Specialized Benefits

Picking up where we left off….

PORTABILITY – If you go to renew your term on your mortgage and you go to a different lender – you have to reapply for your mortgage insurnace – plus you are older so likely you rate will increase. With your own personal policy – you take it wherever you go!

CONVERTABILITY – Whether you are 20 or 100 there are always costs associated with your passing away. From funeral expenses, oustsanding loans/lines of credit, to estate taxes and passing something on to the next generation – having permanent life insurance is the best way to take care of these costs because all benefits from a life insurance policy are passed to a beneficiary tax free. With personal term policies you can convert some or all of your coverage to permanent insurance – WITHOUT A MEDICAL! A bank’s policy will only cover you for the duration of the mortgage.

REFINANCING – If you purchase a larger home down the road – the bank may forfeit your current policy and make you reapply entirely for a new mortgage insurance policy. With your personal policy – you keep the coverage in place and only apply for the extra coverage that you need.

A recent example was one client (couple) who was paying $310 per month for 2 mortgage insurance policies – the same coverage on their own personal policy came in at $225 – a savings of $1000 per year! That extra money can be used to pay down the mortgage quicker – or can be added to their Tax Free Savings Account. Never mind all of the other benefits such as the ones above.

Another example was one fella who was looking at $450k mortgage insurance from his bank. But for the same price I was able to secure him $700k of insurance. This extra $250k will be very handy for his wife and children should something unexpected occur to him in the future.

These are just some examples of clients who I have worked with and saved money and provided better protection.

Should you have any questions about your mortgage insurance – I encourage you to contact  me and I will be more than happy to do a no obligation quote.

Cheers!

Rhett

Hi all – hope you had a great summer. Seems like Edmonton is getting a but of an extension on summer this year with the weather we have been having so far in September.

One topic that I wanted to discuss is mortgage insurance. Throughout the summer and fall many people are purchasing new homes, refinancing the mortgage on existing homes, or trading up/down for something bigger/smaller.

In each case, the lending institutions offer you mortgage insurance – which pays off the mortgage should you or your spouse pass away. The banks make purchasing this valuable peace of mind very easy – simply initial here and you are good! However, there are a lot of things that the mortgage specialist is not telling you! (There is a reason why they are called mortgage specialists – they are not insurance specialists)

In a two part series I will list the advantages of having your own personal life insurance policy as opposed to one from the banks…..

COVERAGE GUARANTEES – with an individually owned policy once you are approved – terms and prices are guaranteed for that period – you can “lock in” a rate for 10,20, 30 – even 40 years! With the bank – your premiums increase every 5 years or whenever you renew.

PREFERRED UNDERWRITTING – if you have a good health history and so does your family – it is possible to receive better than standard rates! This can mean a 10-25% reduction in your insurance premiums! Banks have only a generic smoker/non-smoker rate.

PROCEEDS ON DEATH – you receive the same amount on day one of your coverage as you do on day 5475 (15 years into your mortgage) – the banks only will payout the remainder of your mortgage. So not only do your rates increase – but your coverage decreases over time! Also you decide who receives the money – not the bank!

FLEXIBILITY- you can purchase higher amounts than your mortgage amount with an individual policy – this can cover additional expenses that my come up with your passing and provide your loved ones with some additional income to replace your income. This can be used for RRSPs, RESPs, food, utilities, property taxes, and other ongoing expenses. Banks can only offer coverage for the mortgage – nothing more.

RATE BANDING – sometimes purchasing $500k of insurance is cheaper than $450k! It’s true! Because with life insurance as you increase your coverage you get volume discounts! The banks can’t offer you this opportunity.

In the next part I will continue with more advantages – plus tell you of some real cases where my clients have saved significant dollars by switching to their own personal policy!

              Cheers!

                Rhett

Maybe it is just me, or is there another baby boom going on? It seems that everytime I turn around I have a client, friend, or a referral that is expecting or has recently had a baby!

It could be that I am “at that age” where people in my circle of influence begin to have babies, but nonetheless babies make for a great reason to discuss life insurance.

When life goes from “me” to “we”, it is normal to think about the “what ifs”. Life insurance is designed to protect these concerns and in the realm of life insurance there are 2 main types – term and permanent. I thought I would take a moment to discuss the difference of each area…..

Term Insurance – is the most inexpensive insurance available. It is designed to be in force for a period (term) of time. Most providers have 10 and 20 year term plans – some have come out with 30 and even 40 year term plans. The advantage is that for the term – your premiums are locked in. Until renewal comes – then they increase. I describe term insurance like a flight of stairs. Cheap at first, but by the 1st or 2nd renewal – look out!

Term insurance is great to help protect short term liabilities/costs such as loans, lines of credit, mortgages (personal policy is better than the banks – but that is another topic), children, education savings, retirement savings, etc.

The idea is that eventually the kids grow up, loans/the house gets paid off, and your retirement nest egg is sizable enough. So after a while - term insurance is not required.

Permanent Insurance – such as Whole Life or Universal Life – is just that – FOR LIFE! The advantages are that your premiums are locked in forever (unless you cancel the policy). So the cost is higher at first, but eventually is most effective than term insurance because there are no price increases.

Permanent insurance offers other bells and whistles such as guaranteed cash values – after a period of time you can cancel your policy and receive some cash back. Also there can be dividends declared by the insurer and you as a policyholder could receive some of these dividends. There are potentials for premiums flexibility and also some tax-advantaged investment growth.

Permanent insurance is designed for estate planning and for those costs that are associated with your death – unfortunately it does cost money to die. This can trigger estate taxes for capital property (i.e. the cottage at the lake), other debts, and ultimately – leaving something for the children or grandchildren.

Typically if it is in the budget – I suggest a combination of some permanent and some term. The advantage long term becomes lower premiums because when you need for insurance reduces – you can the term insurance and move forward with the permanent that you put in place years ago.

However, if it is not financially feasible – term insurance can be converted to permanent coverage down the road – so you can have the coverage you need now – then convert it later when the budget allows it.

Hopefully this helps some of you out there. I welcome any questions or comments.

Ciao!

Rhett