Money Talks – Toronto Talks http://torontotalks.org Toronto's most popular speaking series Sun, 01 May 2016 13:13:02 +0000 en-US hourly 1 https://xodmedia.com/content-management-system.php?v=4.7.4 Insuring for Divorce http://torontotalks.org/money-talks/insuring-for-divorce/ Mon, 01 Nov 2010 18:51:21 +0000 http://torontotalks.org/?p=121 Insuring for Divorce Written By: John Klotz1 0-11-2010 Is there an epidemic out there?  Or does it just seem like everybody and their brother is looking to split with their spouse?  And this often occurs following years of marital bliss.  So, it’s not surprising that we, as financial advisors, are called upon by various lawyers and clients to set up ...

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Insuring for Divorce

Written By: John Klotz1
0-11-2010
Is there an epidemic out there?  Or does it just seem like everybody and their brother is looking to split with their spouse?  And this often occurs following years of marital bliss.  So, it’s not surprising that we, as financial advisors, are called upon by various lawyers and clients to set up insurance policies on couples who are splitsville to protect various financial agreements that have been set up.  This article will address those insurance needs.

The first part of any insurance discussion involves calculating the risk at hand. In this regard, we need to figure out just what the financial impact on the family would be in the event one of the divorcing spouses dies.    Initially, when ascertaining the financial number you put on someone’s life (always an exercise that only an insurance advisor or actuary could find fun), we start with the basics. These basics includes paying for a funeral, final year’s expenses for taxes, education funding for the children, eliminating the mortgage, providing an emergency fund (typically 3 months of salary), providing for a cooling off period following the death of the spouse, and monies for any charities.  These are fixed expenses at death.

However, there are ongoing expenses that we need to look at.  These include providing the salary of the deceased spouse for a period of time. Depending or not if there are dependent children, this commitment could be for 10 or 20 years, or perhaps a lifetime.  When a spouse dies, the ideal situation is to provide between 60 and 80 % of the deceased’s income for this period of time.

Since we are dealing with divorce, this calculation would include child support payments, alimony payments, equalization payments, and any other ancillary features to a divorce agreement.  These would ultimately increase the financial commitment required of the deceased in the event of their demise.  Often, we come up with a very serious financial commitment required from the estate of the deceased ex-spouse.  It often is lopsided if there was a discrepancy in income in the family. For example, if one spouse was a dentist and the other spouse stayed home and raised the children, the dentist spouse would require a greater financial commitment on behalf of his or her estate than the stay at home spouse.

Obviously, if there are dependent children involved, the financial commitment of the estate of the deceased will increase.

We then subtract the assets from this number including stocks, bonds, savings, secondary properties, and other assets. In a happily married couple, there are two assets we do not include in this subtraction process, namely RRSP’s and the principal residence.  The reason the RRSP’s are not subtracted as an asset is that they can be rolled tax free to the surviving spouse.  With respect to subtracting the home from the calculation, it’s clearly obvious that the surviving spouse and children still need a place to live. It’s bad enough to have a parent die and be forced at the same time to move.  Since we are dealing with divorce, there may be two homes, and the deceased spouse could have their home sold to provide for the financial commitments.

Once all our calculations are completed, we typically arrive at a figure that is between 7 and 10 times annual income.  So, if we had a spouse earning $100,000 per year, this would result in the estate requiring between $700,000 and $1,000,000 in insurance coverage.  And if you think about it, this figure makes sense. If you are earning $100,000 per year and need to provide 70 % of your income for a significant period of time, how much money would you need in the bank to guarantee this amount?  70% of $100,000 is $70,000 per year. Using a 6 % rate of return, you would need $1,166,000 in the bank to guarantee this amount for life.

Once we have determined the amount of coverage required to satisfy the financial commitments to the divorce, we then need to figure out which products are best suited.  These programs can range from inexpensive term insurance programs to the more costly permanent insurance programs.  Permanent insurance, while more expensive in the short run, provides a level premium that does not increase during your lifetime.   You may want to consider this as a solution if your insurance needs go beyond say 20 years.  Programs include a Term to 100 insurance products, whereby the insurance premiums stay fixed until age 100.

So, once you have decided on your policy and budget, we need to discuss how the policy is to be set up.  One of the issues we have is ownership and beneficiary designations.

Firstly, there is the issue of the beneficiary. Typically, in a divorce, the agreement states that you need to make your ex-spouse the beneficiary of the policy.  In the event something happens to you, the ex-spouse receives the proceeds of the insurance policy.  And that’s fairly straight forward.

But what about the kids?  How do you make sure they receive the monies, especially if they are minors?  Ideally, what should take place is some type of joint beneficiary.  If you take out a policy for $1 million,  50 % is to be paid to your ex-spouse, the other 50 % is to be paid to your children.  But what if your children are minors?  How do you make sure they get the money?  There are a few ways to do so which vary in tax efficiency and control. Remember, you are dead when the proceeds are paid out.

The most tax efficient way for your kids to receive the monies is to designate them as beneficiaries on your life insurance policy and have the monies held in trust, probably with your ex-spouse as the trustee.  The upsides of this beneficiary designation on the policy are that the monies by-pass the estate and avoid probate tax (approximately $15 on every $1000 received) and executor fees (approximately 2 to 5 % of the estate).  Because the monies bi-pass the estate, creditors to the estate cannot seize the monies.  But there are downsides to this designation.  Firstly, your kids need to receive the monies at the age of 18 regardless of their state of mind or maturity.  If you’ve as a child the future Doogie Howser, MD, then you know the monies will be spent for education. But what if you’ve got a hell raiser at 18 with his eyes on sleek new Porsche and the tawdry redhead at school?  How can you be sure he puts the money aside for education and not for immediate gratification? In this scenario, you can’t.    The other downside of this direct designation is there is nothing from stopping the trustee (your ex spouse) from spending all the insurance proceeds by the time the kids are 18.  He or she would turn to the kids and state that all the monies have been spent and go ahead, sue me!  Now, you are dead, and their closest living relative, namely their remaining spouse, has just screwed them.  Now, they have the option of suing their mother or father.  It’s so ugly that it’s not even funny.

Another downside of naming the kids directly as beneficiaries with monies to be held in trust, is that if the trustee (your ex spouse) has issues with creditors, there is nothing stopping the creditors from seizing the assets of the insurance policy.

So, what is a divorcing parent to do?

