

The older you live the more years you will require in long term care. For all Canadians, there is a 50% chance they will require some form of long term care in their lifetime. And this isn’t the light help around the home for the elderly. This is the heavy lifting, serious long-term care, including help with bathing, mobility, feed, dressing and toileting.

For the very old, there is a higher likelihood of being in long term care for many more years than the average 3 years most Canadians need care. A “super senior” might be in care for 5-10 years of their lives. This is because the super seniors (people living beyond age 90) are traditionally in very good health as they age. They are fit, not overweight and handle stress well. This doesn’t mean that the effects of age do not catch up with them, it just takes longer. Super seniors tend to need care into their 90s, not in their 70s and 80s. And, because of their overall good health and lower rates of dementia, they can live for many more years with proper long term care and assistance.

Becoming a financial burden on your adult children

What happens if you can no longer afford your lifestyle in retirement? And if you can no longer afford to pay your long term care or home care bills? The financial responsibility falls on your adult children. By law, the cost of caring for the elderly falls on the next of kin – the children. They would have to sacrifice their lifestyle to come to your rescue.

I know that very few aging parents today want to be a financial burden to their children. They don’t want to rely on adult children who are also trying to save for retirement and put their kids through college and university. Such a financial cost could destroy their retirement nest egg too – causing a devastating financial impact on their lives as well as yours. It would be best to avoid such a situation.

Financial solutions against longevity risk:

The good news is that with proper financial planning these outcomes can be avoided. Your money can last as long as you do. Your lifestyle and care needs can be provided for. Let’s look at a few ways you can protect against longevity risk.

Life insurance for aging couples

The cornerstone of any good financial plan is to have life insurance. You will have to own permanent life insurance, typically whole life insurance, to protect one another with a life insurance payout. You should own personal life insurance policies, payable when one of the partners passes away (instead of a joint last-to-die policy which is used primarily for estate planning purposes).

Since it is twice as likely that the man/husband will pass away before the woman/wife, it is imperative to have life insurance on him. Life insurance on both partners is the best plan, but if cost is an issue, go with the husband first. Upon death, there will be a large, tax free payout to the surviving spouse to be used for their ongoing living costs. This can help fund many years of personal income and long term care needs.

Long term care insurance

A long term care insurance policy is designed to payout a monthly or weekly income, tax free, for the costs of in-home or facility care by professional long term care providers. The cash flow from this type of policy can help pay for the rising costs of care and help you afford the kind of care you truly want in your retirement years.

Long term care insurance can protect your retirement nest egg from being depleted in a few short years from the high costs of care. It is far more common that women will spend many years in a long term care facility than men, but if both own the policy it would be better. You see, very often elderly women care for their husband’s first through his long term care years. By the time he passes away they are totally worn out and need care themselves. If you broke this cycle, and the couple could afford professional care help for the husband, it is more likely the surviving wife will have a much better life as she ages into those super senior years.

Plan for retirement savings to last into your 90s

Are you going to be a super senior? Who knows? Your family history might say yes, but a car accident next year might say no. What we know for sure is that life expectancy in Canada is going up. The number of people living into their 90s and over 100 is constantly rising. The better health you are in today, the more likely you too will live to a ripe old age.

There are a few ways to plan your retirement income to last for a very long time. One way is to use a traditional income product called an annuity, which pays out a monthly income for the rest of your life based on a fixed deposit you give an insurance company today. There are also newer products on the market called GLWBs and other retirement income generation tools. These plans will typically pay out 5% (or there about) of your capital invested per year for the rest of your life.

One concern people have is that if they pass away early, then the capital invested into an annuity plan is lost to the insurance company. Well, think of it this way, if you live to be a super senior you win big time from these plans, as they pay out much more money than you originally invested. If you pass away early, then the insurance company wins. True, but who cares? Not you – you’re gone and money no longer matters for you. You can buy an annuity as a joint income plans so the cash flow will go on for the surviving spouse of a couple, and end only upon the last death. Not a bad bet, when there is a 50% chance that one partner in the relationship will make it to age 90 or older.

Life Guard Insurance can ensure you age with dignity, and protect you against longevity risk

At Life Guard Insurance we have many brokers across Canada who are experienced in dealing with retirement planning issues. We help our clients put income strategies in place and protect themselves from the high costs of long term care. Contact us today to put a longevity risk plan in place.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about longevity risk: the risk of living too long would be very much appreciated.

