Archive for February, 2012

Video About Final Expenses Your Estate Will Pay

It costs money to die – see how Final Expenses all add up

In Canada there are no special Estate Taxes as there are in the US. Instead there is one more tax filling your estate needs to complete called your terminal tax filing. Upon death, all your worldly assets are assessed for taxation, and capital gains and tax sheltered savings in vehicles like RRSPs will all come due and become taxable at their fair market value on the date you died. So, the final tax bill can be a huge part of your final expenses.

Along with taxation, your final expenses include all the other fees payable by your estate upon death. Theses fees include:

• morgue fees
• funeral home charges
• legal fees
• executor fees
• probate fees

And there could be more depending on how you arranged your affairs. It all adds up and costs thousands of dollars. Even the most common funeral in Canada runs around $9,000 on average (and that doesn’t include all the taxes owing).

One solution to pay for all these costs at death is via permanent life insurance (either whole life or universal life insurance). Proceeds from a life insurance policy are paid out tax free to your estate or names beneficiaries who can then pay off all these mounting costs.

Get life insurance advice to offset final expenses

Our brokers at Life Guard Insurance can show you how cost effective life insurance can be to generate the much need cash flow you will need for final expenses. Contact us today and we can walk you through an estate plan to cover the many final expenses and taxes at death.

The video was produced by Life Guard Insurance and posted by +Mitch Reynolds. If you found the video 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 video about final expenses would be very much appreciated.

VIDEO: Renting vs. Owning Your Life Insurance

Term vs. Perm Life Insurance – Which is better?

In this video we discuss term vs. perm life insurance – the age old debate. which type of life insurance is better. Well, I’m not going to answer that question for you since there is a place for both in your insurance and risk planning portfolio. The major differnece, to keep things simple, is one is like renting an apprtment and the other is like buying th ehouse.

Term life insurance is much cheaper in monthly premiums than buying permanent life insurance. However, it is designed for a short period of time, like 10 or 20 years, to protect you from the financial cost of shorter term things, like paying off the mortgage or the cost of raising children. In the end, if nothing happens to you and you are still alive at the end of the term (or whenever you cancel the policy) the premiums you have paid are like a sunk cost. Very much like renting an appartment. You have the home to live in while you rented it, but when you move out there is no money given back to you by your landlord.

Permanent life insurance is different. With permanent life insurance you are “buying the house”. The cost of buying permanent life insurance is based on how long the life insurance company thinks you are going to live (statistically). This is like amortizing the cost of you life insurance over the rest of your natural life (or you could quick pay the policy in 10 to 20 years by paying even more today). In the end you will actually own the underlying block of money you originally bought as a death benefit – but you insured for the full amount form day 1. Permanent life insurance also has a cash value, which makes it an asset to you. You have equity in the policy. The trade off is that perm life insurance will cost you more than term.

Find out more about Term vs. Perm Life Insurance

Get some advice from one of our brokers at Life Guard Insurance about term vs. perm life insurance, and which type of insurance is right for you.

The video was produced by Life Guard Insurance and posted by +Mitch Reynolds. If you found the video 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 video about term vs. perm life insurance would be very much appreciated.

Canadian Banks Do Not Act In the Spirit of The Bank Act

The Bank Act: Following the letter of the law not the spirit of the law

Most Canadians are not aware of laws in The Bank Act to prevent Banks in Canada from actively selling personally owned insurance products to clients. The federal government of Canada has decided to try and keep the insurance and banking industries separate. There are many good reasons for this (see the previous three articles about how the banks operate and how they might sell life insurance if they were allowed). The overriding argument by the government and the insurance industry is that Canadians will be much better served by licensed insurance professionals who make it their primary focus to sell and service insurance products vs. offering credit. A financial professional needs to specialize in their field to be good at it. Doing a little of everything leaves clients lacking in-depth and knowledgeable advice.

The insurance industry is very complex. It is divided into two main parts – 1) Life and Health Insurance; and 2) Property and Casualty Insurance (also called Home and Auto). Insurance professionals would need to hold different licenses in each area to do that side of the business and most choose one or the other because each is so complex. Asking bankers, who are also specially trained to sell credit products to then also be licensed and up to speed on insurance would be too much. This is why The Bank Act separates the two industries: insurance professionals can’t lend money and bankers can’t sell insurance!

What does The Bank Act actually say?

The Bank Act has broken up the sale of insurance products in bank branches into two categories: Authorized Insurance Products and all Other Insurance Products. Here is a list of what the banks are authorized to sell in branches:

• Credit or charge card related insurance
• Creditors’ disability insurance
• Creditors’ life insurance
• Creditors’ loss of employment insurance
• Creditors’ vehicle inventory insurance
• Export credit insurance
• Mortgage insurance
• Travel insurance

All these forms of insurance are based on group insurance principles and are attached to an existing loan or mortgage from the bank (except for travel insurance). The insurance is designed to pay for all or part of the loan, and no money is payable to the insured person. So, in effect the insurance protects the bank from the credit it extends the client. This is arguably the least valuable or worst type of insurance you can buy.