I suggest that you bite the bullet from the tax perspective and make the estate the beneficiary for the kid’s portion. Yes, you have to pay probate tax of $15 on every $1000, and yes, there is an executor fee of 2% to 5 %, but you get to rule from the grave!  (Always a plus).  And here is what you can say.  The children can receive $50,000 when they turn 18 to pay for university.  They can receive another $50,000 when they graduate from university, and they can receive the remainder when they turn 30.  At the same time, you can leave instructions to the guardian (your ex spouse) that they can use 50% of the insurance proceeds to raise the kids.  But they have to leave 50 %in the estate for the kids to fulfill your estate distribution requests.

As a parent, I like this way much better. While it is not as tax efficient, it does put in some controls.  And to compensate for the tax issues, you just buy some more insurance.

Finally, there is the issue of the policy ownership on your ex-spouse.  Now, what if your ex hooks with a new person?  And what if this new person wants your ex to change the beneficiary designation to him or her?   Would this not mess up the estate and the issues with the beneficiary designations?  Of course it would.  The way to prevent this problem is for you to become the owner of the policy on your ex.   This will stop them from changing the beneficiary mid stream to the new squeeze as they cannot make this change without the consent of the policy owner (you).

You can also make the beneficiary designation irrevocable, which means that the beneficiary can never be changed.  Both achieve the same effect, but there is more flexibility with just owning your ex-spouses policy.

In summary, you should consider all your insurance options before setting up your policies for your divorce settlement. Amounts of coverage, types of coverage, and beneficiary and ownership designations will all be part of these discussions.  Best to find yourself a trained advisor who can guide you through the insurance jungle.

This article was written by John Klotz, John is President of Northwood Mortgage Life Insurance Corporation. You can reach John at 416-969-8130 ext. 230 or email atjohn.klotz@northwoodmortgage.com.  You can also listen to John on his bi-weekly broadcast, Money Talks Media (www.MoneyTalksMedia.com).

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Mortgage Life Insurance – What is the Best way to Purchase it? http://torontotalks.org/money-talks/mortgage-life-insurance-what-is-the-best-way-to-purchase-it/ http://torontotalks.org/money-talks/mortgage-life-insurance-what-is-the-best-way-to-purchase-it/#comments Sat, 11 Jul 2009 17:34:57 +0000 http://torontotalks.org/?p=74 Mortgage Life Insurance Written By: John Klotz 7-11-2009 Ok – so we are going to slam the banks a little in this article. I know, many of you love the banks and will be upset that anyone could say anything negative about them. In this regard, we humbly apologize in advance. But this article is a must read if you ...

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Mortgage Life Insurance

Written By: John Klotz
7-11-2009
Ok – so we are going to slam the banks a little in this article. I know, many of you love the banks and will be upset that anyone could say anything negative about them. In this regard, we humbly apologize in advance. But this article is a must read if you are considering purchasing mortgage insurance. That being said, the conclusion of this article will be to purchase your mortgage insurance from a licensed insurance broker. So it’s not all bad.

What is the deal with purchase mortgage insurance from the bank. For starters, with the lending institution policy, the contract is not portable from bank to bank. Why is this bad? Let’s say you take out a mortgage life insurance policy with Bank A today. 5 years from now, your mortgage comes up for renewal and you wish to switch to Bank B because they offer a more competitive mortgage rate, and perhaps a different type of mortgage than you had before. The resulting savings on the new mortgage are over $50000 over the amortization of the mortgage and you are motivated to move. And you have every right to do so.

However, in the past 5 years you have suffered a heart attack and are no longer eligible for mortgage life insurance. Now Bank B says they cannot offer you coverage (you are not insurable). Therefore, it is not in your best interest to move your mortgage because you can’t get the life insurance coverage. And Bank A’s insurance policy is not transferable to Bank B. So, now, you are now stuck with Bank A forever!!!! Kiss that 50 K goodbye and go beg Bank A for forgiveness!

With an individually underwritten policy, the insurance is not attached to the mortgage and is portable. You can move it from house to house, mortgage to mortgage and suffer no penalty. So in this instance, you can move over to Bank B and tell Bank A to take a flying leap! No hugging required! You get the picture.

Here’s another big difference. With the lending institution (bank) coverage, the bank is the beneficiary of the policy. With an individual policy, you get to name the beneficiary of your choice, like your spouse or children. Why is this important?
Well, suppose you are a parent of two young children. Now I have kids of my own and I’ve got to tell you, while I love them to death, they are expensive little things. According to recent interviews, the average cost of raising a child is approximately $250,000 to age 18! Ouch. And suppose they are in private school – it’s even steeper. So, if you die with a $400, 0000 mortgages and the bank is the beneficiary, the bank gets the mortgage proceeds and the mortgage is released. Yet, your surviving spouse will still have ongoing commitments for your children like school, hockey, ballet, etc. In order to fund these ongoing commitments, your spouse would have to re-finance the house with new mortgage and all the expenses that go along with that.

Would it not be better if the policy named your spouse as the beneficiary instead? In the event of your death, your spouse would receive the $400,000 directly. Your spouse could then turn to the bank and say…”Here fella’s – take $50,000 and don’t bug me for 2 years!”
Your spouse could use the remaining funds to pay for hockey, ballet, dance school, etc. In the interim, your spouse can properly mourn you and perhaps find a new mate with Tom Cruise type looks! The point is, your spouse has more flexible options.

Now I’m just getting warmed up in terms of bank slamming. The big difference between a bank product and a personally underwritten policy is the underwriting. The lending institutions contracts are underwritten at time of claim versus time of issue. What does this mean? Well, if you purchased coverage from a lending institution, there is very limited underwriting that is completed. The questionnaire has about 3 questions that are completed by yourself, typically in the presence of a bank employee who is not licensed to sell insurance. When you make a claim in the event of your death, disability, or critical illness, the bank insurance company then proceeds to start the underwriting at that point. So, when you need the coverage most, the insurance company is verifying your application to see if you mis-represnted yourself. CBC Marketwatch did a program on this type of coverage and it was found that only 3 % of actual policy owners would be able to receive an insurance payment based on how they answered the questions. One of the questions was “Have you ever been tested for high blood pressure.” The answer, for anyone who has been cuffed by a physician for blood pressure, should be “Yes, I was tested for high blood pressure, but it was found to be normal.” Most people would be disqualified by answering “No” and ultimately would not receive insurance proceeds. The insurance institution would say that they had been fraudulent on their application.

