Canadian Life Insurance Blog

Mortage Insurance from Banks

Your DisplayName here! — Thu, 09 Sep 2010 00:46:41 GMT

Life insurance has always been an important part of a financial plan for Canadians. Some Canadian life insurance companies have been around since the late 1800 and 99.9% have never failed to pay a claim. Life insurance pays upon the death of the insured and we all have an expiry date.

Recently Canadian banks have taken a more aggressive stance on entering the life insurance market. Certain banks now have great products and I welcome them to the market place. In fact our company sells life insurance for a couple of the "big five" and often they are a great solution.

However, when you’re getting coverage for your mortgage certain products offered by the banks are far inferior compared to what the more traditional life insurance companies offer.

With most mortgage insurance offered to a bank customer (who is getting a loan for a home), the death benefit follows the amortization schedule of the loan. This means that the coverage goes down as you pay off your debt. Your benefit goes down but the price you pay stays the same. A gap is created.

This gap is great for the bank as their obligation or payout drops as you pay them back. The customer’s beneficiary or estate loses out on what most people assume would be a fair policy or practice.

Buying a house is an emotional time for most buyers and they don't want anything to go wrong on the most important purchase of their life.

Banks play on your emotions and hold you as captive. I recently purchased a new home and even though my Bank has known me for years and know very well that I sell life insurance, they pushed their products on me. When I refused coverage I needed to sign five different pages, wait and waste my time as my "personal banking" officer needed to make copies, see the manager of the branch, and possibly take a DNA sample (just kidding about the DNA) for me to get out of paying for a product that I know was more expensive and offered less coverage then I could get from as many as 20 different insurance companies in Canada.

At a certain point I felt that the loan I was getting was in jeopardy if I continued to refuse to buy their life insurance (and also what they call "mortgage disability").

As you can imagine I did not take the mortgage insurance offered by the bank, and I still got my loan.

I would advise all Canadians to refuse the bank’s offer until they have at least checked out what else is available. Trust me, if you are approved for a loan, the bank won’t take it back if you refuse their insurance products.

It is real easy to get life insurance quotes at our web sit. You can instantly see offers from many competing insurance companies and even apply online or over the phone!

Ian Baker,
President,
HealthQuotes.ca Inc.

Charitable Giving and Life Insurance

Your DisplayName here! — Wed, 24 Mar 2010 14:27:24 GMT

The January earthquake in Haiti, followed shortly afterward in February by a major earthquake in Chile has shown just how charitable donations are essential and necessary world-wide. Haiti was struck by the most powerful earthquake it has seen in a century with a magnitude of 7.0. Chile was struck by a very destructive 8.8 magnitude earthquake. These 2 earthquakes alone left millions of people homeless and without food and water; thousands have sadly also died.

Fortunately, Canadians and people from all corners of the world swiftly began to donate money, as well as medical supplies and food. People also donated their time and expertise, from soldiers to doctors, nurses, etc. Due to the generosity of people all across the world, lives were saved and rebuilding will be able to begin.

The Canadian Revenue Agency offers tax deductions for donations to qualified charities as an extra incentive for Canadians to donate money and/or property. Donations that are made to Canadian registered charities or other qualified donees may help reduce the amount of income tax paid at the end of the year; make sure the charity qualified by visiting the CRA website. The Income Tax Act permits qualified donees to issue official donation receipts for donations received; qualified donees include:

•   Registered Canadian charities;
•   Registered Canadian athletic associations;
•   Tax-exempt housing corporations resident in Canada that only provide low-cost housing for seniors;
•   Municipalities in Canada under proposed legislation for gifts made after May 8, 2000, municipal or public bodies performing a function of government in Canada;
•   The United Nations and its agencies;
•   Prescribed universities outside of Canada;
•   Charitable organizations outside of Canada to which the Government of Canada has made a donation to in the tax year, or the previous tax year;
•   The Government of Canada, a province and/or a territory.

In order for a donation to be eligible as a tax deduction, ownership of property (cash, gifts in kind such as goods, land, securities, etc.) must be transferred voluntarily. Donations can be in the form of money, securities, land, properties, as well as life insurance policies. Gifts of services are not considered property and do not qualify for an official donation. If the registered organization/charity provides something of value in return for a monetary donation, the eligible amount of the donation for income tax purposes is usually reduced. The amount will be reflected on the official donation receipt; the monetary value of the gift to the donor will be subtracted from the amount donated. Currently, the first two hundred dollars donated is eligible for a federal tax credit of 15% of the donation; the federal tax credit increases to 29% of the amount over two hundred dollars. Donors are also eligible for a provincial tax credit; this varies among provinces.