Paying Out Your Life Insurance Claim

The process should go smoothly for a life insurance claim

Once a loved one has passed away, you will need to fill out the paperwork for their life insurance claim. This should never be a painful or tedious process. It should go easily and smoothly so that your family can receive the money they are left, fulfilling the wishes of the deceased.

A life insurance claim should be the fastest and easiest way to receive cash flow after a person has died. The death benefit is paid directly to named beneficiaries, avoiding taxation and probate, and not being tied up in the processing of the will. Here are some tips to help make the process quick and smooth, and get your life insurance claim paid quickly.

Make sure your loved ones know where your policies are

If you have a life insurance policy, you need to make sure your loved ones/beneficiaries know where the policy is. If you died, you won’t be around to find the policy in your filing system or to retrieve it from the bank safety deposit box you haven’t told anyone about.

If your beneficiaries, like your spouse, know where the policy is they can easily start the process of making a claim. The policy number is printed there, plus the contact information of the insurance company’s customer service and claims department. Step 1 – your beneficiaries need to get a hold of your policy to make a claim.

Contact your insurance broker first

Secondly your beneficiaries should contact the life insurance broker or agency who sold you the policy to see if they can help. This might not be so easy. Your insurance broker might have sold you the policy decades ago, and he or she might be retired or deceased themselves. But, there should still be someone looking after the policy. If you have kept up with your local life insurance broker over time, and have updated the contact information on your policy, you will easily be able to contact the office of an insurance broker who can help.

Your life insurance broker can speed up the process by getting your the claim forms, notifying the life insurance company of the death, and even helping the beneficiaries complete the life insurance claim forms properly so that there is no delay in paying the death benefit.

The insurance company’s life insurance claims department

If you can’t locate your life insurance broker, or it is required for the beneficiaries to go directly to the life insurance company (required by some companies) you will have to phone the claims department directly. The contact info for the insurance company’s claims department is printed inside the policy, or can easily be found by calling the customer service centre of the insurance company.

You will have to give them the policy number and name of the deceased. They will open a file and inform you how the claims process will proceed. It usually includes completing the claim forms and proper identification of all beneficiaries making a claim (so that cheques are paid to the right people).

Getting the death certificate and completing the paperwork

In order for the life insurance company to process the claim, they need some type of proof of death. In Canada this is easy because your local funeral home will issue you a stack of death certificates once they receive the body of the deceased. These death certificates are your proof of death to be attached when making a claim.

If you happen to die outside of Canada, proof of death is a little harder. There might be a time delay if you have to wait for the body of the deceased to be repatriated to Canada (having the body delivered back home for burial). If the deceased is not being repatriated to Canada, the insurance company needs to be notified of death abroad and they will inform the beneficiaries of what proof of death certificates they would require to process the claim.

Once you have the death certificate, all beneficiaries making a claim (if there is more than one beneficiary, each one needs to complete a claim form) will have to submit claim forms with proper identification. The insurance company will need to make sure that they are paying the death benefit to the proper beneficiaries to avoid a major mistake. You life insurance broker can really help here, making sure you complete the documentation correctly.

Your life insurance claim should be paid within 2 weeks

Once the life insurance company receives the claim forms and death certificate, they will quickly process it through their claims department. If all life insurance claim forms are in order, and the death certificate is verified, the cheques for the death benefit are process within about 1 week. A cheque payable directly to each beneficiary is issued and delivered to your life insurance broker or mailed directly to the beneficiaries. The proceeds of a life insurance death benefit are tax free for the beneficiaries, so you won’t need to declare the income on your taxes.

Connect with a broker you can trust

If you no longer have a life insurance broker looking after your policies, we can connect your with a local broker in your area who can be your insurance advisor and ultimately help out when there is a life insurance claim. Contact us today.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about a life insurance claim would be very much appreciated.

Personal Insurance is the Foundation of Your Financial Plan

You should build your personal insurance portfolio before any other financial planning

You might have heard this advice before, but so few people really take to heart that their personal insurance plans are the foundation of their overall financial plan. Insurance is very much like the foundation or bedrock on which you build your financial house. If you build your financial future on solid ground, it can withstand any catastrophe life can throw at it. If you build your financial house without a foundation, it is like a house of cards that can come crashing down from any financial stress.

