Specialized Benefits

It seemed like only a short while ago I was closing 2008 and welcoming in 2009 with some friends of mine – hard to believe how fast time flies. It is like the expression – time flies: you better be the pilot!

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

We thought we would run a quick little poll to see what people are going to do with their tax refund this year?

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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