The best way to have an insurance application underwritten is by a licensed and trained insurance agent. Yes, there are a few more questions on an individually underwritten application, and they may request a sample a sample of your blood, a letter of your physician, they may even do an ECG (Electo Cardiogram on your heart). But at the end of the day, the insurer will make a decision on you based on information received. In the event does occur, the chance of receiving a payout increases enormously. In my 20 year career, all my claims have been paid!! There has never been a decline to pay out.

As well, licensed insurance brokers generally carry an Errors & Omissions policy. That means you can sue them if your claim is denied. While I am not thrilled at the prospect of being sued, I show my clients my E&O policy as evidence of my accountability to their insurance payout. Touch wood, no claims to date. And that’s a testament to my desire to properly underwrite each policy.

What is interesting is that all the horror stories about insurance claims really belong to some of the bank policies. Those are the stories where premiums are paid and claims do not get fulfilled. You might want to watch the CBC Marketwatch segment, so we’ve added the link below.

http://www.cbc.ca/marketplace/in_denial/

Told you we were just getting warmed up.

Ok –here’s another issue with bank or lending institution insurance. The coverage they offer you is based on a level premium, but a declining payout. For example, if you purchase insurance to cover a $400,000 mortgage, they would set a premium for you. If you pay down your mortgage to $300,000, the premium stays the same. Yet if you died, the payout would be $300,000. It doesn’t make any sense?

Wouldn’t it be better if the premium stayed level and the coverage stayed level? So, if you purchase $400,000 of coverage, you receive $400,000 of benefit? As well, let’s say 3 years later, you have reduced your balance to $200,000. With an individual policy, you can cut your coverage in half (from $400 K to $200 K) and cut your premiums in half. Isn’t that a better solution?

Here’s another issue with the bank coverage. Because it’s part of a group plan, the insurance institution can change the rates or add restrictive riders. Let’s say there are a number of claims and they have to raise the premiums. The banks pass the new premiums onto you and you have to pay it.

With an individually underwritten policy, the premiums are what we call “Non Cancelable.” It sounds like a negative expression, kind of like you can’t get out of the insurance policy once you are in the contract. But what non cancelable means is the insurance company can’t change the rates or add restrictive riders. You, however, can cancel coverage at any time. Isn’t that a better route to go?

There are other major reasons to consider working with an insurance advisor regarding your mortgage insurance protection. For instance there are just more products to choose from. The lending institutions are stuck with the limited suite of products offered by their bank. An insurance broker can bring offerings from over 40 different carriers with products that include life, disability, critical illness insurance, long term care, health and dental benefits, and much more. And if the insurance advisor is doing is job right, he or she is not married to any individual carrier. Their job is to make sure you get the best coverage available for you, and not satisfy some bank mandate of selling their own branded institutional insurance.

Considering that the number of one reason for mortgage foreclosure is due to disability and illness, wouldn’t it make more sense to look at more of the living benefit types of programs as opposed to just the traditional life insurance plans? Remember, the average age of claim for a critical illness policy is age 41 – and people are claiming within 2.5 years of purchasing the policies. On a personal note, I have delivered many more critical illness policy claims than life insurance claims – and typically my clients are sitting upright when they receive the payout. We will examine Critical illness and disability insurance in other articles.

And did we mention return of premium products. Yes – for many of you, we expect you to be alive at the end of your mortgage. Many insurance products include return of premium where you are refunded the full amount of any premiums you paid into the policy. With certain life insurance products, like universal life (UL), you can actually increase your wealth through tax sheltered growth of your investments held within an insurance policy. That’s a whole other article, but many of my clients are using UL as a wealth creation product that has tax free growth similar to RRSP’s, yet with none of the tax bite at withdrawal time. As you know, RRSP’s are fully taxable as earned income when you withdraw the proceeds. UL can accumulate monies and actually have the proceeds withdrawn through a line of credit tax free at retirement. I have clients who place hundreds of thousands of dollars into UL policies as they know the tax benefits of sheltered life insurance policies – it’s a wealth creation scheme.

Ok – enough said. Now, we have a call to action. If you do currently have an insurance policy though a lending institution or bank, please speak with your financial advisor to make sure it is in your best interests to own that policy. If you are healthy, you should consider replacing it with an individually underwritten life, disability, and critical illness policy. And if you stay healthy, you can get your premiums back.

Protect Your Home, Protect Your Family, Stay Healthy, and get your Premiums back.

For further information, contact John Klotz. John is President of Northwood Mortgage Life. You can reach John at john.klotz@northwoodmortgage.com or phone (416)-969-8130 ext. 230

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Corporate Owned Life Insurance – Is it the best way for you to go? http://torontotalks.org/money-talks/corporate-owned-life-insurance-is-it-the-best-way-for-you-to-go/ http://torontotalks.org/money-talks/corporate-owned-life-insurance-is-it-the-best-way-for-you-to-go/#comments Mon, 08 Jun 2009 17:58:08 +0000 http://torontotalks.org/?p=80 The Advantages of Corporate Owned Life Insurance Written By: John Klotz 6-8-2009 IT Entrepreneurs and consultants need life insurance like anyone else. The question often gets asked whether or not a life insurance policy should be owned individually or by the corporation. Let’s take the example of Jim Smith, Software Entrepreneur. Jim is self employed and is the proud owner ...

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The Advantages of Corporate Owned Life Insurance

Written By: John Klotz
6-8-2009

IT Entrepreneurs and consultants need life insurance like anyone else. The question often gets asked whether or not a life insurance policy should be owned individually or by the corporation.

Let’s take the example of Jim Smith, Software Entrepreneur. Jim is self employed and is the proud owner of Zenith Consulting Inc. an operating company that has revenues of $1 million annually. Jim also has a Holdco company called Jim Smith IT Consulting Inc. (JSIT) . Jim is a happily married to Jane Smith and they have two young children, Stevie and Melissa, aged 9 and 5 respectively. Jane is stay at home mom who has given up her career in advertising. They are financially dependent on Jim’s income.

If something unforeseen happens to Jim such as a premature death or disability, it is important that coverage be in place to protect his family. So he sat down with his trusted and advisor, Davey Jones, and came up with an insurance amount that would pay off mortgages and provide an ongoing stream of income for perpetuity. Several millions of dollars of coverage were required to replace his income for the next 20 years whilst his family grows up. And he agreed to it and went through the appropriate insurance hurdles of blood work and physicians reports and got approved.

Now Davey turned to him and asked “Jim, so, who is going to own this policy, you personally, or your company?”

Jim looked like a deer in the headlights. “Davey, what the heck are you talking about? What’s the difference? Isn’t it the same? What’s the big deal? Why are you trying to confuse me?”