We aren’t talking about forgoing investments into your retirement plans, or convincing you to spend all your money on personal insurance. The idea is to put financial risk protection first. Protect yourself and your loved ones first from the many potential financial disasters that can come from things like premature death, injury and illness causing disability, medical expenses for serious, life altering illnesses and even simple things like covering ongoing medical expenses that could get out of hand.

This article will focus on the life and health insurance portion of your personal insurance plan. Yes, we know there are important home and auto insurance needs but that is not within the scope of the Life Guard Insurance website. We are focusing on the major life altering events that can be insured against that are truly personal – your life, your health and your financial future.

Let’s take a look at why you should take ownership for your personal insurance plans, how much you should spend, what parts of the plan you should be concerned about, and creating a plan that will withstand the tests of time.

Why personal insurance always trumps group insurance

Do you work for a company that provides good employee benefits? Do you rely on these benefits as your primary source of insurance? Well you shouldn’t. You should own and control personal insurance plans and treat your group insurance like supplementary insurance that augments your personal plans. This is very true of life insurance, which has so many advantages when personally owned vs. being owned by your company. One of the first articles I ever wrote for Life Guard Insurance was called What is Better: Group Insurance or Individual Coverage?

Let me summarize the points made in this old article:

• You own and control your personal insurance instead of being a certificate holder of a plan owned by your employer.
• You can control you insurance premiums better with personal insurance vs. being subject to constantly rising prices within a group plan.
• You are never going to have your personal insurance taken away from you, where as group insurance can be cancelled by your employer and immediately ends when you leave your job.
• Personal insurance can be designed with preferred premiums for healthy people and can be either cash value permanent life insurance or term life insurance (or both if you choose). Group insurance is always a one size fits all term life insurance contract – no options.

There is still a place for group insurance products. It is still the cheapest way to get things like disability insurance and even some critical illness insurance policies. However, you always need to review the benefits and limitations of all your group insurance policies and make sure you top up your coverage where there are holes, or take complete ownership and control over your insurance, knowing that you will not be at that job, relying on those benefits, for the rest of your life.

How much to spend on your personal insurance plan

This is tough question, because it can really vary depending on your household income and what your needs are. So, let’s focus on a reasonable percentage of your household budget going towards personal insurance plans (remember we are not including home and auto insurance, which should be added in as another insurance cost on top of this). If you budgeted 2.5 – 5% of your gross household income for personal insurance, this would be reasonable for most families in Canada. The lower end of the scale is for people with employer sponsor group benefits, and the higher end for those who are self employed without any insurance coverage.

So, if your combined family income was $100,000 per year, your personal insurance plans, including your life insurance, critical illness insurance, and possibly a disability insurance top-up, should total $2,500 to $5,000 per year. That is a combined total for both you and your spouse. The more you make, the more you can afford for insurance planning, and you will have more opportunity to invest into plans that have a cash value and generate some tax advantages. If you are a lower income family, you will need to use mainly term life insurance and lower cost personal insurance plans to meet your risk management needs.

The major parts of a personal insurance plan

The first and most important part of your personal insurance plan is life insurance. Life insurance is the cornerstone of any financial plan, because the loss of life is final, and there are so many costs and financial impacts from death. You lose the income of a breadwinner, the childcare of a stay home parent, and all the future potential that person could bring to the family. So, life insurance comes first. The younger you are, the more life insurance you need because your debts are greater, your future earning potential is bigger and you probably have young children who depend on you.

Secondly, you need disability insurance. The first place to look for income protection in your personal insurance plan the group insurance provided by your employer. You still need to review this group insurance to see if you could benefit from a group disability insurance top-up. If you are totally without disability income protection insurance then you need to get a personal plan. It is much more likely that you will suffer a long-term disability sometime in your working career than you dying (actually the chances of becoming disabled for over 90 days is about 1 in 2 for Canadian workers). The severity and length of time you might be off work is unknown, but could your finances and future survive many months of little or no income? Probably not.

