What Happens If You Die without a Will?

Most people think that if you die without a will, your spouse will automatically get everything, but this is not necessarily true. If you die without a will, then legally this means you died intestate.

When this happens, the decisions about who gets your estate no longer remain in your control. This could leave your loved ones without the financial support they need, not to mention, the added complexity in having a government agency, the Public Guardian and Trustee manage your children’s inheritance. And to top it all off, the Public Guardian and Trustee can pay themselves an administration fee directly out of your estate!

On death, your property is divided into two categories: jointly own assets and personally owned assets.

All jointly owned assets will automatically transfer to the surviving spouse. For the average Canadian, this usually includes your home and any joint bank accounts.

The remaining personal assets will form your estate. This would typically include items like your car, boat, prized artwork, jewellery, personal bank accounts and other investments.

From your personal assets, your spouse is entitled to the first $65,000.00 of the estate plus a 1/2 or a 1/3 share in the remainder of the estate. The other 1/2 or 2/3 portion gets shared equally by your children. While most people would not disagree with the current rules, it can produce some unforeseen results.

Let’s briefly consider the blended family scenario, where each spouse has a child from a previous relationship. What happens if both you and your spouse pass in a common disaster like a car accident and neither have executed a will? Many would agree the logical result should be your assets would go to your child, and similarly, your spouse’s assets would go to your spouse’s child.

Unfortunately, this is not what the law says will happen. So long as one spouse outlived the other spouse by a single second, that spouse will take their share from the other spouse’s estate. But what if it can’t be determined who died first? Then law deems that the younger person outlived the older person.

Once your spouse takes their share of your estate, that share forms part of your spouse’s estate. This could result in your spouse’s child getting at least 1/2 and possibly all of your estate, leaving very little to nothing left for your child!

So it is important for everyone to make sure they have properly planned for the disposition of their assets through an executed a will in order to ensure that all your loved ones will be adequately provided for after your death.

How Much Life Insurance do you need and a simple way to calculate it.

Hello All,

Figuring out how much life insurance you should purchase can be a complicated process; no matter what shortcut strategies like multiplying your income imply.  More goes into planning than just your annual salary. You want to find the middle ground; insurance coverage that will meet the needs of your loved ones, that has an affordable premium payment and that is not far in excess of what you truly need.

A simple way to figure how much insurance coverage you should shop for is to take into account four main categories of financial need, in addition to some other contingencies.  These categories are income replacement, debt, final expenses, and education expenses for your children.

Your family’s most immediate need will be the money to cover the expenses of your final arrangements.  Whether you decide in advance not to have a service there will be costs for burial or cremation.  This cost can exceed $20,000.    Make sure that if you want something lavish to celebrate your life after you are gone that you plan for the extra cost.  The benefit of using insurance coverage for this is that beneficiaries are usually allowed quick access to part or all of the policy.

You need to take into account your debts.  These need to include the mortgage or rent on the home you live in now and the likelihood of that expense increasing over time.  Include loan payments such as student loans, credit card balances, and car loans.   Even if your beneficiaries do not decide to sell the home they will need the money to cover the payments each month.  This will ensure a home for them to live in long-term.

After debts have been paid off and final expenses have been met your family should not need your full annual salary but a portion of it.  It is important that you take into account the replacement of your income. Usually this amounts to about 50%-60% of your pre-tax income.

The thought of college expenses is very overwhelming whether you have one child, three or even more.  You need to plan for an estimated cost of college once your children reach 18.  Over the past 20 years tuition at most colleges both public and private has nearly tripled.  Remember to include this amount of money for each of your children.

You need to total the amounts for each category and combine them to get an estimate of your insurance needs.  Medical problems, spousal income, a paid off home, and more will figure into exactly what your needs will be. You also need to consider how long you want the coverage to last.  If you are most worried about covering the expenses of your children growing to adulthood you might consider a 20 year term policy.  If you want to ensure that your spouse and children receive death benefits when they are independent adults you will want to check into a whole-life policy.

