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To help you determine which plan would be most suitable to your then circumstances,
this section explores the basic options and types of coverage. Critical Illnesses happen every day, to young and old alike. But, advances in medical science have made it possible for thousands to survive and resume meaningful lives. While this is encouraging, it may also be a reason to be concerned, because today's high recovery expenses can have serious and potentially long-lasting financial consequences. There is a solution, Critical Illness Insurance, which can help protect your assets, savings and/or business from the high recovery expenses associated with surviving a critical illness. This insurance covers from 4 - 22 critical illnesses or conditions, and provides a lump sum benefit to:
Income Replacement (Disability) Insurance The ability to earn an income is the single, most valuable asset of any individual during their working years. Yet, income replacement insurance is often overlooked in many Canadians financial plans. Some people may completely ignore the financial devastation that would result from a disabling injury or sickness. Others may assume that traditional safety nets such as group/government benefits or personal savings will be enough to see them through. However, individual income replacement insurance is the only reliable source of income that can be counted on during a period of complete uncertainty. Wide ranges of income replacement products are available for professionals, business owners, executives, part-time and home based workers. In some cases the individual may have no other source of income, or they may be replacing or supplementing group or association coverage with a more comprehensive, portable individual plan. Long Term Care Canadians are living longer today than previous generations. While this is positive, it presents a greater responsibility for financing the long-term care required by elderly Canadians. Nursing facilities and home care costs are expensive, and it is difficult to budget for unknown lengths of time. What happens if the person requiring care needs facility care for longer than 5 years, as is the case with 20% of nursing home residents? All Canadian provinces impose user fees for nursing homes, so while you may think care is covered by the government, in reality, the funding for care is paid partially by the resident or their family. User fees range from just under $12,000 annually for a private room in Alberta to as high as $57,000 in Nova Scotia. Meanwhile, private homes can charge according to market conditions. In Ontario, a privately owned facility can cost over $40,000 annually. Add to this the costs of incidentals that may not be covered under government plans, such as wheelchairs or special therapy costs, and an elderly Canadians finances may not last the length of time needed. These issues are particularly taxing to the sandwich generation, the baby boomers who are juggling the costs of caring for elderly parents, and providing educations for their children, while planning for their own retirement. What is the solution? There are options available:
Term insurance Term insurance can often be the best choice of life insurance protection since it can meet your needs now and fit comfortably with a budget. These policies are commonly issued for specified periods, such as one, five, ten, fifteen and 20 years. Since term is the most common type of life insurance the features between different companies are very similar and therefore can be listed below. Affordability: Term insurance provides a large amount of insurance protection
for a relatively low premium. Individuals who have a financial need for insurance
coverage during a specific time period find term insurance particularly cost-effective.
The fixed term creates a lower cost of insurance that translates into level
and lower premiums when compared to other life insurance products. Creditor protection: Provided certain family relationships exist between the life insured and beneficiary or that a beneficiary designation is irrevocable, term insurance policies may be protected from the claims of creditors of the policy owner. Multiple lives covered on one policy: Almost all companies allow for more than one person to be insured on a single life policy, each with their own coverage and beneficiary designation. This allows business partners or family members to be covered on the same policy, reducing cost through a single policy fee and centralized billing. Conversion Options: Individuals have the choice of either a fully-convertible term policy or a less expensive non-convertible plan. Convertible policies are often eligible to universal life or a permanent plan without providing evidence of insurability. Non-convertible premiums are often fractionally less; however, absolutely no conversion is available. Joint life coverages: Term insurance can be purchased on multiple lives,
with the death benefit payable on first death or the last death, depending on
the individuals particular needs. This reduces costs as compared with purchasing
individual coverages. Universal life Universal life insurance uniquely combines permanent life insurance protection
with the benefits of tax-advantaged investing. You may have heard the saying:
buy term insurance and invest the difference, well universal life takes care
of both all in one policy. And while it does have an investment component, you
can decide to pay only the insurance and administration costs each month and
not use the investment component at all. The money left in the investment account earns a return based on the performance
of the investment account(s) you've chosen inside the policy. Whole Life Insurance Whole life insurance policy is designed to provide insurance protection for your entire life, with built-in savings element, provided premiums are paid as specified in the policy. There are two major types of whole life: Participating, and non-participating. Participating whole life insurance appeals to people who are not interested in managing day-to-day investment risk and are attracted to the historical stability of the insurance companies. Equally important are the guarantees inherent in a participating whole life policy: level premium guaranteed for life; level death benefit and; guaranteed cash surrender value increasing over time. Participating whole life policies are also eligible to receive policy dividends. While not guaranteed, dividends have the potential to enhance your policy. * We talked earlier about annuities within the Long-Term care section below is a quick overview. Annuities When its time to stop working, selecting the best possible income options may be the most important investment decision you will ever make. Annuities can form an important part of a balanced income portfolio, by taking the guesswork out of investing for income. Unlike other income-producing investment options like bonds or GIC's, an annuity can guarantee income for your client's entire life, providing them peace of mind by knowing they will never out-live their savings. What is an annuity? Generally speaking, an annuity is like a mortgage in reverse. Instead of a person borrowing money, they invest money with a financial institution such an insurance company. In exchange for this investment, the insurance company makes regular income payments back to you that contain both interest and principal. But unlike a mortgage that would end after a period of time, annuities can continue to provide income for the entire life of the investor and their spouse. In addition, non-registered annuities can offer significant tax advantages for retirees. Because the interest income can be averaged over the lifetime of the annuity, there is an attractive element of tax deferral. * * *
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, Fiscal Agents Money Management Newsletter
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