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

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

How this relates to insurance? It doesn’t – but it is just my $.02.

What it does relate to is how these people died – stroke and cancer. Both critical illnesses. The amazing thing about many illnesses is that they do not pick on one particular category of person. Black, white, male, female, younger, older, rich, poor, healthy lifestyle or not (okay that helps a little), celebrity or average joe. Some live for years after diagnosis, others are dead on the spot.

It is the true equalizer. What is one to do?

What you can do though is protect yourself, your lifestyle, and your loved ones by having Critical Illness Insurance. This is a “living” benefit – as opposed to a “dying” benefit (which is what life insurance is for). You have survived a critical event – such as cancer – but now your life has taken a serious change. If you have seen the Farah Fawcett documentary – you know the changes that occurred in her life. Perhaps you can’t work, perhaps you want to have the latest and greatest medical care, or maybe you want to go on the “last trip” with the ones that you love.

Critical Illness Insurance pays a tax free benefit after surviving 30 days from a named critical event – and you can use the money in whatever way that you want! Many policies even have a cash back feature that allows you to get your premiums back if you do not get sick!

For more details, give me a call or drop me a line.

I wish you all a happy Canada Day – or for some of us hockey diehards – Free Agent Day!

Go Blue!

Rhett

Long time no blog – personal life has been taken over a little as last month I took the plunge and “popped the question”. Fortunately, she said yes!

Needless to say – we have been busy hosting engagement parties, talking with parents, setting dates, finding venues, photographers, DJs, bridal party people etc….

It is truly amazing the things you have to do more than 14 months in advance! But I think we have the most important things done and in place.

It is with that thought I wanted to go with today – we plan so much in advance for this wonderful day in our life – yet most people spend little time planning/preparing/protecting our financial and health future.  Perhaps it is because I’m “in the biz” – but one of the other things I have done is purchased more life, critical illness, and disability insurance  for myself and my fiance.

God forbid that something happen in the next 14 months and my ability to pay for the wedding becomes jeopardized. Plus we have to think about our future children and protecting them.

So even though it is a great thing getting engaged and their is lots of excitement and planning – it is important to keep focused on the long term importance of protecting the ones you love.

Looks like summer is here – get out and enjoy it with those loved ones!

Cheers!

Rhett

Travel agents make travel insurance very convenient to purchase when you book your trip. However, like mortgage insurance from a bank – this is not always the best type of coverage for you.

I can across this article that illustrates the importance of purchasing an insurance policy from someone who is versed in this arena:

http://www.cbc.ca/money/moneytalks/2009/05/ellen_roseman_read_the_fine_pr.html

As the article relates – there are policies out there for people who do have pre-exisiting conditions – they are harder to find and cost a little more – but for these people it is the best value for your dollar.

For those who are in good health – travel insurance is very inexpensive – typically less than $2 per day for singles and about $5 per day for families. These numbers pale in comparison to the potential tens of thousands that a single claim can generate. If you have coverage through your employer but are travelling for an extended period of time – you can “top-up” you coverage very easily.

If you are traveling soon – be sure to look before you leap. And as the commentor below the article says – you wouldn’t book a trip through an insurance agent so why would you purchase insurance from a travel agent?

Have a good one!

Rhett

   I have discussed how a PHSP can be beneficial for a sole proprietor/one man incorportated company – some of those same benefits can be translated to a small business with employees.

   With a group plan you pay premiums every month – even if your employees are not using the plan. Also your premiums increase based on the claims experience with your group – generally all it takes is one employee to make significant claims to cause an increase for small groups. The other thing to consider for small group plans is that you generally will not have enough staff to cover major dental expenses such as crowns, caps, bridges, dentures, and orthodontia.

   The advantages with a PHSP is that you set the limits as to how much each category of employee is allowed – say $1500/year, the owner can (and typically does) have a maximum of $5000 or more. You can create dozens of different categories based on family size, employment status, employment position (F/T or P/T), seniority etc. This employee is allowed to spend these dollars on whatever medical and dental expenses they want – even MRI’s, laser eye surgery, and even their own individual Blue Cross plan(or similar).

   The owner then know exactly what the health costs will be at a maximum – if the full amounts are not used by the employees – they can be rolled over (for one year only) or they are lost. This way if there is significant claim experience – the costs will not increase. Plus the unused dollars can be eventually returned to the owner!

    It should be mentioned that there are optional programs available for prescription drug coverage, hospital, ambulance, accidental dental, travel, life and disability insurance – for the “what ifs” – but for everything else you can use the PHSP.

   Finally, just like premiums for your health and dental portion of your group plan – any dollars that are used by the employees are tax dedutible for the owner and the benefits are received tax free by the employee.

   In closing a PHSP can offer small business owners an opportunity to offer their employees a benefits package without having to worry about the costs getting out of control – plus the employees can use the dollars on items that are actually going to use.

   Have a great weekend everyone – looks like spring has finally arrived in Edmonton!

  Rhett

Just an invite for anyone interested to come down to Millennium Place this weekend to see our booth at the Sherwood Park Trade Fair. We have a couple of great door prizes that we will be giving away, plus an opportunity to meet me and ask any questions you might have.