Five Reasons of Using an Insurance Broker

When buying insurance, you can choose to buy from an insurance agent who represents a specific insurance company, or you can choose to purchase your insurance through an independent insurance broker.  Often, an independent broker can prove to be the better choice, and it’s easy to find the  the best  premiums and products  from a broker in your area online.  Here are some of the advantages of purchasing your insurance through an independent insurance broker:

1.     An insurance broker works for you – not the insurance company.  Your insurance broker is not tied to a specific company or a specific company’s products.  They can search a number of companies and their offerings to find the best deal for you.  A broker can take a thorough look at your personal needs and recommend the best coverage for you based on your situation.  Brokers who are registered with the Insurance Broker’s Association of Ontario (IBAO) are bound by the organization’s Code of Ethics to find the best coverage available for their clients.  Brokers can get you the best deal available from their portfolio of offerings, while agents are bound to represent a specific company, and are therefore more limited in the number of products they can offer.  They can only recommend and only have access to their own company’s products, which may or may not be the right fit for your specific insurance requirements.

2.    Brokers are experienced and professional.  Brokers deal with a wide range of products and services and are qualified to recommend the policies that best suit your needs from a broader portfolio of options than a direct insurance agent.  They typically have experience with clients dealing with losses and can guide you through the often confusing and stressful claims process, answering any questions that you may have.  Brokers usually work for smaller companies representing big insurance companies and can often offer faster and more personalized support.  In addition, every insurance broker must be bonded, meaning that you are protected in the event of any dishonest conduct.

3.    Brokers (in Ontario) are licensed through the Registered Insurance Brokers of Ontario (RIBO).  RIBO was established in 1981 and is a self regulated organization that authorizes the licensing of brokers for all general insurance in Ontario.  Brokers are required to meet RIBO requirements in ethical conduct, professional competence and insurance related financial obligations.  RIBO provides brokers with the opportunity for life-long learning and a chance to continually improve their knowledge and skill.  Brokers are required to earn additional education credits each year to ensure that they stay up to date on the latest developments in the insurance industry and offer comprehensive advice and knowledge.

4.    Your privacy is protected.  Brokers are required by their Code of Ethics to maintain your privacy and keep all client discussions and information completely confidential.

5.    Brokers give full disclosure on commission rates and their effect on your insurance premiums.  Brokers are required to disclose their commission rate and the effect this has on your insurance premiums.  Broker compensation is included in your premium payments and your broker will provide you with a statement at the point of sale that tells you how much of your premium goes toward the broker’s commission.  This allows you to make an informed choice when buying insurance.

Brokers in Ontario are also required to declare any financial links with specific companies that could be considered a conflict of interest.  For example, your broker must disclose any ownership position they may have in a specific insurance company, or any loans or financial relationship they may have with a specific company.  It all comes down to providing you with all the information you need to make an informed choice when you decide which policy is right for you.

Choosing an insurance broker means that you have a professional on your side when choosing the best policy for yourself and your family.  Brokers offer professional and unbiased advice, ethical conduct, and full disclosure of all the information you need to make an informed decision. Insurance brokers are also experienced and skilled in dealing with the claims process from many different insurance companies – giving them a unique perspective.  They can talk you through each stage while giving you personalized advice and excellent customer service.

Brokers will help protect your privacy and advocate to the insurance companies on your behalf.  They’re committed to lifelong learning, ensuring that they are informed on the latest changes and adjustments to insurance policies and legislation to give you the best options available when you purchase your next  life or mortgage and disability insurance policy.  It’s easy to find a local broker online when you get a life insurance quote to find the best rate.

Eight dos and don’ts for a healthy RRSP

 

1. Don’t ask friends for advice.

There are a lot of misconceptions about RRSPs out there, so don’t assume that what someone tells you over lunch is necessarily right. Go to a reliable source. There are numerous books on the subject, as well as magazine and newspaper articles. The Canada Revenue Agency has a page that is a useful gateway to a wealth of RRSP information, and a Google search will turn up many more references.