All other types of insurance are prohibited for sale in banks. These would include personally owned life and health insurance products, home and auto insurance, business insurance, etc. The legislation goes further than to just make it illegal to sell the products. Promotion of such products is also illegal. Here is a brief overview of prohibitions on the bank from the 2006 Parliamentary White Paper, Banking On Insurance:

Moreover, sections 8 through 10 of the Regulations prohibit banks from conducting other activities in the area of insurance, including:

• sharing customer information with insurance companies (subsidiary or otherwise), agents or brokers;
• providing telecommunications devices (e.g., telephones and computers) to customers for the purpose of linking customers with an insurance company, agent or broker; and
• conducting business in a location that is adjacent to an office of an insurance company, agent or broker, unless the bank clearly indicates to its customers that the two premises are “separate and distinct.”

Tied Selling: Another thing clearly spelled out in The Bank Act (Section 416.1(1)) is the concern over tied selling. The Canadian government wants to protect consumers against one all encompassing financial services company that compels people to buy other insurance products in order to get what they really need, like a loan. The Act reads: “A bank shall not impose undue pressure on, or coerce, a person to obtain a product or service from a particular person, including the bank and any of its affiliates, as a condition for obtaining another product or service from the bank.” This is another major reason why banks are not allowed to sell insurance products in branch.

Are Canadian Banks Following The Bank Act?

I think this is a good question. Are banks really adhering to these laws, or are they finding ways around them? The answer is very simply they are trying very hard to get around the law. Let’s look at a number of examples in the last 5-6 years that shows the attempts by Canadian banks to circumvent The Bank Act and sell insurance.

Adjacent Branches

One Canadian bank in particular (but the others are now starting to follow) has been building adjacent insurance branches next to their banking branch for over 5 years now. You have probably seen them – a larger bank branch with an insurance office stapled on the side. To conform to the law, there is no connection between the two “building” from the inside and they are constructed completely separately. But to the consumer, they look like one single unit. The branches have very similar logos (mainly the colour scheme is reversed for the insurance logo), the signs are placed on top of each other on the street, and the two “separate” branches are part of the same bank box construction. Since most banks in Canada build branches that are stand-alone buildings, the adjacent insurance branch looks like it is part of a single offering of financial services from the bank. All that’s missing is some colourful footprints on the sidewalk leading from the banks door over to the insurance door that say “Insurance This Way” on them.

Bank Website Selling Insurance

This was a contentious issue for the government who tried to stop banks from promoting insurance products via their websites. On Oct 11, 2011 the Minister of Finance, Jim Flahrety final had enough of the back and forth and imposed new regulations. “We want to ensure the Bank Act reflects the new reality of online banking, to avoid attempts by banks to do on their web sites what they are prohibited from doing at their branches,” said Minister Ted Menzies, Minister of State for Finance. “We must make sure there is a level playing field where small businesses can compete, thrive and create jobs.” Until this time the bank’s website was not considered a part of the branch, as defined by legislation, and banks had been aggressively promoting their insurance products online. People would get message alerts when logged into their online banking to try sell them life insurance and home and auto insurance regularly. This is a clear contradiction, as banks aggressively promoted online banking as a way to do your everyday banking more efficiently, but for the purposes of insurance sales it was not an electronic extension of your branch.

Mail Out Offers for Insurance

Many Canadians still receive their bank statements in the mail every month. This was another great opportunity to market insurance products by the bank. Mail out stuffers about life and home and auto insurance were regularly put in with your monthly bank statements. These stuffers would direct you to the website or a call centre to get quotes and apply for coverage. Again, this is a violation in the spirit of The Bank Act, since the monthly bank statements coming out are again an extension of the services from your branch, so it would be your branch promoting the sale of insurance products. Does it really matter whether or not is occurs on branch premises or not?

Quasi-Banks Selling Insurance in Branch

There are a number of “banks” that do not fall under The Bank Act. These include Credit Unions and some regional/provincial banks formed under different legislation. The Credit Union Act also prevents Credit Unions from selling unauthorized insurance products to members, but they have been pushing hard to change that. This is another ongoing battle where Credit Unions are employing a staff of licensed insurance agents to sell life and health insurance, but they are doing it outside the bank branch. This means client information is being passed from the Credit Union branch network to insurance agents (who are also employees of the Credit Union) for the purposes of selling insurance to their members. Even though this is a clear violation of The Bank Act, it might be not as clearly defined in The Credit Union Act (I haven’t researched it as much). There is at least one regional bank formed under distinct provincial legislation that does not have any particular restriction to selling insurance through their branch network. This “bank” (that is not a bank) is sending referrals directly from branch staff to licensed insurance agents for the purpose of selling life and health insurance policies. Sales appointments are taking place inside the branches and in many cases, branch staff that are not licensed to sell insurance are acting on behalf of the agent for things like policy deliveries and getting paperwork signed by clients.

It’s a really hard line for the banks to follow. They want to enter the insurance business, selling life insurance, health insurance, home and auto insurance, etc. They have built some of Canada’s largest insurance companies. Having their policies distributed through the existing independent broker network to sell their products is fine – not a violation of the Act. Using an in house sales force and call centres that reach clients completely separate of the branch network and any of its affiliated business units is also fine – not a violation. But how do you control it. Every activity of the sales force would need to be scrutinized regularly to prevent abuse. How to you really keep the staff from the adjacent insurance branch from forming relationships with bank staff next door.