Thirdly, there is an insurance policy to protect you from the devastating financial impact of living through a critical illness, like cancer, heart attack, stroke, MS and many more illnesses. It’s called critical illness insurance, and with a third of all Canadians suffering from one of these critical illnesses before the age of 65, it is a risk that should not be ignored. You can by a small amount of critical illness insurance, like $25,000, or a very large amount like $2 million of coverage. Again it depends on your budget, but everyone could benefit from even a $50,000 injection of tax free cash if they were diagnosed with cancer, heart disease, had a stroke, etc. The financial consequences from major illnesses are great, but you can protect yourself against them.

Fourthly and finally there are the ongoing medical bills that you can insure. If you don’t have coverage through your work, a personal health & dental plan is a great way to offset the high cost of prescription drugs, dental care and even things like ambulance rides. The other great benefit for you is that there are many tax credits for those without group insurance needing to pay for their own health & dental insurance. The tax deductions for this kind of insurance often mean that the after-tax cost of the insurance is far less than the actual premium you pay.

Making your personal insurance plan work now and in the future

One of the great benefits of a personal insurance plan is that it can really grow with you. Personally owned insurance policies can change as time goes on to adapt to your future needs and financial situation. For instance, term life insurance can be converted to permanent life insurance without medical evidence in the future. Many disability insurance and critical illness insurance policies in Canada are convertible into long-term care insurance as you reach retirement age. If you start off with permanent life insurance now, like whole life or universal life insurance, it will build up a cash value that you can use later in life as an extra source of retirement income. So your insurance plans can be designed to solve immediate risk needs today, and also provide different benefits in your future that you might need as your financial situation changes.

Getting help designing your personal insurance plan

At Life Guard Insurance we have many excellent life and health insurance brokers across Canada who can help you design a personal insurance plan, contact us today to speak with a broker in your local area who can help you lay the solid foundation to your financial plans with personal insurance.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about personal insurance plans as the foundation of your financial plan would be very much appreciated.

Your Needs for Insurance in Retirement Should Be Reducing

Scaling back on your insurance in retirement years

When you stop working do you expect to be buying more life and health insurance? Adding insurance in retirement is not the best idea, as this can be far too expensive for retirees living on a fixed income. In fact, with wise planning and fore-thought, you should be able to scale back on your insurance premiums in retirement, or stop them all-together. You might even be able to use the cash values accumulated inside permanent life insurance as a source of retirement income.

Let’s take a look at how you might be able to save money on your insurance premiums once you hit retirement age.

Provincial and federal government programs can reduce the need for health insurance

We are all very lucky to live in Canada, one of the best countries in the world. Our government does do a lot to support its citizens and there social assistance programs for people in retirement. Depending on which province you live in, there are different levels of support for things like prescription drugs, dental care, in-home nursing care, and more.

Here is a great resource to locate all the government programs for seniors care in each provincial healthcare system in Canada. Very often you will be able to get subsidized drug plans, assistance with vision and dental care, and possibly even be eligible for a living allowance and support with home care or facility care (if you need long term care assistance).

Be sure to look into all your provincial healthcare support options for seniors. This can make paying for things like health and dental insurance unnecessary, and could free up hundreds of dollars per month.

Life insurance premiums should be reduced or ended

If you have planned out your life insurance in advance, and purchased permanent life insurance with a cash value attached, you should be able to reduce of retire your premiums. Good planning will mean your life insurance premiums are finishing up about the time you enter retirement years, or they are reducing because of accumulated cash values inside your policy or having your premium offset by dividends. You might also have purchased a guaranteed quick-pay life insurance policy, so that your premiums end after 10, 15 or 20 years.

If you don’t have this type of policy and you’ve been relying on term life insurance your entire life, then you might be in for a shock at how much a new permanent life insurance policy will cost you into your late 60s and 70s. It can often be too high a price to pay for retirees on a budget.

Final expense plan if you have nothing else

If you are retiring without any life insurance, you might want to look at a small amount of permanent coverage for things like final expenses. A very small policy, like a $25,000 or $50,000, might be all you need. These “final expense” plans are really just designed to pay for the funeral, legal fees, probate and help with the final tax bill. For most Canadians, this amount of life insurance would be sufficient for those final expenses. Unfortunately, such a small amount of life insurance will not leave a legacy or protect a large estate from tax erosion of accumulated wealth.