Davey took a deep breath and began to explain. “You see, Jim, you may want to consider holding this policy in your Holdco ( JSIT). Remember your decision to incorporate. It was based on the fact that you were being taxed in the 47% marginal tax rate. You felt you were getting hosed by Revenue Canada with the huge personal taxes you were paying. As well, you needed to be protected from lawsuits, so incorporation presented a great tax and risk reduction strategy. Your accountant set up your Opco (Zenith). He also set up your Holdco (JSIT). Lo and behold, you suddenly found yourself in the 16 % corporate tax rate. That’s a huge difference, wouldn’t you agree?

Jim sighed…”Yes – we were getting hammered before with taxes, and now my taxes are so much more reduced.”

Davey continued. “With the premium on your life insurance being owned by the corporation, the corporation only has to earn $1191 for every $1000 of insurance premium, assuming a 16 % corporate tax rate. If you own the policy personally, with your 47 % marginal tax rate, you will have to earn $1886 for the same $1000 premium. That’s a big difference!

Jim was slack jawed. “That’s is a big difference, Davey. I want to have it owned by the corporation.”

Davey looked patiently at his client. “I’m not finished, Jim. Because, there’s more. In many cases, corporate owned life insurance provides tax planning opportunities that would be unavailable if insurance were held outside of a corporation. For example, there is the existence of the Capital Dividend Account (CDA). If you die, the insurance proceeds are paid into the CDA. The monies in the CDA can be paid out generally tax free dividend to your heirs less the Adjusted Cost Base (ACB) of the policy. Generally speaking the ACB decreases over time and becomes insignificant.”

“So What does this mean to me?” asked Jim.

“Well it means that your corporation can pay for the premiums at corporate tax rates and that Jane and the kids can receive most of the proceeds tax free, if it is structured properly.”

Jim thought about it for a moment.”But you told me that life insurance was a tax free payout. Now you are talking about tax on the life insurance”

“Good listening, Jim,” said Davey. “That being said, perhaps if you are concerned about the small amount of insurance proceeds that will be subject to tax, then you can increase your coverage on the insurance policy? Considering that you are paying less as a result of your 16 % tax bracket, then it might make sense to do so.”

“OK” said Jim.” I’m sold.”

“But Jim, there’s still more. Life insurance is tax shelter. Any growth within the policy accumulates tax deferred. Remember you mentioned that you had $25,000 annually you wished to allocate from the corporation to build wealth for yourself personally. The neat thing about the policy we have set up is that you can deposit monies into the policy and not pay any tax on the growth. When you want to retire, you can use the cash values in the corporation for collateral for a loan. The monies will flow out of the line of credit into the corporation and you can use the monies to pay yourself a pension. At the same time, the interest on the corporate loan is tax deductible to the corporation. When you drop dead at age 100, the life insurance pays off the line of credit and the rest of the monies flows tax free to your family through the Capital Dividend Account.”

“So you are telling me that not only can I protect my family, but I can shelter corporate assets tax free and create a retirement plan for myself?” plied Jim.

“Yes – I think you get it,” said Davey. “But there are some drawbacks to having the life insurance policy held in corporation versus owning it individually. One of the issues is creditor protecting the assets. If creditors make a claim against your corporation, they could seize the cash value of the insurance policy. That’s why it’s important to have the policy in the Holdco (JSIT), versus the Opco, (Zenith). As well, if the policy is owned by Opco (Zenith), the cash value is considered passive income and it could jeopardize the $750,000 Capital Gains exemption that Opco (Zenith) is allowed. This would occur if the cash values of the policy made is such that Opco (Zenith) went offside on the fact that 90 % of its assets must be used principally in active business. So, again, we’ve got to use the Holdco (JSIT), to host the policy.”

“Thanks Davey,” said Jim. “I guess there’s more to this insurance than meets the eye. Let’s set up the policy under my HoldCo (JSIT) and start the retirement plan! Now let’s grab our clubs and head out to the links!”

This article was written by John Klotz. John is President of Northwood Mortgage Life. You can reach John at john.klotz@northwoodmortgage.com or call 416-783-7526.

The characters in this article are fictitious. However, the ideas are not. But the concepts discussed in this article are meant to be used in conjunction with the appropriate advisors including financial consultants, accountants, and lawyers. We will not be held responsible if you act on this article without getting advice from the proper disciplines.

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How Should a Self Employed Consultant Purchase Insurance? http://torontotalks.org/money-talks/how-should-a-self-employed-consultant-purchase-insurance/ http://torontotalks.org/money-talks/how-should-a-self-employed-consultant-purchase-insurance/#comments Thu, 02 Apr 2009 18:00:43 +0000 http://torontotalks.org/?p=82 How should a Self Employed Person buy insurance? Written By: John Klotz 4-2-2009 When it comes to purchasing insurance, many self employed consultants are confused as to how they should cover off their risks. This article will address this concern. In assessing your insurance needs, you should purchase insurance that covers off a Critical Risk. A critical risk is a ...

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How should a Self Employed Person buy insurance?

Written By: John Klotz
4-2-2009

When it comes to purchasing insurance, many self employed consultants are confused as to how they should cover off their risks. This article will address this concern.

In assessing your insurance needs, you should purchase insurance that covers off a Critical Risk. A critical risk is a risk that leads to severe financial hardship, or bankruptcy. You deal with a Critical Risk through Risk Transfer. With a Risk Transfer, you transfer the risk to someone else, namely an insurance company. If the inevitable happens, they cover your Critical Risk.

A minor risk, such as dent to your car or a cracked windshield, should not be insured, since the ramifications of this incidence, while annoying, are not life altering.

Since you are self employed, your most Critical Risk would be your inability to earn a living. If you became disabled, you would not be able to pay your monthly bills. One of your monthly bills would be your premiums for your health and dental plan – which would cancel because you would not be able to make the payments.

So, your first priority should be to purchase an Income Protection Plan, otherwise referred to as Disability Insurance. If you became disabled, you would receive your monthly paycheque to cover your bills.

Next on the list is life insurance. If you died, your family would lose your income forever. Again, you cover this Critical Risk by transferring it to an insurance company through purchasing a life insurance policy.

Thirdly, you need to cover yourself off from expensive drug treatments. If you develop a disease or sickness that requires expensive drug treatments, this could lead to serious financial consequences. Again, you transfer this risk to an insurance company and, if you develop a disease with expensive medical treatments, the insurance company picks up the tab. This risk transfer can be satisfied through either a comprehensive drug plan combined with a critical illness insurance policy.