I know the banks have tried hard to comply with the letter of the law, but the spirit of The Bank Act is not being followed. Banks in Canada are trying every legal way to get around the Act to sell insurance (to the point the Federal Government had to amend the regulations regarding websites to qualify them as part of the branch services to stop the promotion of insurance products). In the end, Canadian banks are very large, very powerful organizations that have a lot of power with our government and over the regular people of Canada. These restrictions are in place to protect you – the consumer. It’s a fight that is far from over.

What do you think?

Tell us what you think about The Bank Act, its restrictions for banks selling insurance products, and whether or not you think the banks are acting fairly and in good faith. We would love to hear your feedback.

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 Canadian Banks violating the spirit of The Bank Act to sell insurance would be very much appreciated.

If You’re a Sales Opportunity the Banks Are Quick to Respond

Do banks have the right to share your client info between different divisions?

I bet it’s happened to you. A phone call at the supper hour from some kind of complimentary service offered by your bank and/or bank credit card. The worst I have found is when the bank actually sells your client info to a third party company selling a product or service, like identity theft insurance protection, and it can easily be billed through your bank credit card. You can bet the bank will be making a cut off every sale these companies make, plus the monthly billing will go straight onto your bank credit card, adding to your interest charges.

Who gave them the authority to sell your personal information? This is a flagrant breach of the trust we all place in the banks. But is it much more different when you are solicited for investment products, mortgages and loans and other offers from separate divisions within the bank? You might only have a few products with your bank, like a chequing account and a line of credit, but they want to get all of you. Your mortgage, your credit card, you investments! Did you ask to switch before the phone rang? No! So who gave the bank the right to pass on your personal information to another bank division to try sell you another product.

The fact is you probably gave them this right, unknowingly. Whenever you sign documents at the bank, there are reams and reams of paper with small font contractual wording that no one reads. Buried in these contracts is you giving the banker authority to share your information internally and maybe to specific outside companies to “better serve your needs” for financial products.

Canadians will ask when they need something

Everyone I know is connected to the internet. They all have certain needs for financial services, like renewing their mortgage, getting a business line of credit, applying for life insurance, etc. When they need to do financial planning the majority of Canadians will go online and research the best products and companies to meet their needs. Then it’s a simple matter of picking up the phone or sending an email, and everything is taken care of.

This is the way business should be done in this new technological age of information only milliseconds away via a Google search. Why should your bank still feel the need to pass your personal and confidential information around to multiple people inside the bank without your express consent (versus implied consent on the forms you sign)? If you need to renew or port your mortgage you can ask them for service – instead of them pouncing on you when they smell a sale.

Banks are quick to sell, slow to serve

If the local in-branch banker or teller sees a potential sales opportunity it is in their job description to send these “leads” onto the appropriate banker to make contact with you. Banks even have advanced lead distribution and tracking systems, call centres to contact potential sales clients and book them into meetings at the local branch, and track how quickly bank staff act on these leads and close the sale.

Unfortunately the relationship management systems are much less sophisticated. I worked at a bank that couldn’t implement a Client Relationship Management system (CRM) for their financial advisors to use, and promoted the use of Microsoft Outlook as the main client management tool. OUTLOOK!! It was a big joke among bank staff, when they saw their colleagues who are independent financial planners and brokers using state of the art systems like Salesforce.com for as little as $250 per year to professionally manage their client relationships.

Even those bankers who have the mandate to build a long-term relationship with their best clients aren’t provided with the tools to manage this (except for making notes in their email management system).

How do banks deal with life insurance referrals?

Many Canadians do have a good relationship with their local bank branch and/or banker and will ask them where to get proper life insurance. Now The Bank Act of Canada says that in branch staff are not allowed to sell personal insurance products or make any kind of promotion of specific products (this will be covered in detail in the next article). They are only allowed to give general advice about the life insurance industry and allow the client to find the insurance broker or agent they want to deal with.

Does this really happen? No! Bankers usually have a relationship with a life insurance broker who they refer to (against the rules) or promote the bank’s own life insurance company to the clients (doubly against the rules). It’s a really difficult situation for bankers to be in, where their client is looking for advice about life and health insurance and they are asking the local icon of Canadian financial services – their bank. Bankers feel they should have something valuable to offer here, and thus refer clients onto specific channels where the client can get their insurance needs met.

Unlike the situation above where the bankers are taking advantage of a spotted sales opportunity, here the client is asking for advice. The laws are very clear – bankers are not allowed to refer to any specific insurance broker or agent or promote any specific insurance company. This is as much to protect you as it is to keep the two industries separate. You have a wealth of personal and financial information at the bank. It is a fine line the banker is walking when they start to refer clients to outside financial services providers. It could quickly lead to the banker getting commission kick-backs and having your personal and confidential information forwarded to an insurance broker outside of the bank. How can the bank then guarantee the safety and security of your confidential information? In a situation like this they can’t. And even thought your local banker thinks they are acting in your best interest, they are putting you at risk.

If you need life insurance advice, we can help

Life Guard Insurance is an association of independent life insurance brokers across Canada. We don’t have any direct contacts with the big Canadian banks. If we are offering you a complimentary service in the form of a referral, we will fully explain the nature of the referral, the services that our business partners provide and how we will keep your information confidential (for instance we can refer clients onto Manulife banker’s for an advanced home line of credit to replace inefficient traditional mortgages).

Contact us today and we will connect you with a local life insurance broker who can solve your insurance needs and who can also help you with your retirement and investment planning.

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 privacy concerns about your personal information at Canadian banks would be very much appreciated.