To learn about how to use your life insurance to donate to charity, please visit our page on Charities and Life Insurance which has in-depth information on this topic.

Tax Season: Tax Free Savings Accounts and RRSPs

Your DisplayName here! — Sun, 28 Feb 2010 18:11:00 GMT

Once again, tax season for Canadians is drawing near. As the past 12 months have been financially challenging for most people, choosing the right financial tax options are especially important this year. The deadline for getting a Registered Retirement Savings Plan (RRSP) is coming up; many people now have to decide whether or not an RRSP is the right choice for them.

Canadians can now choose between a RRSP and a Tax Free Savings Account (TFSA). Each option offers its own advantages, as well as disadvantages. Having detailed knowledge about both choices is vital for making the best financial decision for your situation. As financial situations can fluctuate, what was the best choice last year may no longer be the best choice for this year; don’t simply rely on what has worked in the past.

The TSFA has become a popular financial planning tool since it was introduced. The TFSA is being recommended for those who make forty thousand a year and under; at this income rate there won't be very much saved on taxes. As well, there is a possibility of being penalized later on when a large amount is withdrawn from this retirement savings. The TFSA does not penalize any withdrawals at any time, making the money much easier to access if it is needed. The government declares how much can be withdrawn from a RRSP; these withdrawals are then considered income; money withdrawn from a TSFA is not.

When making under forty thousand the TFSA is considered the better savings plan; however when the yearly income grows past this point, this money can be withdrawn and then invested into a RRSP. Conversely, for those making the higher income now with the understanding of making significantly less in the retirement years, the RRSP can be the better savings tool then; it can later be withdrawn and then deposited into a TFSA.

It is important to remember that a healthy financial plan includes the fact that your planning must be flexible in order to accommodate the financial fluctuations that occur. Different financial savings products do become available; research your options every year to find out what is now available that would be beneficial for you. As well, during different stages of life, a different financial plan and budgeting will be needed. Such things as buying a home, starting a family, etc. can all have a major impact on our finances, as well as our financial savings strategy. Consult with a financial advisor or another professional who is educated and well versed in the financial field.

Finance and Romance: Tips on Successfully Managing Both

Your DisplayName here! — Sat, 20 Feb 2010 19:11:07 GMT

While some people view Valentine's Day as a day that focuses on love and romance, others may view Valentine's as nothing more than a time to make money by companies trying to cash in on 'yet another holiday'. Regardless of what your personal views about Valentine's are, it does seem that a 'successful' Valentine’s does seem to correlate with the amount of money spent. Some people want to have that 'one special night' that can easily run up a huge bill.

Spending a large sum of money on Valentine;s might also not fit in with the couple's yearly budget as. For couples who are planning to buy home, a car, etc. or planning their wedding, financial obligations may mean cutting back on other expenses. Many Canadians also have student loans that have now become payable as well. So while the romantic side of a person may be to spend the extra money and 'go the extra mile', i.e. buying a larger diamond ring that really isn't financial feasible. The more financially responsible thing to do may be to buy a'‘nice, but not extravagant' ring and use any extra savings towards the wedding, honeymoon, purchase of a home, car, etc.

While openly and honestly discussing finances may not be considered very romantic, it can be more beneficial in the long term. It is also important to realize that the larger diamond companies are at their high point in the advertising season; for them this is the number one season for the high sales items. The same also rings true with other expensive items such as cruises, honeymoon getaway packages, etc. This means that for approximately a month before Valentine's Day, the media will be bombarded with advertisements and commercials regarding all the romantic things to do and buy, as well as spending money to impress the other person. But it is also important to understand what each other considers to be a necessity and what is considered a luxury. For some it may be more important to save for a down payment for a home, for some it will be getting out of debt as quickly as possible, and for some others as well, it may be buying a new car or going on an expensive vacation.

Having a successful financial plan may be a little tricky and some hard work, but it doesn’t have to take the romance out of the relationship. By both people taking an equal share in the financial planning, both parties have an equal stake in the couple’s financial health. This can be a great opportunity in making the future plans meet realization, and therefore can actually be a positive bonding experience for both.

Financial Health and Literacy

Your DisplayName here! — Sun, 31 Jan 2010 23:27:36 GMT

When it comes to reading the small print in financial contracts, very few people actually bother to read the document in whole. Whether the paperwork relates to business or personal finance, being able to have comprehensive understanding of the information included is inherent to making the best financial decisions possible. For those who cannot fully understand the language, and/or those who have difficulties with reading may suffer financial consequences if they sign a contract that is not in their best interests. For those who have competent literary skills, many tend to lose interest after a couple of pages and discontinue reading the contract.