Where this whole insurance discussion about risk transfer falls down is with Dental coverage. A typical dental plan pays out $600 / year, yet, the premiums cost $50 / month. Do the math – it’s simply a cost savings plan and not really insurance. Again, the type of insurance you should purchase should pay $10000 for each dollar of premiums which is line with purchasing insurance for Critical Risks.

What you should do with your dental bills is pay them out of pocket. At the same time, we can discuss a program that will allow you to deduct your payments for your dental bills just like you would deduct any other business expense. You can create such a deduction through a health spending account, which are available through a variety of offerings.

Ideally, you should consult about your requirements with an experienced insurance advisor who is versed in Risk Management.

This article was written by John Klotz, BA, CFP, CLU, CH.F.C, RHU, TEP.
John is a Risk Management and Wealth Creation Specialist with Northwood Mortgage Life.
You can reach John at john.klotz@northwoodmortgage.com or call (416)-969-8130

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Medical Expenses http://torontotalks.org/money-talks/medical-expenses/ Mon, 28 Jan 2008 19:33:03 +0000 http://torontotalks.org/?p=111 Medical Expenses Written By: John Klotz 1-28-2008 As we stare down the last few days of 2002, it’s time to consider some helpful YEAR END TAX PLANNING techniques. So here are a few simple tax planning points to consider (preferable when your not inebriated with rum laced egg nog!). Medical Expenses Your medical expenses and those of your spouse/partner and ...

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Medical Expenses

Written By: John Klotz
1-28-2008

As we stare down the last few days of 2002, it’s time to consider some helpful YEAR END TAX PLANNING techniques. So here are a few simple tax planning points to consider (preferable when your not inebriated with rum laced egg nog!).

Medical Expenses

Your medical expenses and those of your spouse/partner and of your dependants may be claimed for any 12-month period ending in the taxation year and may be claimed by you or your spouse/partner. To qualify as eligible medical expenses, payments must be for approved treatments by recognized medical practitioners (such as doctors, nurses, dentists, chiropractors, naturopathic doctors, physiotherapists, psychologists or dietitians), private hospitals, attendants or private health insurance premiums. To get the most tax savings, medical expenses for the whole family should be claimed by the lower income spouse.

Charitable Donations

Donations made to registered charities, registered Canadian amateur athletic associations, Canadian municipalities, the federal government or a provincial government are eligible for a tax credit that reduces the taxes you must pay.

In order to qualify for tax credits, charitable donations must be made and receipts dated by December 31st. To maximize tax credits, consider having one spouse claim all donation receipts. Remember that charitable donations may be carried forward for up to five years. This strategy may allow more of the donations to earn a higher credit.

Education Credits

Education and tuition credits are transferable within certain limits. If you have a son or daughter in post-secondary school, and they have no income, parents are permitted to claim a maximum of $800 in federal tax credits per child. In addition, the cost of academic and training courses, application and admission fees, athletic fees and library and laboratory privileges may also be claimed. The school will send a tax receipt for these fees on a Form T2202.

Fees That Are Tax Deductible

Interest paid to earn investment income may be deducted. If a loan is procured to purchase shares or mutual funds, the interest is deductible (this does not apply to RSP loans). Other fees that may be deductible include the cost of renting a safety deposit box, management and safe custody and related accounting and bookkeeping fees. This does not include commissions charged by brokers or financial planners. Income tax regulations stipulate that only fees paid to a professional investment counselor for managing or for giving advice on purchasing investments may be deducted. While investment counsel fees are deductible, the yearly administration fee for self-administered registered plans is not tax deductible.
Capital Gains and Capital Losses

As the end of the year approaches, it is time to review non-registered investment portfolios and the performance of these holdings. If you have been the recipient of capital gains either from stocks, bonds, mutual funds or real estate, you will have to pay tax on those gains, assuming they were held as capital property. Capital losses can be used to offset capital gains and can be claimed for the previous three years or carried forward indefinitely. Be aware that if you are planning to sell any securities before year-end, the last trading day for settlement in the year is three business days before the year-end. This year the last trading day is December 24th, 2002.

While the idea of tax planning may seem like a long way away today, these tips can help you make that April 30th deadline go more smoothly.

This article was compiled by John Klotz. John is President of Northwood Mortgage Life. You can reach John at john.klotz@northwoodmortgage.com or call 416-969-8130 ext. 230

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How to Keep your RRSP’s Creditor Proof http://torontotalks.org/money-talks/how-to-keep-your-rrsps-creditor-proof/ http://torontotalks.org/money-talks/how-to-keep-your-rrsps-creditor-proof/#comments Mon, 28 Jan 2008 19:31:48 +0000 http://torontotalks.org/?p=109 How to Keep your RRSP’s Creditor Proof? Written By: John Klotz 1-28-2008 You know, every so often, something pops up in my day to day practice that stops me in my tracks. Such an event occurred with a prospective client. Here’s the deal. This individual is a successful consultant who makes a healthy six-figure income. She’s been socking it away ...

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How to Keep your RRSP’s Creditor Proof?

Written By: John Klotz
1-28-2008
You know, every so often, something pops up in my day to day practice that stops me in my tracks. Such an event occurred with a prospective client.

Here’s the deal. This individual is a successful consultant who makes a healthy six-figure income. She’s been socking it away into her home and RRSP’s to name a few. Infact, her RRSP’s are in excess of $300,000. Not bad for someone in their late 40’s!

So, what’s the problem? Well, here it is. She got involved in a bad business venture and is holding the bag for the losses of the company. And she is only a minority shareholder!

Here’s the downside. She’s being sued and if the suit is successful, she will lose her house and her RRSP’s! Ouch!

The truth is, if she had met me before the trouble had begun, she could have creditor protected herself and kept it all! But now, because the lawsuit is in action, she can’t do anything. Infact, she asked me if she could creditor protects her RRSP’s and I advised her that it was too late. Since there is a lawsuit pending, a move to Creditor Protected RRSP’s will not work for her. And I’ll tell you why as we go through this article.   But if she had acted prior to the sniff of a lawsuit, she would have been fine and her RRSP’s would be out of the reach of credtiors.

So, you might be asking yourself, just what are creditor protected RRSP’s? And do I need them.