Smoking Cigarettes Costs More for Insurance Premiums

The elevated risk of being a smoker for life insurance

If you are among the 20% or so of Canadians who regularly smokes cigarettes, then you will be faced with a higher cost for your life insurance. In fact the insurance companies treat smoking very black and white. If you have had even one cigarette in the last 12 months they will consider you a smoker and increase your premiums. I guess there is no reasonable graded scale for smoker, quasi-smoker and non-smoker. Either you smoke cigarettes or you don’t. And if you do, then you present an elevated chance of health risks and a shortened life expectancy.

Not every smoker suffers from common illness related to smoking. We have all heard the stories of so-and-so’s great uncle who smoked 2 packs a day and lived to 95 without any health problems. Even if people like that do exist, there are still hundred who suffer cancer, heart disease, emphysema, and many other smoking related illnesses. Being a smoker puts you amoung that group, and it is the statistical average risk of the group the insurance company is looking at – not at you individually (unless you already have a serious smoking related illness).

BIG TIP: If you ever quit smoking, and are off all forms of tobacco and nicotine products for a period of 12 months (include nicotine gum and the patch) then you can have your life insurance premiums reduced to non-smoker rates. Once you have qualified for non-smoker rates the life insurance company can never again raise your rates, even if you take up smoking again in 3 or 4 years. You can save more money than just the cost of cigarettes when you quit – your life insurance premiums will probably be cut in half too.

The video was produced by Life Guard Insurance and posted by +Mitch Reynolds. If you found the video 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 video about smokers having to pay more for life insurance premiums. would be very much appreciated.

Keeping Clients Loyal with Multiple Products is a Bank’s Strategy

One size fits all service and advice model from the bank

Do you like big organizations that treat you like a number, put you in a queue and focus on how efficiently they can process you? Well, for some people this is a great fit. They like to know they are part of a larger system that has all the efficiency in the world and don’t care about the personal touch or the relationship they can build with a financial advisor. For others, they hate being treated like cattle – herded through the lines and given the same canned advice and products as everyone else.

The banks have models and do manage clients very efficiently. They have to, since millions of Canadians do multiple transactions with them every month. Bank staff are authorized to move clients up the chain of service, with more experience bankers and better products offered to clients with higher balances, more products at the bank, and larger monthly deposits. For those with fewer products and less cash deposits, there is less service and advice. The real issue comes when you want more than basic advice from your banker. You want a relationship and trusted guidance. You want to know your advisors name, and be able to call them after hours to ask a question.

This is where the banks fall flat. They just can’t afford to give everyone that level of service and advice. It would eat up all the time of their personal bankers, and nothing would get down. This is why bank staff are sales driven. Get more loans, sell that credit card, bring the mortgage over, etc. Each client is a sales opportunity, and they are always looking to move you up the profit line, not down it with time wasting advice.

Complexity ties you to your bank and limits your choice

One way banks create loyalty is to heap on complexity to your financial affairs. They will sell you multiple products and so that you have so much going on with them it is hard to close down all your accounts and move to another bank. The average Canadian family has 2-3 bank accounts, a line of credit, a mortgage, at least one credit card, a high interest savings account, savings accounts for their kids, an RRSP, RESPs for Kids, and more, and more, and more…

Do we need all this? The banks are making killer profits off the small administrative fees on each of these accounts. It basically costs them nothing to administer your accounts once they are set up, so the small monthly fees really add up. And that line of credit, mortgage, car loan, etc. all might be insured with the worst type of life insurance on the market – bank’s mortgage/creditor life insurance. This is almost a 100% profit margin product to the bank’s bottom line.

The average Canadian family can’t make heads or tails out of all the different products and services they have going on. The banks have them so confused it is like mentally and emotionally tying them up, and keeping them “loyal” because they can’t imagine the pain of switching everything to another bank.

Felling you must do business with your bank

Now here’s a funny thing –many Canadians think that when it comes to financial services and advice, their bank is THE ONLY place to go. The huge marketing dollars banks spend to give you that message is amazing. The impression that if you need a loan, set up an account, save into your retirement program, etc., that THE ONLY place to go is your local bank – and there are just 5 to choose from in Canada.

Well the truth is so far away from this perceived reality it makes me laugh. You can get much more efficient loans and bank accounts from major financial services companies that don’t have the bricks and mortar branches across Canada (costing millions of dollars to run). They can invest in advanced product development, offer higher interest rates, and generally be more competitive. But the average Canadian doesn’t know about these products and services unless they get to know a financial advisor or insurance broker who can show them options.

Just know that you don’t have to do all your business with the bank if you choose not to. You do have options, and they might save you money or make you a lot more money.

Products/Service/Advice very streamlined by your bank

As I said above, products, service and advice are put into boxes for clients that fit into different categories. For the highest net worth clients with big loans, there is an elite level of service, with bankers that have been 15 plus years in the business and have the best rates and most advanced products to offer. For middle income Canadians there is mid-grade service with in-branch personal bankers (grouped into A, B, C type categories of authority, so they can only sell certain products).

Not everyone can get the platinum credit card with no annual fees (but you can if you’re a high value client). Not everyone can get prime minus 2% on their mortgage (but you can if you have a huge mortgage, other loans and large deposits at the bank). You get slotted into a certain level of service and advice based on how valuable you are to the bank. Unfortunately the types of products available to you are also limited based on your value to the bank.