According to the Canadian Council of Learning, almost half of Canadian adults have low literacy skills. This non-profit organization estimates that 12 million people in Canada are below the internationally accepted standard of literacy that is required to effectively cope in a modern society. The Organization for Economic Co-operation and Development defines literacy in five different levels; they report that the average Canadian score is 2.5 within this range. The five different levels are:

•   Level One: Very poor literacy skills. Individuals operating at this level of literacy may not be able to correctly determine medicine dosage as given on the packaging, for example.
•   Level Two: The ability to deal with only simple, clearly defined materials that involve uncomplicated tasks. Individuals operating at this level of literacy may have developed everyday coping skills but are challenged with the acquisition of new skills. Individuals at this level may find it difficult to learn new job skills, for example.
•   Level Three: The ability to adequately cope with the skills required for everyday life and work in an advanced society. Individuals at this level of literacy have about the same level needed to finish high school and enter college or university.
•   Levels Four and Five: Very strong skills. Individuals at this level of literacy can successfully process complex and demanding information. Individuals who are in this range generally experience less unemployment, earn more money and rely less on government transfers.

There is no common denominator when it comes to literacy skills. People with low scores can be seniors or young adults, employed or unemployed, etc. Surprisingly, twenty percent of university graduates have literacy skills that score below level three. Many who score low have not completed high school, although some have pursued some form of post-secondary education.

It is important to fully understand and comprehend any and all forms of financial transactions. This includes life (and health) insurance policies. When purchasing life insurance coverage, make sure to read all written materials that are provided, and have a good understanding of what those materials mean. For individuals who may have problems understanding these types of documents, make sure you have someone who is trustworthy to fully explain the material before signing the contract. Individuals may also want to inform their insurance broker that they need further clarification of the contracts and policies as well.

Preventative Measures a Concern for Insurers

Your DisplayName here! — Fri, 22 Jan 2010 19:52:28 GMT

As Canada is now facing an aging population, insurance companies are now focusing on preventative rather than reactive measures when it comes to potential health issues. Insurers are now building comprehensive databases of health information for the clients that they insure. These databases contain the details of health issues that can range from drugs that are prescribed, chiropractic visits, etc. This information will be used for the purposes of being able to more accurately predict those who may be at risk of having and/or developing major health issues, i.e. chronic diseases.

By focusing on preventative measures, insurers hope to be able to effectively intervene before the health problem becomes severe, which usually also means more expensive, in order to help the individual take action to either manage and/or prevent the health condition from becoming worse. Not only is this strategy beneficial to the person, but also to the insurance company by keeping costs lower. Some insurers are also planning to take even more immediate action; Manulife Financial is implementing a new program that will benefit providers by setting up a workplace clinic which will be able to provide employees with the resources to test such health concerns as cholesterol levels, blood pressure rates and body mass levels.

One of the issues that insurers are hoping to accomplish is to quantify the value of good health by attaching a dollar value to activities that promote a healthy lifestyle. By using this strategy, insurers hope to be able to convince employers to establish wellness programs for their employees that would ultimately result in the cost of employee benefits being reduced. This would ultimately save money for not only the insurers, but for the business, and of course the employees benefit from being able to access services that improve their health.

With new medical breakthroughs and treatments, Canadians now have a longer lifespan. However, living longer does not necessarily mean that this population is living a healthy lifestyle. Medical costs tend to rise for people as they age; they also tend to be more expensive for health conditions that are more advanced. Healthy living as well as early detection practices are beneficial not only for the individual, but for those who cover these expenses.

As life and health insurance rates are based in part by health status, premiums are lower for those who are healthy. Consult with your employer about ways to promote health in the workplace, and ways to encourage these practices.

Do Canadians Have enough Life Coverage?

Your DisplayName here! — Mon, 28 Dec 2009 17:08:59 GMT

2009 has definitely been a financial roller coaster ride for many Canadians. Many experienced financial stress; all the uncertainty did make many Canadians review their financial planning.

RBC recently did a survey through Ipsos Reid to assess how Canadians felt about their existing life insurance coverage. Out of more than 1000 Canadians polled, only 68% said that they felt confident that they had enough coverage for them and their family's needs. Adults who have children were more concerned about life insurance coverage in regards to the death and/or disability of a parent. 75% of parents polled said this is one of their biggest financial concerns.