Even if you have some health troubles and can’t qualify for fully underwritten life insurance, a no medical life insurance policy is still affordable at lower amounts and can ensure that all final expenses are paid for, and your family is not left holding the bill.

Leveraging cash value life insurance for retirement income

If you have invested into permanent life insurance earlier in your life, now is the time to consider using your life insurance as a source of retirement income. Many investors actually use a life insurance strategy called an Insured Retirement Plan to create an estate AND tax free income in their retirement years.

A large amount of money built up inside a whole life or universal life insurance policy can be “borrowed” out of the policy and used as retirement income. The trick is not to borrow out so much money that the interest on the loan will get ahead of the growth of the cash value. If the cash value becomes negative, the policy will collapse and you will lose your life insurance. So long as the loan is not greater than your cash value, you need not pay interest on the loan. Upon death, the life insurance company repays the loan first from the death benefit, and then pays the remaining balance of the life insurance policy to your beneficiaries.

Even if you borrow a lot (assuming you have a large cash value) your policy will still pay a positive amount to your beneficiaries and you will be able to spend tax free cash as part of your retirement income.

Long Term Care Insurance might still be worth looking at

I know I said in the previous article that you should buy long term care insurance before you retire, otherwise it becomes too expensive. Well, it might still be worth looking at. If your family is very long lived, and they tend to age in retirement homes, needing the help of care workers for many years, these genetics will mean you will probably have the same experience. The premiums might be very high for long term care insurance today, but they are nothing compared to the crippling cost of private home care or facility care in a private long term care facility. Even if you could afford only a small amount of long term care insurance, it could make a world of difference when you have to pay those high costs of care each month.

Life Guard Insurance can help you review your insurance in retirement to save you money

If you are retired or about to retire, it is worth reviewing your life insurance plans with your broker. If you don’t have anyone to speak with, contact us here at Life Guard Insurance and we will have one of our local life insurance brokers across Canada make time to speak with you about insurance. Hopefully we can save you money on your premiums with your insurance in retirement.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about planning your insurance in retirement would be very much appreciated.

Getting Ready for Retirement and Being an Empty Nester

Those empty nester years before your formal retirement

As I continue my Life Stages articles I am now getting into unfamiliar territory. I am not an empty nester approaching retirement. In fact my wife and I have two young boys and are very busy still feathering the nest and caring for our little trouble makers.

Not to say I am totally inexperienced with this type of planning stage in life. Many of my clients are going through these changes and need advice and insurance solutions to meet their changing needs. So, the advice I dispense is good textbook advice from someone who has never had to make these decisions. That being said, there is a lot of common sense to financial planning, looking at the social and economic trends affecting Canadians. For those of you living these years, I hope you find this article useful. Please feel free to use the comment section below to add more value to the article for other readers.

What is retirement anyway?

Is retirement a mandatory prescribed age of 65 when you suddenly stop working all together and spend the next 10 years on the beach in Mexico? We all wish! No, retirement is different for everyone. In my circle of experience I have some clients who sold a business in their 50s and are now living half the year in Bermuda, while others retired with a government pension, but are still carrying a mortgage and continue to work full time right into their 70s.

Work trends show that most Canadians will not fully retire from their jobs at age 65, but continue to work either full-time or part-time for another 5 years. Even after age 70, many Canadians are able to earn income through various sources of “work” that they do. This could be a part-time service job that helps get them out of the house, which is more of a joy than a chore.

I think we are all rethinking retirement. The government of Canada certainly is, now that they have moved the Old Age Security pension age from 65 to 67. I think we are truly retired when we have the choice to work or not. When we can slow down from the rate-race of staying ahead of our creditors and paying the bills each month. When we have the freedom to choose the type and amount of work we want to do, not the job we have to do. When you reach this financial freedom you are retired in our modern world.

The kids still need a helping hand

Now that you’re an empty nester, are you really financially free from your kids. Mostly, but there are always those big things that keep coming up that children ask you for help with. It might be helping to pay for a wedding, or getting the down payment on a house together, or tuition when they want to go back to school (the first degree wasn’t good enough, now they want to go to grad school). It might mean helping out an adult child who is getting divorced and becoming a single parent.