Again, this allows the bank to be more efficient and streamline their service levels. Certain clients get more attention and time, others get only basic service and hardly ever a telephone call. Where do you fit in the bank’s service model?

Life insurance planning will always be secondary to bank model

I can just imagine where life insurance planning would go if bank’s were allowed to sell personal life insurance in branches (which they are not allowed to yet because of the Bank Act of Canada). Banks would slot the vast majority of Canadians into a Term Life Insurance offering. If you were self employed, then some basic form of Disability Insurance for income protection would be offered, stripped of important benefits and riders to keep the price down and increase sales. Critical Illness Insurance would only be available online, like one of the major banks current offers, covering only the top 4 major illnesses and offered in simple, $25K, $50K or $75K amounts (all term 10 coverage meaning the price goes up every 10 years).

If you were making over $150,000 per year you might warrant some personal advice for permanent life insurance, like whole life or universal life and more advanced disability insurance advice. Maybe. It all depends on whether or not it would be more profitable to keep selling you the cheap, simple insurance with lower long-term value for the client and higher profit margins for the bank (for example, term life insurance which is very cheap is much more profitable for life insurance companies because they rarely pay a death claim, while more expensive permanent life insurance, like universal life, has a much lower profit margin because they pay out much more money in claims).

Insurance would also be treated as the ugly cousin to the bank’s traditional products, such as loans and investments. I have worked in banks and they generally don’t understand life insurance and bankers want their clients to have very little to do with the product. If banks were allowed to sell life insurance, and bankers were forced to offer it to their clients, they would generally do a poor job of explaining and selling proper life insurance protection.

Tell us what you think about banks boxing their clients in

From my many years working inside two of Canada’s largest banks, and seeing how they operate, I know how people are boxed in. I know the banks’ strategy to overwhelm you with products and complexity. I know their service models for different levels of clients. Do you want to be boxed in by the big banks, or do you want a personal relationship with a trusted financial and insurance advisor? Tell us what you think of this article and how banks might sell life insurance if they were allowed to do so in branches.

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 being boxed in by Canadian big banks’ sales strategy would be very much appreciated.

Can You Buy Life Insurance If You Smoke Marijuana?

Many Marijuana Smokers Qualify for Standard Smoker Premiums for Life Insurance

The majority of people in Canada who smoke marijuana just do so occassionally. In this video I want to explain to you the difference between casual/recreation marijuana use and habitual marijuana use when buying life insurance. Life insurance companies take a very different view-point of the risk you present the company depending on how much marijuana you smoke on average.

For those who only occasionally use marijuana, like 2 to 3 times per week, they will just be treated like a standard smoker (assuming no other medical conditions). Habitual marijuana users will not be looked on so favourably. I think there are many reasons for this. The old argument that marijuana use is a gateway drug to harder substances is a factor once a person is using it very regularly. Also, there is a stereotypical lifestyle that is associated with habitual marijuana use that is not very healthy. But, I think the biggest factor is the hard evidence that people who regularly smoke marijuana do have much higher instances of health problems and an unhealthy socioeconomic standard of living.

Even though this might not be you, the insurance company is looking at broad statistics, and any risks you bring, be they lifestyle choices or health problems, are evaluated on the average or most typical outcome. So, your choice to smoke marijuana, either occassionally or regularly, with result in either standard smoker premiums or an increased premium (and even a possible decline if you smoke a lot).

Marijuana users can get confidential insurance advice

I hope you find this video helpful. And, as always, if you would like to speak with a qualified insurance broker about whether or not you could qualify for life insurance, please contact us. We can give you private and confidential advice about your insurance planning considering your marijuana use.

The video was produced by Life Guard Insurance and posted by +Mitch Reynolds. If you found the video 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 video about buying life insurance when using marijuana would be very much appreciated.

Banks Like to Simplify Insurance for Clients

Are Simple Insurance Products Meeting Your Needs?

We’ve all seen the ads by the big banks – “easy to understand insurance” – “we make insurance simple”. The ads are great too, with the insurance agent acting as the hero when people are getting robbed or a bear is attacking their car. The marketing around simple insurance speaks to Canadians because the bank seems to be some kind of savior, swooping in with the power to clear away confusion and give you simple, straight forward insurance that everyone can understand.

So, what’s the truth behind the advertising? If you bought an insurance policy from a big bank do you think they will give you a contract that is written in brief clear language that anyone can understand? No – they will give you the same old insurance contract like a small book packed full of legal speak that most people can’t make heads or tails of. The one thing I will give the bank’s credit for is they run a very good customer service call centre, where you can speak with a live person about your policy and get answers and help. But that doesn’t mean the contract is any simpler than the other guys.

And, for life-long insurance planning, does simple mean good? Or does simple just mean easy to understand, package and sell? Simple life insurance could be lacking a whole bunch of things that you would really benefit from (will explain more below) and as I will show you, simple insurance is often the most profitable policy for the insurance company, or bank.