As well, those polled showed that more than half of Canadians felt that they suffer from too much stress in their lives; parents felt particularly vulnerable to stress. 7 out of 10 Canadian households that have children admitted they experience too much stress; 51% of households without children reported these unhealthy levels of stress. They also are aware that high stress levels can contribute and/or exacerbate health problems as they get older.

When it came to the challenges of what these people would do to reduce their stress and lead healthier lives, the poll showed at:

•   55% were not willing to give up television watching time;
•   45% were not willing to give up eating red meat;
•   34% were not willing to give up their alcohol consumption
•   More than 75% of those polled felt they maintained healthy eating habits most of the time;
•   Men seemed to experience less willpower when it came to indulging in unhealthy behaviors; half were unwilling to give up red meat to add five health years to their lives, 4 in 10 women were willing to make the change.
•   39% refused to give up alcohol in order to improve their health; 28% were willing to.

As the holiday seasons have traditionally been a time when people eat foods that they know are bad for them, overindulge in alcoholic beverages, etc. this may also be time to reflect how your lifestyle suits your life insurance coverage. Especially owing to the uncertain financial times other safeguards such as savings may no longer be in place or at the right dollar amount. After the holiday season may be the perfect opportunity to review your financial planning strategy and make sure that your coverage is reflective of your needs for the upcoming year.

Canadian Real Estate Market on the Rise

Your DisplayName here! — Tue, 01 Dec 2009 20:03:30 GMT

Despite the current uncertainty in the Canadian and global economy, the Canadian Real Estate Association claims that residential house sales in Canada actually reached the highest level ever for the month of October 2009. As well, the average sale price was up by over 20% from October 2008. This increase in residential house sales is being credited to low interest rates. Currently the average mortgage rate is 4.55, which is a decline from 5.41 which was the average for 2008. As well, consumer confidence is also being credited for the increase in residential home sales.

Out of all the provinces, British Columbia had the highest monthly gain in residential real estate sales; B.C. also had the most dramatic decline in sales last year. British Columbia has traditionally always had the highest real estate prices as well as the highest average mortgages. Vancouver's sales have risen to 117% over the past year. The Canadian Real Estate Association is now forecasting national activity in residential home sales will reach over 460,000 units in 2009 which is an increase of 6.6% from last year. The national MLS home price average is forecast to climb 4.2% in 2009; this will reach a record of $317,900.

This is the first time that residential home sales have increased in price since the spring of 2008. This means that purchasing a home may now be less affordable for Canadians, according to a new study by the RBC Housing Affordability survey. This survey measures the proportion of pre-tax household income needed in order to cover all the necessary costs of home ownership. This measure rose for all housing types in the third quarter, with standard bungalows and two storey homes seeing the biggest gain. Demand for housing has now outstripped supply since the recovery in real estate sales began last winter.

For those Canadians who want to take advantage of the low mortgage rates to buy a home, mortgage insurance coverage must also be considered. Most lending institutions require mandatory mortgage insurance. However, mortgage insurance does not have to be obtained through the lending institution, although almost all do offer this coverage. Term life insurance in an amount that covers the mortgage can be a better alternative to bank mortgage insurance. Term life also offers several advantages that bank mortgage insurance does not. Term life insurance offers the homebuyer the advantage of naming the beneficiary of the policy. When purchased through a lending institution, the mortgage insurance policy names the bank as the beneficiary. When using term life insurance the policy is owned by the homebuyer, not the bank.

Another advantage to using term life to insure a mortgage is the option of purchasing a policy that can be converted into whole life insurance upon completion of the term. This allows the homebuyer to buy a term life policy when they are in good health, and the rates are less expensive. Some convertible policies will not require any additional medical information, but will be based on the original health status.

When shopping for a home, and mortgage, consult with your insurance broker about using term life insurance to insure the mortgage and explore all the options. Many times term life insurance is also cheaper than the coverage offered by the bank. For more information on using term life insurance, please visit our mortgage insurance page.

Employment Insurance for self-employed Canadians

Your DisplayName here! — Mon, 16 Nov 2009 15:06:27 GMT

With an estimated 2.6 millions being self-employed, the Minister of Human Resources and Skills Development has announced that the Government of Canada has introduced the Fairness for the Self-Employed Act. This new legislation is intended to extend Employment Insurance (EI) special benefits which will include maternity, parental, sickness and compassionate care benefits for those Canadians who are self-employed.

Traditionally, Canadians who are considered self-employed have had little and/or no income protection in regards to major life events. Situations such as sickness or injury, giving birth, caring for a newborn and/or a newly adopted child, or assuming the care for a gravely ill family member have usually only been covered for those who are employed by an employer and who are entitled to EI benefits through paying via their weekly deductions.