2. Do choose the right plan.

I have not seen any precise numbers, but it’s a safe bet that billions of dollars of RRSP money is tied up in guaranteed investment certificates. The banks love GICs and promote them aggressively. Why not? They get to use your money for many years (five-year maturities are standard), loaning it out to others at higher rates and making a nice profit in the process. Meantime, your RRSP grows at a snail’s pace. My advice is to open a  Mutual Fund or Segregated Funds with extra Guarantees As mentioned earlier, an average annual gain of between 5 per cent and 6 per cent, which is realistic in a conservatively managed plan, will keep you ahead of inflation and build genuine value in your RRSP.

3. Don’t speculate.

Never forget that your RRSP is just a mini pension plan. That means you must think like a pension fund manager – protecting capital, avoiding unnecessary risk, and aiming for a reasonable return on investment. While all investments carry some degree of risk, there’s a wide chasm between prudent risk and speculation. Your RRSP is not the place to gamble. Keep it conservative, even dull.

4. Do contribute regularly.

I know you’ve heard this a million times. Well, now it’s a million and one. The easiest, most painless way to build an RRSP is to have automatic contributions deducted from your account each month. People who wait until RRSP season comes around often end up without any money to invest. They vow to do it next year but usually don’t.

5. Don’t blow the refund.

The tax refund generated by an RRSP contribution is windfall money. It’s like winning the lottery – it is all yours to keep, with no tax to pay on it. Depending on how much you contributed, we could be talking about thousands of dollars. The temptation, especially with younger people, is to spend it. I can suggest several better ideas that will build your personal wealth in the process. Pay down credit card debt. Pay down the mortgage. Contribute it to a TFSA. Put it back into the RRSP as the first contribution for the next tax year. Add it to your non-registered investment account. Just don’t blow it!

6. Do borrow, but carefully.

If an RRSP loan is paid off quickly, preferably within a year, the math is compellingly in favour of going that route if the cash for a contribution is not immediately available. Let’s look at the case of someone who has a 35 per cent marginal tax rate and needs $5,000 to make an RRSP contribution. We’ll assume interest of 4 per cent on the loan. Using our assumptions, a $5,000 loan will generate a tax refund of $1,750. If the invested money earns 5 per cent this year, the RRSP will grow by $250 in 12 months. The total gain (investment income plus tax savings) is $2,000, which is a 40 per cent return on investment. If the loan is repaid over 12 months at a rate of $425.75 per month (principal and interest), the total interest expense will be only $108.99. That can be reduced further by applying the tax refund against the loan principal. In sum, it has cost slightly more than $100 to generate a cash benefit in the first year of $2,000. And the invested $5,000 keeps on giving. With an average annual compound rate of return of 5 per cent, it will grow to almost $17,000 over twenty-five years. So by all means, borrow for an RRSP as long as the loan can be repaid within a year, or two at the most. But avoid getting locked in to a long-term loan, even if the interest rate is attractive. The returns diminish for each year that you are paying it off, especially since the interest is not tax-deductible.

7. Don’t contribute if you expect your income to be low.

RRSPs are great savings vehicles, but they aren’t right for everyone. In particular, older people who expect to have low incomes after retirement should avoid them. Any money available for savings should be put into a TFSA instead. This is because RRSP/RRIF withdrawals are taxable income and will affect your eligibility for income-tested government benefits and tax credits, including the Guaranteed Income Supplement (you lose fifty cents for every dollar in income over $3,500), the GST tax credit, and the age credit. TFSA withdrawals, on the other hand, are not considered income for any of these calculations.

8. Do pay off high-interest loans first.

I have always regarded RRSPs as one of the pillars of wealth building, but that doesn’t mean they should always take top priority. Anyone carrying high-interest, non-deductible debt, such as a credit card balance, should pay that off first before even considering an RRSP contribution. And finally, do open an RRSP and contribute to it regularly. In future years, you’ll be happy you did.

What factors should I consider before buying private disability insurance?

First of all, we’re talking long-term here. For short-term needs, you are better off funneling pricey premium payments into a liquid emergency fund. That way, if you never need it, it’s your money!