In Branch Mortgage Insurance – Example of Simple = Bad Insurance

The traditional life insurance policy that banks have been allowed to sell in branch thus far is mortgage/creditor life insurance (some banks also offer disability and critical illness creditor insurance too). I have gone into it on numerous occasions why the bank’s mortgage insurance is a terrible product compared to owning your life insurance personally. Here is a brief recap of all the things wrong with bank’s mortgage life insurance:

• A declining benefit for a level premium
• The bank owns the plan, is the beneficiary of the plan, and you pay the premiums
• You can’t move the policy from one bank to another or from one home to another
• Prices increase if you move banks or move houses
• There is a high likelihood your claim will be denied because underwriting is done at time of claim, not when you apply for the policy
• The plan can’t be continued after you pay off your mortgage, even if you wanted to keep the insurance

All these factors make bank’s mortgage insurance a poor insurance policy, since none of these issues are a concern when you own personal life insurance. To add a little salt into the wound, let me tell you how profitable this insurance policy is for the bank. This is a BIG MONEY MAKER for Canadian banks. I’ve worked in two of Canada’s largest banks, and I know how they account for the profits of each mortgage life insurance sale. When a lender convinces a client to take the mortgage insurance, the bank branch gets to immediately add 25% of the annual premium to the net profit line of the branch, regardless of whether the client keeps the policy or not. This is like the sales commission to the bank branch for selling the policy.

And then the policy is still profitable to the insurance division of the bank. Very few claims are ever paid because of post claim underwriting (the process of determining, after you are dead, whether or not you qualify for the insurance). Either through an outright denial of the claim or a through client fatigue trying to get through the claims process, a very large number of death claims for bank’s mortgage life insurance are never paid out.

So, here is an example of very simple life insurance that is really not in the clients’ interest, but is really best for the bank. Think twice before signing the mortgage insurance stapled to your mortgage/loan documents because it really is a way for the bank to add a big fat profit margin to the loan they are giving you.

Simple Life Insurance Means Term Life

So, if you’re not getting mortgage/creditor insurance but are phoning the life insurance call centre of the bank (since they can’t use in branch sales staff for personal life insurance – yet) what do they have to offer. They have term life insurance on the shelf – typically Term 10 or Term 20. Now, there isn’t anything wrong with term insurance. It is the most affordable way to get your risks protected in Canada today. What I have a problem with is if that is all they have to offer you’re not able to cover all your bases. Term life insurance is for short to medium term risks in your life, like paying off the mortgage, raising children, dealing with a business loan, etc. These risks can most economically be dealt with by using term life insurance.

There are a whole host of reasons people buy life insurance other than term needs. There is taxation issues at death, estate planning and leaving a legacy, charitable giving, tax sheltered cash accumulation inside life insurance as another asset class of your investment portfolio, etc., etc.  The problem here is I probably just confused some people and maybe scarred the rest off from finishing this article. This is why dealing face-to-face with an experience and licensed insurance broker is the best idea. They will help you understand how the different types of life insurance work, the different needs you might have, and how to design an insurance package that can meet those needs, provide you with real value, and fit it into your budget. No – this is not a simple process. Yes, it will probably take a few meetings and lots of paperwork. And, yes – the process is worthwhile because you will own something that has real value to your life, not just another profitable product of the bank’s.

Easy to Train Staff for Basic Life Insurance Knowledge

The insurance sales staff in the bank’s call centres, and now in their insurance mini-branches, are trained only with a basic knowledge of life and health insurance. The product that makes the banks’ insurance companies the most money and has the highest sales volume is home and auto insurance, not life and health insurance. So, their staff gets most of their product knowledge training around P&C insurance (Property and Caasualty – also called Home & Auto). Life insurance is really an after-thought as in, “we also sell life insurance.” In order to get their staff up to speed on life insurance sales, they focus on simple products – which is term life insurance again. Product knowledge and sales training around permanent life insurance is almost non-existent for bank’s insurance sales staff.

So, if they don’t know anything about the permanent insurance solutions how are they going to tell you about them and sell them to you? They aren’t. Their managers and departments have sales targets to meet too, so they push their sales staff to close deals for term life insurance, even when the client expresses a need for something more advanced or permanent. Simple is Good – Simple is for Everyone – Sell the Simple Insurance! I can almost hear the morning pep talk before the staff hits the phones.

No Advanced Insurance Offering

As said above, the bank’s insurance sales staff doesn’t offer permanent life insurance solutions. There is only one Canadian bank that I know of who has a commissioned sales force who sell permanent life insurance and complex living benefits, like disability insurance and critical illness coverage. The rest just don’t bother. And even for this one stand-out bank offering a greater level of service, getting clients referred over to that division from the insurance call centres or insurance branches is like pulling teeth. Why would one division, with sales targets and incentive bonuses, send a potential client down the street to another division and all they get in return is a nice thank you and maybe a Tim Horton’s coffee card.

Your needs are not their main concern. The bank’s need to make each division profitable, to maximize sales, and to earn their annual bonuses. These are the real driver’s of behaviour. When dealing with an independent life insurance broker, they too are paid on commission, but they are only paid when they sell you something. If you don’t like what they sold you, and cancel your policy, they have to repay their commissions to the insurance company. Their motivation is to do good work for the client, build a strong life and health insurance plan the client can afford and is happy with, so the business stays on the books and everyone is happy. Independent insurance brokers don’t have sales pressure coming down from above to maximize the return on every client – regardless of what is right for that client. If they do a good job as an insurance advisor, they make a very nice living. If not, they starve and fail out of the business. It’s really that simple.

