Living Benefits
Critical Illness Insurance
One of the great advantages of modern technology is that it’s allowing more people to survive once fatal medical conditions. However, the unfortunate reality is that many survivors must bear a heavy financial burden for things like medical treatment outside Canada, or ongoing care at home or in a facility. What can prevent depletion of your savings if you should fall ill? Critical Illness (CI) insurance can stop loss and protect your assets. Critical Illness Insurance (pdf)

Living Care
You work hard, save and invest to reach your financial goals. You want to retire without financial worries, control your own future and never burden your loved ones. Maybe take a dream trip. Spend more time with family and friends. A summer home. An inheritance for your loved ones … But life is unpredictable. Some of those dreams may have to change if you develop serious health concerns. Manulife’s LivingCare long term care insurance can help you prepare for the unexpected. LivingCare helps preserve your savings and investments and gives you choice about the type of care you receive. It lets you live all of your life your way. Living Care Guide (pdf)

Long-Term Care Insurance
The good news you ask? Positive lifestyle changes and medical advances over the last few decades have resulted in people living longer. The bad news? Living longer increases the chances of developing chronic medical conditions and the costs associated with caring for these conditions can be astronomical. Fortunately, an insurance product exists that can provide financial support required, should there be a need for long-term care in the future. Long-Term Care Insurance Overview (pdf)

Estate Planning
Estate Bond
Would you like to give more to your family and less to the government? If your answer is “yes,” you might want to consider an Estate Bond®.
Estate Bond (pdf)

The Estate Reallocation Strategy
The key to effective estate planning is to minimize estate tax and maximize the amount of wealth that is transferred to the next generation. But how? Life insurance offers a unique strategy. The Estate Reallocation Strategy (pdf)

Q. My two partners and I are all in our mid thirties and we have a computer consulting corporation where we are equal shareholders. We have ten employees and we service medium and large size corporations. I am the technical expert, Mark is the project leader and administrative coordinator, and Kim is our marketing specialist. The loss of any one of us would be a major setback for the business. We generate $3 million in business revenue annually and have about $400,000 in equipment and other business property. While we hold some cash on our books, the loss of any one of us would result in a 25 per cent decline in business revenue and that would have a serious impact on the viability of our company. What can we do to protect the business in the event of the premature loss of any one of us? – Carlos H.

The significant loss of business income could have serious implications for the viability of your business and replacing a member of the team would be time consuming and costly both financially and emotionally. The best solution would be corporate-owned key person coverage. Here’s how it works. One low cost option is for your company to purchase term life insurance policies on the three key individuals. The cost is approximately $100 a month for one million dollars of coverage. Another option is to buy a multi-life universal life policy on the three key persons. While a more costly approach, there is more flexibility. For example, for $500,000 coverage on each individual, the annual cost would be approximately $4,500 to $4,800. The company owns the policies and pays the premiums because it can use the small business preferred tax rate on approximately the first $400,000 of business income. In this way, the insured individuals are not paying the premiums with after-tax dollars. By choosing universal life, there is flexibility to add more key people to the policy, to increase or decrease the coverage at a later date, increase premiums to create a tax deferred cash value, or make other changes as the business needs change or evolve.

With key person insurance in place, you and your partners have ensured that in the event of the loss of a team member, the company will have the financial means to stay afloat as well as search and pay for a new partner.

Bev Moir is a Senior Investment Executive and financial planner with The Moir Team at ScotiaMcLeod,Toronto. ScotiaMcLeod is a division of Scotia Capital Inc., a member of the Scotiabank Group. Member Canadian Investor Protection Fund (CIPF).

This article is for information purposes only. It is recommended that individuals consult with a financial or tax advisor before acting on any information contained in this article. When discussing Life Insurance Products, ScotiaMcLeod Investment Executives are acting as Life Underwriters representing ScotiaMcLeod Financial Services (Ontario) Inc. The opinions stated are not necessarily those of Scotia Capital or The Bank of Nova Scotia

Following last week’s column on the basics of critical illness, several additional questions were asked.