On to long-term…

As is the case with life insurance, there are two basic types of disability insurance: group (obtained through work or membership in an organization) and private (purchased on your own). Unlike life insurance, however, private disability insurance is almost always more expensive than group, often significantly so.

So, if you carefully examine your employer’s plan and decide you need more disability coverage, start by looking in your own back yard. Some employer plans allow you to buy additional coverage — often a boost from 60% to 80% of your salary — through the same group plan, at bargain rates. Also, if you are a member of any groups, clubs, or professional associations, check those sources too.

If these leads don’t pan out and you’re forced to buy a private disability policy, it’ll be expensive, but you may also find some nice advantages to ease the pain a little:

Some advantages to private disability insurance

1.   Benefits you receive if you become disabled will be tax-free, as long as you paid the insurance premiums with after-tax money.
2.   The policy will not be tied to your current job. This leaves you free to experience a mid-life crisis, heading off to the Himalayas with disability insurance in tow. More seriously, if you have entrepreneurial ambitions, it might be a good idea to lock in an individual policy while you can. Once you become self-employed, affordable disability insurance will be very difficult to find.
3.   If you are a highly skilled, highly paid specialist — like a brain surgeon, a power forward for the Knicks, or a wedding DJ — you may want disability insurance that locks in this exceptional income level. This more-expensive class of policies is called own-occupation coverage. Any-occupation coverage is the more-common — and less-expensive — group insurance option. Any-occupation policies require you to take lower-paying jobs in your field, if available, with no insurance payments to make up for any lost income.

Some important things to look for in private disability insurance

• Be sure the policy is “non-cancellable.” This guarantees that policy premiums cannot be changed as long as you pay them on time. Avoid “guaranteed renewable” policies. These sure sound great, but only “non-cancellable” locks in premium costs.
• Be sure the policy is non-cancellable to age 65.
• Unless you have direct access to Nancy Reagan’s astrologer, don’t purchase an “accident-only” policy or one with a limited benefit term (five and 10 years are common). Sure, these policies are cheaper, but they don’t cover disabling illnesses or the whole of your working life, respectively. Who knows what the future holds?
•  ”Residual benefits” is an important rider. This benefit — which can also come in the form of a loss of income policy — pays the difference between your old salary, prior to becoming disabled, and the best salary you can get afterward. Not only does this protect you from the downside of any-occupation policies (being forced into a lower-wage career), it might also head off an awkward situation in which you are forced to choose between sitting at home (and collecting disability) or working part-time (and losing all disability payments).
•  If you can afford it, a cost-of-living rider will protect your future benefits from the ravages of inflation. Also, with a private policy, your “income” will be set at the time you take out the policy. You might want to increase this protected income level as your career progresses, without a medical exam. Check to see if this requires the purchase of a policy rider.
• The waiting period, before disability payments kick in, acts just like a car insurance deductible. The more emergency savings you have, the longer you can wait for disability income, the lower your premiums will be.
• Watch for clauses that exclude pre-existing medical conditions or dangerous hobbies, unless of course you are in perfect health and define excessive risk as two cards on bingo night.

Believe it or not, this isn’t a complete listing of all the important details regarding long-term disability insurance. If you decide to purchase a private policy, then you might want to work with an independent insurance agent or a financial planner. The Internet is a great source of information, but when a purchase combines high cost with this many potential pitfalls, it often pays to have an expert on your side, that’s me.

Non-medical life insurance , what is it?

Non-medical life insurance does not require medical testing, doctor’s reports or medical reports before your application is approved. Who should consider this type of insurance?

• Anyone who has been declined for insurance requiring medical tests
• Anyone who has poor medical history and would likely not qualify for traditional insurance
• Anyone with average to good medical history
• Non-smokers and smokers
• Those who do not want to go through medical testing or are uncomfortable with needles
• Anyone wanting fast and immediate coverage

What type of non-medical life insurance is available?

We offer a range of non-medical life insurance products to meet different needs. Whether it is Term insurance to cover a certain period of time or Permanent insurance that lasts for life, there is something for you. Deferred insurance may be for you if you have been declined in the past two years and you do not have any of the conditions in the first part of the application. It is available as Term and Permanent insurance.