Creditor Protected RRSP’s are referred to as segregated funds. Like a mutual fund, a seg fund pools money from many investors so it can be managed by a professional and provide a good return. Infact, many seg funds look like brand name mutual funds like AGF, Trimark, and Fidelity. But seg funds are actually insurance contracts with two components: an investment that produces the return and an insurance contract that covers the risk. Unlike mutual funds, seg funds guarantee either 75% or 100% of your principal. A small part of the fund’s assets goes to insure there will be enough cash to pay that guarantee. Since there is an insurance element with the seg funds, they are considered annuities. Therefore, they are creditor protected since they are effectively insurance contracts.

To ensure creditor protection of a segregated fund, the beneficiary must be a family member. The wording of the Insurance Act s. 196 (2) for the protected family beneficiary : is as follows:

196(2) While a designation in favor of a spouse, same-sex partner, child, grandchild or parent of a person whose life is insured, or any of them, is in effect, the rights and interests of the insured in the insurance money and in the contract are exempt from execution or seizure. [Definition includes common-law and same-sex parties who live together in a conjugal relationship]

Note to reader: Don’t get cute and name your mistress – leave your creditor protected RRSP’s to your family members.

That being said, you can’t wake up one morning and find yourself facing a lawsuit (like my client) and decide to plop your funds into a creditor protected RRSP. According to the legislation,“Settlement” of your RRSP’s into a segregated fund must be done within 1 year of bankrupt, or within 5 years of bankruptcy if the property was at the time required to pay the person’s debts. If there is a sniff of trouble at the time of the transfer to the creditor protected RRSP, this will be construed as Fraudulent Conveyance , which basically means the individual knew they were in trouble and looked for a safe hideaway. The courts rule in favor of the creditors in times like this and seize the funds.

For the client mentioned in this article, it’s just too late, as a quick transfer to a segregated fund will be construed as fraudulent conveyance. That being said, she’s considering taking out her RRSP’s altogether, flying to Vegas, and betting on RED! More power to her at this point!

What does this mean to you? Well, if you are a consultant or a business owner, you really must consider creditor protecting your RRSP’s. And you have to do so when your affairs are in good standing order. If you contribute regularly to a segregated fund and you find yourself with a litigious creditor, then the creditor will not be able to access your RRSP’s for loan payment.

It’s best to speak with your advisor about segregated funds to see if they suit your financial planning requirements.

This article was written by John Klotz. John is President of Northwood Mortgage Life. You can reach John at john.klotz@northwoodmortgage.com or call 416-969-8130 ext. 230

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Is a Trust a Must? http://torontotalks.org/money-talks/is-a-trust-a-must/ http://torontotalks.org/money-talks/is-a-trust-a-must/#comments Mon, 28 Jan 2008 19:30:18 +0000 http://torontotalks.org/?p=107 Is a Trust a Must Written By: John Klotz 1-28-2008 Many people believe that trusts are only for the very wealthy, but that\’s not the case. All of us make financial commitments during our lifetime that we want to see continued. A trust can provide the control needed to ensure that these commitments to the financial security of others last ...

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Is a Trust a Must

Written By: John Klotz
1-28-2008

Many people believe that trusts are only for the very wealthy, but that\’s not the case. All of us make financial commitments during our lifetime that we want to see continued. A trust can provide the control needed to ensure that these commitments to the financial security of others last a very long time. Here are some questions to ask yourself to help decide whether you need a trust:

  • Do you have a beneficiary with special needs or one who is too young to manage an inheritance?
  • Do you want to provide income to someone without forcing him or her to make all the investment decisions?
  • Do you have a cottage or family business?
  • Are you concerned about taxes?

If you\’ve answered yes to any of these questions, a trust could be an important part of your overall financial strategy.
Trusts For Now and For The Future

In most cases, one of the following two types of trusts will meet your needs:

Inter Vivos or �Living� Trust: An inter vivos or �living� trust is established while you are alive. Your specified assets are transferred to a trustee that ensures that the terms of the trust are carried out and that the trust is professionally managed. An inter vivos trust often becomes the foundation of your estate plan.

Testamentary Trust: A testamentary trust is set up under the provisions of your Will and can consolidate your estate plan for your heirs. Upon your death, your specified assets are retained in trust and administered according to the instructions given in your Will.

Both types of trust can help you achieve a number of important estate planning objectives, including:

  • Support for a beneficiary with special needs
  • Providing income for loved ones for life without the burden or responsibility of managing the estate\’s assets
  • Ongoing support to a favourite charity
  • Offering privacy because, unlike a Will, a trust agreement can remain a private document between you and your trustee
  • The education or support of a beneficiary such as a child or grandchild
  • Holding in trust a family member\’s share of your estate until the individual reaches an age you consider appropriate
  • Holding an important asset such as a cottage or family business
  • Income-splitting opportunities

Professional Help is Key

Professional administration is vital to the long-term success of your trust and can include such matters as:

  • Collection, reinvestment, and distribution of income capital
  • The custody and safekeeping of assets
  • Comprehensive reporting to beneficiaries
  • Trust tax preparation and filing
  • Maintenance of personal financial records

A Flexible, Lasting Solution

A trust can be one of the most effective and flexible ways to ensure property is managed according to your directions or to transfer assets to your family or a charitable organization, both during and after your lifetime. And it doesn\’t have to be complicated.

If you think a trust may be right for you, speak with your financial advisor who can then either provide trust services or help put you in touch with a professional trustee to provide you with advice on:

  • The role of a trust within your overall financial plan
  • The structure of your trust agreement
  • A comprehensive, long-term strategy to protect and transfer your trust assets
  • The ongoing management of your trust

While trusts can be useful in many estate-planning situations, they\’re not right for everyone and carry the potential for adverse tax consequences if they are not set up properly. That is why it is important that you enlist the help of your financial advisor as a key member of your advisory team that also includes trustee, legal and tax advice. If you decide to set up a trust for your estate, your financial advisor can help ensure that you get access to professional help you need to get it done right.

This article was compiled by John Klotz., BA, CFP, CLU, CH.F.C, RHU, TEP.� John is Vice President – Financial Services, of LMS Prolink Ltd.��� You can reach John at johnk@lms.ca or (416)-595-7484 ext. 305

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Do I need Critical Illness Coverage? http://torontotalks.org/money-talks/do-i-need-critical-illness-coverage/ Mon, 28 Jan 2008 19:28:52 +0000 http://torontotalks.org/?p=105 Do I need Critical Illness Coverage? Written By: John Klotz 1-28-2008 Many of you have read stories of people who have elected to travel to another country for access to medical treatment not otherwise available in Canada, and have heard the staggering costs associated with these decisions. Others may have read of families renovating homes to accommodate their loved ones ...