The Fairness for the Self-Employed Act is aimed at rectifying these situations which face not only those who have employers, but also those who are self-employed. This act is in response to the Federal Government's 2008 pledge to help provide improved economic security as well as support for all Canadians who are self-employed. These changes will allow self-employed Canadians to voluntarily opt into the EI program in order to be eligible for these special benefits. These special benefits are intended to closely mirror those that are currently available to salaried employees.

Through the new legislation, self-employed Canadians who opt into the EI program will be eligible to receive special benefits that are currently available to salaried employees such as:

•   Maternity Benefits. 15 weeks are available for birth mothers and covers the period surrounding birth; a claim can start up to 8 weeks before the expected due date.
•   Parental/Adoptive Benefits. A maximum of 35 weeks are available to biological or adoptive parents for caring for either a newborn or a newly adopted child; this may be taken by either parent or shared between them. If the parents are sharing, only one waiting period must be served.
•   Sickness Benefits. A maximum of 15 weeks are available for a person who is unable to work due to sickness, injury and/or quarantine.
•   Compassionate Care Benefits. A maximum of 6 weeks for a person who temporarily has to be away from work in order to provide care and/or support to a family member who is gravely ill and has a significant risk of dying.

In order to be eligible for these benefits, self-employed Canadians will be required to opt into the program at least one year prior to claiming benefits. They must also be responsible for making premium payments starting with the tax year in which they apply to the program, i.e. a program start date of January 2010 mean that claims can be made as early as January 1, 2011. In order to access EI special benefits, self-employed Canadians will need to earn a minimum of $6,000 in self-employed earnings over the preceding calendar year.

Self-employed people can also opt out of the EI program at the end of any tax year if they have never claimed benefits. For those who have claimed benefits they will have to contribute on self-employed earnings for as long as they remain self-employed. Self-employed Canadians will pay the same EI premium rate as salaried employees, but will not be required to pay the employer portion of those premiums as they will not have access to EI regular benefits.

Banking and Online Insurance in Canada

Your DisplayName here! — Tue, 03 Nov 2009 16:53:36 GMT

Starting in 2010 Canadian banks will be prohibited from selling insurance products via their primary websites. Currently Canadian top banks such as the Royal Bank of Canada, Bank of Nova Scotia, Bank of Montreal, CIBC and the Toronto Dominion Bank offer their customers the option of purchasing insurance online from their main banking websites. The Minister of Finance Jim Flaherty announced that the new rules regarding the sale of insurance products over the internet will become applicable when the next budget comes into effect in early 2010. This will essentially reverse a decision that had been made in favor of the banks earlier this year.

The Bank Act prohibits the banks from directly selling insurance in their branches; however the Office of the Superintendant of Financial Institutions (OSFI) ruled in June that a bank website is not the same as a bank branch, thereby allowing for the sale of insurance products online. However, Flaherty considers a bank’s primary website a virtual bank branch, making the sale of insurance against the rules. Recently Flaherty faxed letters to the CEOs of Canadian banks requesting that they change their websites to preclude the sale of insurance; most banks have not complied with this request. Flaherty has stated that he intends to change the Canada’s Bank Act to prohibit banking websites to sell insurance, making this current practice illegal.

The Canadian Bankers Association, which represents 50 Canadian banks, claim that Flaherty made this recent change without any consultations with either the public or the banking industry. In an emailed statement, the CBA said they were “shocked that Mr. Flaherty would want to limit how and where consumers can access information about insurance.” Flaherty’s decision to amend the current legislation came as a result of Liberal MP Alexandra Mendes introducing a private member’s bill, which, in her opinion, would level the playing field between independent insurance companies and Canadian banks. The insurance brokerage industry has previously complained to the federal government as well as lobbied MPs about this issue.

While some members of the insurance brokerage industry are welcoming these proposed changes, others fear these new rules will impede Canadians from being able to make informed choices due to insurance information being restricted. The internet affords Canadians the opportunity to quickly and efficiently be able to compare insurance quotes, the type of insurance products offered, etc, without being pressured by a sales agent. Currently people can ‘surf the net’ and research the different types of insurance that are available, and can compare the not only the costs of available insurance policies, but to also compare the different types of policies available. This allows people to benefit from having the most information available in which to make their decisions. It also allows for people to become aware of different types of insurance which they may not have known was available. As well, a healthy competitive market means that the consumer benefits from no one specific company being able to monopolize the industry.

It is important for anyone contemplating purchasing insurance to do their own independent research and compare quotes as well as what those specific policies offer. While it may make sales a little more competitive for the insurer, it allows for the consumer to benefit.