Hours are Friday 1-8pm Saturday 10am-8pm and Sunday 10am-5pm. Other than Saturday morning, I will be there the whole time. (Guess I’ll relax next weekend….)

I look forward to seeing you soon!

Rhett

This is a good news/bad news. Sure it is less benefits for those that are using the chiropractor – but the benefits were limited to 12 visits per year  – so you only received about $17 per visit.

The good news is that if you have a health plan – personal or through your employer – you don’t have to wait until the Alberta Health maximums are exhausted before the insurance company will pay you!

If you are without employer coverage or do not have a personal health plan – give me a call. For as little as $26/month I can show you how to get $400 in chiropractic benefits per year (plus much more in benefits!)

With golf season around the corner – your chiropractor may soon be your best friend!

Cheers!

Rhett

Continuing from my previous discussion – PHSA’s can be very beneficial for the one person company to a company with multiple employees…..

For the one person company(incorporated or unincorporated), the advantage of a PHSA is firstly your cash flow; instead of paying premiums to an insurance company month after month, whether you or your family uses the plan or not – with a PHSA you only pay for the plan when you use it. If you are someone who goes to the dentist once a year, rarely gets a prescription, and has little to no other expenses – why pay $50-$100 per month for an insurance plan? Sure the premiums are tax deductible, but you only get a percentage of that back. Save your money and pay for the dental visit when you need it – and deduct that just like you would premiums.

     The other advantage is that you pay for these expense with pre-tax dollars as opposed to after tax dollars. Take a $1000 dental bill: if you had no plan you would have to pay yourself about $1500 (depending on tax bracket) in order to account for CPP, EI, and payroll tax so that you have $1000 left to pay the dentist. With a PHSA – you would simply pay $1100 out of your company account – saving you about $400!

    Another great example I find is for major dental work such as crowns, orthodontia, bridges and implants – most individual plans do not cover this type of work, or if they do – you have to pay into the plan for 2 years before you can claim for your son’s/daughter’s braces. With a PHSA you can claim these expenses on day 1 of your coverage and therfore fully deduct this expense from your business income.

    Finally, this plan is better than the medical tax credit that you have from the government for a couple of reasons – 1. With the gov’t tax credit you have to pay a deductible of 3% of your income (max. of $1925) before you are allowed to claim any expenses. This is where I find a lot of clients get confused – they tell me “My accoutant already writes off my medical expenses – why would I want a PHSA?” True, your accountant is writing it off – but the question is – are you getting any sort of credit? If you earn $50k per year – you would have to pay $1500 in medical and dental expenses to cover the deductible – if you have $1200 in expenses – sure you accountant is “writing them off” but you will receive no tax credit. With a PHSA you get a credit from the 1st dollar that you claim!

2. Once you hit the deductible – you only get a 15% federal credit and a 10% provincial credit (Alberta) – so a total of 25%. A PHSA allows you to deduct 100% of the cost of your medical and dental expenses.

Take an example of a family who has child going in for orthodontia work – assume they are incorporated, report an earned income of $60k, and the ortho bill is $3000 per year.

Under the Medical tax credit, the family would have to pay $1800 (3% of 60k) before getting a credit – then they would get a 25% credit on the remaining $1200 = $300 tax credit – at the 36% tax bracket (26% fed. 10% prov.) this means a total tax savings of $108 – WOOOHOOO! (sarcasm)

With a PHSA, you would deduct the full $3300 from you business and based on a 36% tax bracket – this would translate to a $1188 tax savings! No sarcasm here – that’s a great deal!

Next part will show how this plan can work as an employee benefits plan.

Happy Easter!

Rhett

With the closing of 2008, naturally so does the wonderful experience of telling our government how much money we made last year so we can pay our taxes. Now I’m not against paying taxes – I just don’t want to pay more than my fair share!

With the topic of taxes in mind I wanted to start a short series describing an excellent tax saving strategy for self employed business owners – the Private Health Services Agreement (PHSA).

PHSA’s are best described as a tax saving strategy as opposed to a typical health insurance plan through Blue Cross, Manulife, or any of my other suppliers. The advantage is that there are no premiums and no waiting periods – for any services including crowns, bridges, dentures, and orthodontia!

Also more services are covered that typical insurance company plans won’t – such as MRI treatments, laser eye surgery, plastic surgery, and even over the counter drugs! Another feature is that there are no limits or caps imposed by the insurance company i.e.  prescription glasses are covered up to $200 per 2 year period. You can spend as much as you like on these health and dental services!

In a nut shell – whatever medical and dental expenses you have – they will become 100% tax deductible expenses for your company – just like premiums for a traditional insurance plan. However, if you are like some people who rarely use their health plan – this can save you significant dollars on your monthly cash flow because you are not paying the premiums.  Or if you already have coverage from your spouse and are looking to “top up” – this can provide you with a better alternative to purchasing  individual health plans.

In the next parts I will discuss how this plan can work for a one-man operation (Joe the plumber) to a company with multiple employees. In the meantime if you have questions, contact me at any time!

Until then,

Rhett