As a parent of young-adult children, you almost need a separate emergency fund labelled “Kids” just for these sorts of situations. You want to avoid taking on more debt as you approach retirement. You also want to avoid cashing in your investments. Both of these things will prevent you from reaching that sense of financial freedom you seek to attain to be really retired (whether or not you work to earn an income). You children will always look to you for help, so it is a good idea to be prepared.

A focus on spending and preserving wealth

You investments need to change from accumulating wealth to preserving what you have. As you approach retirement you need to decrease your exposure to market risks – the chance your investment might go down drastically when the economy hits a rough patch. Regardless of market conditions you need to know that your retirement income will flow.

Moving assets from investments that are volatile equity-type funds to more income generating products is very important. There are many different investments that pay either an interest rate or a dividend regularly that can be a good source of income. You can also look at shifting some of your money into an annuity to guarantee a steady source of income each month.

This is a very important time to reduce your risks and set up plans to guarantee income will be paid for the rest of your life, no matter how long you live. Be careful too. Almost 50% of all retired couples in Canada will have at least one of the spouses reach age 90 or older. You need to have enough money to last for about 30 years of retirement, just in case.

Estate and Legacy needs come into focus

If it hasn’t been a concern of yours before, now is the time many Canadians begin to think about their estate and the legacy they will leave behind. Let’s look at the two pieces and how estate planning is different from legacy planning (from a life insurance perspective).

Estate Planning: A typical estate plan is about dealing with end of life taxation, minimizing the loss to the government in taxes that can be avoided or reduced, having a smooth transition of assets to your surviving heirs, and eliminating and conflicts and bickering over money that might come from the division of your estate. Life insurance is typically used here to offset government taxes with a very economical, tax-free, cash generating policy, and to pay for final expenses so the estate can be processed quickly and all the bills paid for (like the funeral and legal fees).

Legacy Planning: Your legacy goes beyond your estate. It isn’t just about preserving what you have, it’s about leaving something with a lasting impact to people or organizations once you’re gone. You might have a lot of wealth, and the legacy you give is an allocation of that wealth for the benefit of certain people or maybe a charity you support. If you are not wealthy, you can use a life insurance policy (permanent coverage like whole life insurance) to create a large amount of tax free wealth upon you death to be given to certain people or charities. Your legacy is all about structuring your wishes and funding them so your legacy, or lasting impact on the lives of others, will go on.

Who will care for you as you age?

This is a very important question you need to ask yourself. It really doesn’t matter what you have planned, time marches on and we all age. Sometimes aging is graceful, and other times it can be tragic. Needing help or care as you age is all too common. Most Canadians will need serious long term care for about 3 years of their life as they age (over 50% of all Canadians will require some form of long term care). Who is going to provide that care? How much will it cost?

Even though your children depended so heavily on you while growing up, I don’t think we can rely on them for our elder care. Just when you will be entering a long term care facility, them might be dealing with teenagers and trying to save for retirement. This is called the sandwich generation, when adult Canadians are caught between dependent children and now financially dependent elder parents.

If you don’t take steps to be financially prepared for the very high cost of long term care, then you will legally become the financial responsibility of your adult child(ren). That is a burden no parent wants to drop on their kids. One of the best ways to be financially prepared is to own a long term care insurance policy, that pays out tax free income for the cost of care when you need it. Your mid to late 60s is about the last time you can reasonably look at buying long term care insurance, because after that the price gets too high for retirees living on a fixed income.

Review your insurance plans now, before it’s too late

“Before it’s too late!” Sounds like a car salesman pitching a year end model clearance sale. At the risk of sounding like a high-pressure sales pitch, I just want to remind you that if you’re in your late 50s or into your 60s the clock is ticking. Your ability to qualify for life and health insurance might suddenly be gone if your health deteriorates, and the price for insurance is really jumping up each year you get older. The longer you delay in making decisions now, the more out of reach life and health insurance becomes.

Contact us today for a free, no obligation meeting with a life insurance broker in your area. Our brokers can show you how to plan in the empty nester years; for your estate; any legacy you want to give; and for your long term care needs.

The article was written by +Mitch Reynolds. If you found this article interesting or it made you think, please feel free to share your comments below. Liking us on Facebook, giving us a +1 on Google or Tweeting this article about life stage pre-retirement and being an empty nester would be very much appreciated.