NON-MEDICAL PERMANENT LIFE INSURANCE:

• Permanent life insurance does not expire as long as premiums are paid.
• Because the insurance is permanent, you can be sure your loved ones will be cared for when you die.
• There are three plans available through Canada Protection Plan: Deferred Life; Simplified Life; and Simplified Life Plus. Qualifying for Simplified Life Plus means you can have a higher death benefit amount.

NON-MEDICAL TERM INSURANCE

Term insurance is temporary insurance that allows you to purchase only for the number of years you wish to be protected. There are three types of policies available all available as a 10, 20 or 100 year term: Deferred Term; Simplified Term; and Simplified Term Plus. Qualifying for Simplified Term Plus means you may have lower premiums. Who is Canada Protection Plan?

• Canada Protection Plan is the leading supplier of non-medical life insurance in Canada.
• They offer insurance plans that are among the most secure in Canada.
• 100% independently owned Canadian company that designs insurance products to meet the needs of Canadians. They recognize that some people have more health challenges than others but still need life insurance. It’s not always easy to think ahead to difficult times, but having life insurance can give you comfort in knowing that when you die, loved ones need not worry about finances. Call us today at: 1-800-661-9156 and we would be happy to help you find the most suitable insurance to meet your personal needs.

Premiums
Male and Female rates

Minimum & Maximum Premium
$5,000 minimum – $50,000 maximum .

If death, other than accidental occurs within the first two (2) years the contract is in force, the benefit paid will be limited to the premiums paid plus 3% interest.

Payable for a reduced period according to the age at issue:     Payment Period:

Issue Ages			Issue Ages
6 months- age 65	First 2 year	103% premiums paid	20 years	$50,000
66-74	First 2 year	103% premiums paid	up to 85 years of age	$50,000
75-85 years of age	First 2 year	103% premiums paid	10 years	$50,000

Death Benefits – (Accidental)
There is no waiting period. In case of accidental death, the benefits payable will be double the face amount.

Guaranteed Face Amount and Premiums
The face amount and the premiums are guaranteed and will never increase.

Guaranteed Cash Surrender Values and Reduced Paid-up Values
This policy generates cash surrender values and reduced paid-up values.

Once you complete the form, you will receive a response — along with your quote — in just 24 hours.

Difference between Term Insurance and Permanent Insurance ! What you need and why !

When you are shopping for life insurance, a lot of people are not aware of some very simple differences between term and permanent insurance. This  article series is setup to shed some light on most important factors you need to be aware of before you make your purchase. 

Why do we use Term life insurance?

Term insurance is setup to be present for a set “term” or period of time. This term vary from 5, 10,  20 , 25  and 30 (and many other options) and after that term expires it then goes up in price… sometimes the price increase is pretty dramatic.

We use this term insurance for your protection needs that are for a set amount of time. This could be to offset a mortgage, pay for your children’s education, or pay off other debts (business, consumer, etc) if you passed away.

Why do we use permanent insurance?

We use permanent insurance for your insurance needs that are unlikely to change over time. This could include things like burial costs, donations to charity, or giving money to your heirs (this could also be considered charity for a lot of people). These are all needs that are unlikely to change dramatically as you age and will likely still be your needs/wants 20-50 years from now.

How do they work together?

Typically for young families in the Lower Mainland at around 30 years old we are buying our first houses, getting married, and having kids. At this point you may have some consumer debt, a large mortgage, and young kids that you will want to put through school should something happen to you. This is one of the times in your life when you will need the most amount of insurance compared to any other time in your life. Most of these expenses are also pretty time sensitive. By the time you reach 50 or 60 you should have the majority of your mortgage paid down (hopefully paid off) and your kids will be out of school and moved out of the house (if you’re lucky). At this point you will have no need for that term insurance anymore and should be able to remove it before it increases in cost.

The permanent insurance should already be put in place and continue to be in place for the rest of your life as this is insurance that doesn’t change much over the course of your life.

There are a few other things to be aware of and I’ll explain a few of those in the next  article.

 

 

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