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Do I need Critical Illness Coverage?

Written By: John Klotz
1-28-2008

Many of you have read stories of people who have elected to travel to another country for access to medical treatment not otherwise available in Canada, and have heard the staggering costs associated with these decisions. Others may have read of families renovating homes to accommodate their loved ones suffering from serious illnesses. Not only have these families endured life-threatening illnesses but also significant financial costs.

Founded in South Africa in 1989, by the brother of the famous heart surgeon, Dr. Christian Barnard, critical illness insurance was first introduced to Canadians in the mid-1990s.

In Canada, more than 15 companies now offer variations of this important insurance policy. While you may say that you have planned for this unexpected illness with the purchase of life and disability insurance, critical illness insurance fills a void in financial planning. While life insurance policies pay out upon death (and in some cases upon the diagnosis of a terminal illness) and disability insurance covers lost wages due to illnesses or accidents, critical illness insurance attempts to bridge the gap. Upon the diagnosis of a critical illness, a lump sum payment is made to the insured individual (usually paid 30 days after diagnosis of the covered condition but policy conditions will vary).

Do I Need It?

Each year 1 in 4 Canadians will contract heart disease, and the approximate acute care costs are $27,500 per stroke (Heart and Stroke Foundation of Canada – 2001 Statistics). The average Canadian male and female is at a 40% and 35% (respectively) risk of developing some form of cancer, but at a much lower risk of dying from this cancer diagnosis (Statistics Canada – Health/Status 2002). These serious illnesses are often described as “life-altering” because of the need for large amounts of cash, in order for families to put their lives back together again. How would you pay for the extra medical costs not covered by provincial healthcare plans, or make your mortgage and bill payments? What can you do to protect yourself and your family in the event that you suffer from a life-threatening illness?

When diagnosed with a critical illness, the first few months following diagnosis can often be the most traumatic and expensive. Critical illness insurance provides a “living benefit” without specifying or restricting benefits. In other words, the money from the insurance contract can be used to cover unusual costs, such as renovating or retrofitting your home or automobile to accommodate your illness, to access available treatment in another city or country or to infuse cash into your business.

How Do I Search For The Right Policy?

Each insurance policy is different, so examine policies closely. Be sure to read the detailed descriptions of which medical conditions are covered or not covered. There may be exclusions for certain illnesses. A family history and a personal medical history may be taken and coverage for a pre-existing condition may result in its omission from your policy. In most cases a recurrence of an original illness may not be covered.

When conducting your review, ask how long before the policy is paid out after diagnosis. While 30 days seems to be the norm, there could be exceptions. While most policies are available to Canadian residents between the ages of 18 to 65, some can be renewed until the age of 75 or even for life. Premium amounts are usually determined by your age, gender and whether or not you are a non-smoker. Many critical illness insurance contracts have an interesting provision that provides a full refund of premiums without interest (or a minimal amount) at death or at maturity, if no benefit has been paid during the life of the policy.
How Much Do I Need?

The best way for you and your financial advisor to estimate your coverage is by constructing a cash flow statement. Consider the immediate loss of income before your long-term disability benefits begin. Think about debt elimination, ongoing loss of income during your recovery and initial and post-illness expenses. You may also require personal care during your recovery or alternative forms of treatment available in another province or country. While all of these considerations are difficult to answer, you can see that the critical illness policy can go a long way to help take the pressure off at a vulnerable period of your life.

A proper or well-executed financial plan and an estate plan should include life insurance and disability insurance as well as critical illness insurance. Whether you are an employee, a business owner, or the sole income provider for your family, your ability to earn income is your biggest asset and an unexpected critical illness represents a risk to your financial plan.

For further information, contact John Klotz. John is President of Northwood Mortgage Life. You can reach John at john.klotz@northwoodmortgage.com or call 416-969-8130 ext. 230

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How to Choose an Advisor http://torontotalks.org/money-talks/how-to-choose-an-advisor/ http://torontotalks.org/money-talks/how-to-choose-an-advisor/#comments Mon, 28 Jan 2008 19:27:27 +0000 http://torontotalks.org/?p=103 How to choose a financial advisor? Written By: John Klotz 1-28-2008 If you speak with most people, you will find they have an accountant a lawyer and a family physician. There is one more advisor that they count in on their team and that is a financial advisor. Infact, this is probably one of the more important relationships that one ...

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How to choose a financial advisor?

Written By: John Klotz
1-28-2008
If you speak with most people, you will find they have an accountant a lawyer and a family physician. There is one more advisor that they count in on their team and that is a financial advisor. Infact, this is probably one of the more important relationships that one will maintain throughout one’s lifetime.

Yet, if a financial advisor’s role is so important, how does one go about choosing a person for this role? What do you look for and how do you evaluate the individual’s fit to your financial needs? Do you look for someone you like, or do you shop for qualifications? Or just go on a reference from a friend?

Here are some tips on how to choose an advisor:

Do Some Research
Start by asking around your friends, family members, or co-workers. Ask whom they use and how it has worked for them? Has their portfolio grown? Are they happy with the advice they are receiving? Is the advisor only interested in big fish clients? Or would they take on smaller accounts if there were an upside potential with the client?
Get out to financial planning seminar. Go and listen to a few planners present their know how. Have a conversation with them. Stare them straight in the eyes and ask them if they would be sincere about taking on a new client?
3) Ask Questions: Before you hand over your hard earned life savings for an advisor to handle, ask a lot of questions. Find out about the advisors firm and their professional profile. How many years have they been licensed for, what are their professional qualifications? How does the person get paid ie commission or fee for service? Ask for referrals. That being said, very often the relationship between advisor and client is often confidential. Arranging referrals by clients can compromise the advisor’s fiduciary duty of being completely confidential about his or her clients. But ask anyway.

4) Arrange a face to face interview with the advisor. Consider this like going to purchase a home or automobile. Do you buy the first house you see? Should you marry the first girl/guy you kiss? In this regard, you should arrange a few meetings with different advisors. Get a feel for whom you feel more comfortable with? Ask questions like:

• What are your areas of expertise?
• How do you provide services that are outside your expertise?
• Describe your typical clients and what you do for them.
• How can you help me plan my financial future?
• What is your approach to saving and investing?
• How often will you review my portfolio?
• What kinds of statements or other information will be sent?
• How are you compensated — by fees paid by me or by commissions from what I buy through you?
• What do I receive in return for the fees or commissions?
• Provide me with names and phone numbers of clients who are on your reference list.