Let us know what you think about simplified life insurance offered by banks

After reading this article, what are your thoughts. Do you see value in the simple approach and easy sales process of dealing with bank’s for your life insurance, or would you rather enter into a more complex sales process with advanced insurance solutions and ultimately higher value to you? Leave your comments below and I will respond to everyone on this important debate about insurance sales models for the benefit of all Canadians.

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 Simple Insurance from the Banks is Good for Canadians or Not would be very much appreciated.

The Big Canadian Banks Have Begun Selling Life Insurance

Is it a Good Thing to have Canadian Banks Sell Life Insurance?

This is the first article in a 5-part series about Banks Selling Life Insurance in Canada.

This is a big topic and a perplexing question – Should Canadian banks be allowed to sell life insurance? In many ways this question is already a mute point, as some of Canada’s largest life insurance companies are owned by the big banks, and are even branded with the bank’s generic logo (usually saying Insurance next to the logo). In many other ways this is a simmering debate in the Canadian financial services industry that will affect the products being produced and the level of service provided to Canadian consumers for years to come.

The Federal Government of Canada has held the line on their strong stance that banking and insurance should be maintained as separate businesses and all insurance products (life, health, home, auto, etc.) should NOT be offered to consumers through the local bank branch network. Why? Traditionally in Canada there were 4 pillars of the financial services industry:

• Banking
• Trust Companies
• Mutual Fund/Investment Companies
• Insurance Companies

None of these different financial services companies could do business in the realm of the other. Well, the walls have fallen and Canadian banks almost totally control the Trust companies in Canada and have huge mutual fund divisions, controlling over 40% of all mutual fund assets in Canada (and with the largest amounts of new money coming into them all the time). The only pillar of financial services that has remained separate from the banks (well sort of) is the insurance industry.

That too is changing as the big banks have begun buying up life insurance companies and strategizing about how they can leverage their powerful brands and national distribution arms to reach the mass market of Canadians. Now, I’m not saying this is totally a bad thing. Canadians are very under-insured and there really does need to be more sales people and a more efficient distribution model to get the insurance protection people need out into the market place. But, changing the fundamental rules (in The Bank Act of Canada) to allow big banks to sell life insurance might be a huge mistake.

I will take the next four articles to explore this topic in more depth. It is just too complex to rush through, and as a consumer you should be aware of all the ramifications of buying life insurance through the current bank owned distribution models and what the world might look like if things were to drastically change. Here are some brief highlights of the upcoming articles on banks selling life insurance in Canada (being written over the next 4 days).

Simple or Complex Life Insurance Advice

One scary thing, from the eyes of a licensed insurance professional, is the push for simplicity around insurance planning. Is simple always the best thing? Simple is easy to understand, easy to package, market and sell. However, when it comes to life insurance, simple doesn’t mean high value. Simple means low value for the consumer and big profits for the insurance company. Life is complex. Your investments, wealth creation, risk management issues are complex. How can an overly simplified product address all these needs? There is a reason life insurance, especially permanent life insurance, is complex, and that’s because to create value for the client the product must be designed with many moving part – insurance protection, cash value, investment funds, dividends, optional riders and benefits, etc. We should be careful about the bank’s push to simplify or commoditize life insurance products, as the real winner is the bank, not the client.

Being Boxed in by the Big Banks

The fundamental marketing strategy of the big banks is to get you into as many financial products as possible so that you will never leave them (it’s just too much of a hassle). They get you with a bank account, a credit card, investment funds, mortgage, lines of credit, another bank account for savings, and now they can tack on life insurance (not to mention home and auto insurance and health products). Some people do like dealing with just one financial institution, like their local bank, and keeping everything in one shop. Others like choice and different points of view. The one major concern is the quality of advice being given. Canadian banks are notorious for segmenting their clients based on assets and “value” (how much money they make the bank) and providing varying levels of service and advice. The wealthiest clients with the biggest loans and largest bank accounts get gold key service. The poorest clients get junior bankers fresh out of college. Does this model adequately serve the mass Canadian market when it comes to life insurance planning?

Concerns about Privacy and Sharing Client Information

Far too often the banks are quick to respond to sales opportunities, but slow and broken when providing holistic service to the client. Your client profile is passed around the different divisions of the bank if there are other products and services they think they can sell you. But, the different parts of the banks operate in silos, and don’t communicate well with one another, except when there is an identified sales opportunity and it is part of the bankers mandate and measurable reward system to follow-up on these potential sales. Unless you have developed a personal relationship with your chosen banker, and hopefully they don’t get moved to a new branch, how does the complexity of your total financial needs and now your risk management needs get properly served in a massive, disjointed organization? Are you getting advice or are you being sold?

Acting in the Spirit of The Bank Act

The government of Canada has decided that the differences between managing a person’s money and managing their risks are different types of business, and should be sold by different types of advisors. The rules in The Bank Act, section 416, clearly state that no sales or promotion of personally owned life insurance products (called prohibited activities) take place inside bank branches. The major banks in Canada are taking great care not to violate the express letter for the law, but are finding ways around the laws, as they are written, which many would say is going against the spirit of the Act. Understand what The Bank Act says about insurance sales, why these laws are in place, and how the banks are manoeuvring around them to capture your business.

Let us know what you think about Canadian banks selling life insurance

I’m going to be honest. These articles are all going to position the advice of an independent life insurance broker as a better level of service and product over a bank distribution model (either what they are allowed to do today and what they hope to do in the future should The Bank Act be amended). At Life Guard Insurance we know the value of advice, and working with a professional and skilled life insurance broker. But we would like to hear what you think. Let us know if you want things to change or stay the same and why. Looking forward to hearing your thoughts.

