It is a good idea to evaluate your life insurange coverage once a year.

Changes in your lifestyle, family, and income can affect the coverage you need.

Once a year, re-read your policy to determine whether your current coverage is adequate to meet all your needs. You should consult your insurance agent if any of the following have occurred or will be occurring:

1. Change in marital status.
2. The birth or expected birth of a child.
3. Significant increase or decrease in income.
4. Employment status.
5. If you plan on becoming self-employed.
6. Any move outside your current province or country.

Please call our toll free number 1-866-369-4474 to discuss your insurance needs with one of our qualified representatives.

This article specifically discusses wealth management from the perspective of cottage owners, especially those who want to keep a cottage in the family.

When you pass away assets transferred to your children can result in a capital gains tax, which has to be paid before your children can get the inherited property.

In particular there is a major difference between a cottage and a principal residence, in that the principal residence can be sold tax-free, while the transfer of a family cottage is not tax exempt. Also, if the estate owes money (e.g. tax) then the cottage may need to be sold to pay the money owing.

You should strongly consider selling the cottage to your children while you have the chance. This sets a limit on the tax liability, and the cottage does not have to be sold upon your passing (if the estate owes money). In addition this will avoid probate fees.

NOTE: do not attempt to decrease the capital gain by selling the cottage for a very cheap price. The CCRA calculates the capital gain based on a fair market value.

Consider spreading out the payments for at least 5 years if you take the mortgage back from your kids. Also, you can make the mortgage interest-free, and forgive the left-over balance in your will so that when you pass away your children will own the cottage without owing any debt.

Another thing to consider is using permanent life insurance to help manage your wealth and estate (obviously this would include any cottages). Creditor protection and tax benefits are just a couple of advantages to permanent life insurance!

Most Canadian life insurance companies use a 5-level health classification system, with the least expensive at the top and more expensive with each level drop in classification.

These classifications are generally as follows:

1. Class # 1: non-smokers, only 5% of the general population qualifies for this rating. To qualify for this life insurance rate you have to be in fantastic shape and health.
    
2. Class # 2: non smokers, about 20% of the general population qualifies. To qualify for this rate you have to be in above average shape and health.
     
3. Class #3: 50% of non smokers qualify for this rate. The majority of the population qualifies.
     
4. Class #4: Smokers (non-tobacco and non-marijuana users) may qualify for this rating.
    
5. Class # 5: Cigarette smokers qualify for this rate.

Note:

• Most life insurance companies will not accept marijuana users even if usage is for medically approved reasons.
   
• If you quit smoking for one year , you can re-apply to most insurance companies and be granted a non-smoker rating.
  

Term life insurance rates have been dropping in Canada for the last 10 years or so, due to a variety of reasons.

People are living longer, for one. Smoking, and the overall use of tobacco products has decreased, and rate decreases have been particularly significant for non-smokers.

Another reason is competition, which results in a lowering of premiums. An additional advantage of this is an increasing number of choices as far as term life products available to the public.

In fact, term life premiums are so low that many times we run into cases where people actually save a substantial amount of money by switching their bank mortgage insurance to a term life insurance policy.

For example, a 10-year term for $250,000 for a non-smoking, 25-year old female can cost as low as $125 annually, or $12 monthly (these are preferred rates).

But what about the future trends? Term rates seemed to have leveled out, and it is difficult to say if they will remain the same or start increasing.

If you are considering buying life insurance the time to act is now, while you are healthy and the premiums are low!

Often times people buying their first home are not made aware that mortgage insurance does not have to be purchased from the lending institution (usually a bank).

In fact, term life insurance is almost always a better alternative to bank mortgage insurance. There are many reasons for this, including the following:

• With term life the beneficiary is the person you name (e.g. husband or wife), as opposed to the bank.
• The payable benefits remain the same for term life, as opposed to the bank insurance that only pays the remaining amount owing on the mortgage.
• Term life policies can be renewed at a later time and converted to permanent life insurance. Bank mortgage insurance is not renewable or convertible.

Time and time again we have situations where people we talk to end up saving a lot of money by switching their bank mortgage insurance to term life (one reason for this is the low current term life rates).

The following relates the experiences of one of our clients:

"I recently purchased my first home 6 months ago. Like most first-time home buyers I was elated at the prospect of finally owning my own home and naturally financed my mortgage through my local bank. As the time of closing neared, the bank informed me that I would have to insure my mortgage which was for $350,000. I asked them how to go about this, and they told me that they would take care of the details and prepare the paperwork for me. Being somewhat busy with all of the other things that had to be done such as packing, getting ready to move, etc., I was more than a little relieved as it was one less thing to
worry about, and I signed the paperwork.

About 6 months later I was online at your life insurance web site looking to find out about web insurance. I contacted your company and was asked if I had any other insurance in place. I told him about the mortgage insurance and he informed me that the bank's mortgage insurance usually had three factors that needed to be looked at:

1. The lending institution name themselves as the beneficiaries.
2. The rates tend to be high.
3. When a bank pays benefits it is only the remaining principal on the mortgage that is paid out.

I was informed that I could get term insurance to protect my mortgage instead, and that the rates would be much lower and that I could be the named beneficiary.

I applied for the term life, and I am now paying $78/month instead of the $142/month I was paying for my bank mortgage insurance (I cancelled that policy after my term life went into effect on the advice of your broker). I named my husband my beneficiary, and if something happens to me he will get the entire proceeds of my policy ($ 350,000 instead of the remaining mortgage principal)."

Ann Ritchie,
Toronto, Ont.