Check References
Once you feel comfortable with your choice, ask for the names an phone numbers of several clients who are willing to be used as references. Call one or more to get an opinion of the advisor’s strengths and weaknesses.
Education and Gray Hairs Count – Imagine, visiting a physician who did not attend medical school? Going to a dentist who never went to dental school? At the same time, would you hand over your finances to someone who never took a financial planning course (other than Selling Whole Life Insurance 101). The financial services industry has wonderful educational courses that elevate planners to a fiduciary role through designations and accreditations. An example is the CFP (Certified Financial Planner) designation, the CLU (Chartered Life Underwriter) designation, the CIM (Certified Investment Manager) to name a few. These are highly technical programs that require vigorous study and ultimate know how. There are codes of ethics through these programs that instill the needs of the client over the needs of the advisor. Truly, an educated, designated advisor places the needs of the client above his or her own needs.

Communicate Your Needs and Expectations to your advisor. Share with them your goals and your tolerance for risk. Set up a schedule of how you would like to be serviced. Many advisors often enter into contracts with clients where they promise to deliver a certain level of service. This level can be monitored and, if it is not up to the client satisfaction, the relationship can and should be terminated by the client.
8) Be In Charge of Your Financial Plan
Never take any advice you don’t understand or which makes you uncomfortable. Your advisor may be the expert — but you are the boss. Be proactive. It’s your money being put to work.

This article was written by John Klotz. John is President of Northwood Mortgage Life. You can reach John at 416-969-8130 ext. 230 or email at john.klotz@northwoodmortgage.com

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Disability Insurance Unplugged http://torontotalks.org/money-talks/disability-insurance-unplugged/ Mon, 28 Jan 2008 19:25:46 +0000 http://torontotalks.org/?p=101 Disability Insurance Unplugged Written By: John Klotz 1-28-2008 If you are a self-employed consultant working in the Internet space, you should consider purchasing disability insurance. You might be asking yourself, what are the chances of becoming disabled for a period of more than 90 days before you reach the age of 65? At the age of 35, you have a ...

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Disability Insurance Unplugged

Written By: John Klotz
1-28-2008
If you are a self-employed consultant working in the Internet space, you should consider purchasing disability insurance. You might be asking yourself, what are the chances of becoming disabled for a period of more than 90 days before you reach the age of 65? At the age of 35, you have a 50 percent chance of become disabled for more than 90 days. And if your disability did last 90 days, the average length of time for disability would be 2.8 years. Source: Commissioners IDA Morbidity & Commissioners Mortality Tables, & Commissioners Ordinary Table, Society of Actuaries.
What would be the impact on your life of not having any income for 2.8 years? For most of us, it would be both financially and emotionally devastating.
So, what possible sources of income would you have if you became disabled for 2 or 3 years? Well, you could utilize your savings. Unfortunately, it only takes 6 months of a disability to wipe out 10 years of savings. How would you feel if you depleted all your assets in that short a period of time?
Another alternative source of money would be to borrow money from the bank. However, the banks make it hard enough for us to borrow money when we are physically well. Imagine how difficult they will make it for you if you apply for a loan and you are disabled. In fact, being disabled is the worst possible time to apply for a line of credit, so it’s really not an option.
Another option would be to borrow money from your relatives. I think this option is self-explanatory and its only consequence is strained family relationships and bad feelings towards the disabled person (you).
Or, your spouse can take care of the family income. But the problem is, that unless you are currently banking one full income, can your spouse be expected to become the sole parent, private nurse and breadwinner at the same time. As well, this option is not available to the “single” people of the e-commerce world.
Another alternative would be to rely on government benefits like the disability benefit on the Canada Pension plan. However, you should read the fine print on this program. The definition states that in order to collect on CPP, your disability must be “severe and prolonged.” This means that your disability must have no chance of rehabilitation and death is to be expected within a twelve-month period. This is a very restrictive definition and disability has to be total.
Finally, you can purchase Disability Insurance, the most reasonable solution. This is the only source of money you can really count on during a period of disability – and the least expensive. For a reasonable monthly premium, you can protect yourself and your family from an unexpected event.
Here are some features to look for when purchasing disability insurance. Firstly, the definition of disability should recognize your talents as an Internet professional. The most liberal definition of disability in a contract is the Own Occupation. This states that you will be disabled if, “due to sickness or injury, you are unable to perform the important duties of your occupation.”
This type of disability will allow you to work in another professional and still receive benefits. And the insurer cannot force you to work at a demeaning job like the serving tables. (not that there is anything wrong with serving tables, but it should be your choice to do so, and not the insurer).
The definition that is the most restrictive is the “Any Occupation” which states that you are disabled if “due to sickness or injury, you are unable to perform any occupation for which you are reasonably fitted by training, education, or experience.” It’s this type of definition that is very subjective and you can find yourself waiting tables with the insurer claiming you are fit and not eligible to receive benefits.
Other features that are important on a disability contract include the Residual disability benefit. This clause states that if you become partially disabled and suffer a loss of earnings of say 30 percent, then you will receive 30 percent of your benefit. This is probably the most important clause to an Internet Professional because it allows you to work part time and receive partial benefits. Since most of your work is sedentary, you could potentially work part time from home and still receive benefits.
The policy should also be Non Cancellable. This means that regardless of claims and experience, the insurer cannot increase premiums or add restrictive riders to the contract.
There are additional riders you may want to consider, such as a Future Increase Option (FIO) and a Cost of Living Rider (COLA). . The FIO is important to you as it allows you to increase your coverage each year without showing proof of good health. While we are young, we can take our health for granted, but as we age, this is not the case. As well, the application process to obtain disability coverage is invasive, and most of my clients don’t want to face the scrutiny of the insurance company each year. And the COLA increases your benefit each year in the event you go on claim. Inflation is the enemy of a fixed income person and eats away at your purchasing power. The COLA protects you from this.

If you are a die in your bootstraps kind of individual, you may want to consider the Return of Premium benefit. This provision guarantees to return a large percentage of your premiums in a given period in the event you do not make any claims. Usually, the policy has to be inforce for 10 years. You do pay a premium for this benefit, but it might make sense for you to do so.
There are other features of this coverage to consider, but it’s best done on a case by case basis. Give this article some thought and look into protecting yourself and your family. Northwood Mortgage Life provides a discounted insurance program available through your association.
If you would like more information on this topic, please contact John Klotz. John is President of Northwood Mortgage Life. You can reach him at john.klotz@northwoodmortgage.com or call 416-969-8130 ext. 230.

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