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 Canadian Banks selling life insurance would be very much appreciated.

Buying Insurance is the Practical Way to Say I Love You

Insurance planning should never be done on Valentine’s Day

If you think I’m going to write some sappy, love sick article about how buying life insurance is one of the greatest acts of love for your spouse, think again. I don’t want to conform to the Valentine’s Day hype and standard sales pitch. If I did write that article (which I think I already did) it would go something like this:

“Protecting your family with life insurance is a truly selfless act of love. Be there for them even if tragedy strikes, and always take care of them. Life Insurance can protect their future and, if you were to pass away prematurely, they will always feel your love with the gift you left behind.”

Ok, that’s about as lovey-dovey as I can write. Actually I don’t think life insurance planning has anything to do with Valentine’s Day. In fact, don’t buy life insurance today. There are another 364 days of normal life outside of Valentine’s Day each year that makes a lot more sense to buy life and health insurance. That’s because insurance planning is practical and necessary. Chocolates and flowers are impractical and unnecessary (but if I don’t go out and buy my wife a card and some flowers I’m going to feel her impractical foot in my …).

I heard a comedian say a simple truth recently which made me think about what buying life insurance is all about. He said, “Real love begins when infatuation ends.” I think that speaks volumes to the practical, down to earth planning that is insurance and risk management. I think once you have gotten over that infatuation stage of young love, when talking about death and disability is probably going to make at least one member of the couple cry, then you can focus on the nuts and bolts of designing a plan.

An insurance plan should be more than just life insurance, even though an adequate life insurance policy is the cornerstone of any risk management plan. You need to consider the “what if” scenarios of death, disability, critical illness and even long term care. How are people going to get on without you? Who would take care of you? Can you afford extra medical bills and changes to your lifestyle? So, here’s a summary of the different personal insurance products, why you need them and what to look for when designing a practical insurance plan.

Life Insurance – Your ultimate backup plan

You need to cover the financial risk of your premature death and the loss of income your family would face. Now, if you’re gone from the picture, so are your expenses like food, clothing, vehicle, etc. But there are many constant expenses your family needs to pay for. Utilities and property taxes, paying off debts, groceries for everyone else, etc., etc., etc. The easiest way to plan for this is have enough life insurance to pay off all your outstanding debts, including your mortgage, and then replace your income at 70 -75% until your youngest child is age 21 (not 18 – when was the last time you met a financial independent 18 year old who had finished college or university). Be sure to set aside some extra money for emergencies and education funding through your life insurance.

Also consider adding some permanent life insurance to the mix instead of all term insurance. It is likely you will need some permanent life insurance for estate planning and taxation needs at the end of your life, and the earlier you buy it the cheaper it is. And, of all the different insurance policies you can buy, a permanent life insurance policy is the only one that fully guarantees a payout, because no one is getting out of life alive. Therefore you can consider permanent life insurance as another asset class in your overall portfolio.

Disability Insurance – Because your family still needs to have a life

Making sure your income is properly insured is very important. Unless you have enough money saved to provide for yourself and your family from now through retirement, you are at risk. When income stops, people go bankrupt and lose their house. RRSPs and savings disappear in a matter of weeks that took years to accumulate. And the likelihood you will have at least one period of long term disability in your working life in almost 50%.

Even though it’s your income, it’s your family’s lifestyle that is at risk. Be prepared to still be their bread-winner, even while serious ill or injured and unable to work.

Critical Illness Insurance – To protect your retirement savings and assets

The cost of becoming critically ill with something like cancer, heart attack, stroke or bypass surgery (the Big 4 illnesses) is 1 in 3 before the age of 65 for Canadians. So, if 1 in 3 will have a serious, life altering illness, do you think it might be you? Could be. And if it is you, do you want to put your life-savings and house at risk to pay those extra medical expenses you so willingly would pay if it means the difference between life and death? The unforeseen costs surrounding having a critical illness are huge, and quickly eat away your savings. A critical illness policy would inject a large amount of tax free cash into the situation so that you don’t have to stress about finances (which only makes you sicker).

Long Term Care Insurance – You don’t want to be a burden to your children

With 1 in 2 Canadians going to need some serious long term care sometime in their life, who is going to pay for it all? The wave of baby boomers is now hitting the healthcare system as they age and something has to give. It will probably be health services that are not protected under the Canadian Health Act, like long term care. As you age there is a good chance you will need care. And if you can’t pay for private home care or facility care, and if the government doesn’t have a sponsor bed for you, then your adult children are legally obligated to care for you. No one wants to be a burden to their children later in life. With a long term care insurance policy you will have tax free income available to pay for the high cost of care, and at least retain the independence to choose your own care provider.

Life Guard Insurance can help you design a complete insurance plan

A comprehensive risk management plan should have all these immediate and future needs balanced. Some policies, like critical illness and disability insurance, can be converted into long term care insurance later in life. Term life insurance can also be converted into a permanent life insurance policy when you can afford it. Contact us (maybe not on Valentine’s Day) and we will connect you with a professional life insurance broker in your area who can help you design a proper insurance plan to protect the ones you love.

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 Insurance Planning on Valentine’s Day would be very much appreciated.