Q. What happens if the person insured for critical illness passes away before the benefit is used? – Shane B.

A. Critical illness insurance pays a lump sum benefit after the diagnosis of the first occurrence of a critical illness and after the insured person survives the specified waiting period (usually 30 days.) Many companies offer an optional rider that will return the cumulative premiums on death of the insured if the insured’s benefit has not been used.

Q. How much does critical illness insurance cost? – Ann R.

A. The cost of critical illness insurance depends on factors such as age, gender, smoker status, current health status, height, weight, lifestyle and medical and family history. Here are sample monthly premiums for $100,000 of critical illness coverage that is a level cost to age 75 for non-smoker individuals:

Female
age 40 $75.06
age 50 $119.07
Male
age 40 $88.92
age 50 $156.15

Q. Can I use the critical illness insurance lump-sum benefit to pay off my mortgage or other debt? – Bob B.

A. One of the benefits of critical illness insurance is the flexibility it provides in how the benefit is used. Funds are advanced tax-free and can be used in any way you want. The choice of using the funds to pay off the mortgage or other debt is yours.

Q. What happens to my lifestyle and savings goals if the breadwinner of the household becomes disabled and unable to work? How do I get disability insurance and what does it cover? – George B.

A. Knowing the answers to these questions and taking appropriate action depending upon personal circumstances, means the difference between the peace of mind that comes from having a financial safety net in place, or potential hardship due to a lack of financial planning.

Insurance is a cornerstone of any financial plan. In the event that an insured individual becomes disabled and unable to work, disability insurance provides a benefit, usually 60 per cent to 70 per cent of salary, after a specified waiting period. Depending upon the type of coverage, the benefit period could last months or years. Additionally, disability policies vary based on their definition of total or partial disability and depending on the insured person’s ability to perform the duties required in their own occupation or any occupation.

Many employers offer group disability insurance coverage for their employees. Employees should know what coverage they have, how to apply for it, and what is required to apply. Self-employed individuals and those not covered by an employer need to ensure they have adequate coverage to cover living expenses while unable to work. There are resources available through federal and provincial benefit plans and various advocacy groups and philanthropic organizations that provide education and support for the disabled. For example, in Ontario, many employees are covered by the Workplace Safety and Insurance Board (WSIB). Contract workers and some part-time employees may not be covered.

Disability can happen to anyone at any time. Unless the benefit is in place prior to injury, it is too late to apply once you can no longer work. Now is the time to think about what you would do if you were temporarily or permanently disabled. Would you have adequate savings and resources to meet your living expenses for six months…let alone several years?

Bev Moir is a financial planner with The Moir Team at ScotiaMcLeod in Toronto. ScotiaMcLeod is a division of Scotia Capital Inc., a member of the Scotiabank Group. Member CIPF.

This article is for information purposes only. It is recommended that individuals consult with a financial or tax advisor before acting on any information contained in this article. The opinions stated are not necessarily those of Scotia Capital or The Bank of Nova Scotia.

Recent media reports have highlighted the cost of specialized medications and treatments that aren’t covered by provincial health plans, and are generally unavailable except for those with personal savings or private health plans. Have you stopped to consider what would happen to you and your family if you needed expensive treatment or care and did not have readily available cash?

Unfortunately, many of us do not have to look far beyond our circle of family, friends and co-workers to find someone who has suffered a major illness or injury. Recovering from a critical illness can leave one devastated both emotionally and financially. Financial stress can result from the inability to continue working, medical costs not covered through provincial or personal medical insurance plans, or the financial setback to one’s long-term savings strategy.

Fortunately, there are options. More and more Canadians are discovering the value of critical illness insurance, and how it can protect their hard-earned financial resources if they’re diagnosed with a critical illness. This type of insurance is relatively new and allows those who are ill to focus on what’s most important – getting better.

What is Critical Illness Insurance?
Critical illness insurance is designed to provide coverage in the event you are diagnosed with any of the policy’s covered illnesses. A lump-sum benefit is paid for surviving a specific waiting period (usually 30 days) after diagnosis of the first occurrence of a critical illness that is defined in the policy. The most commonly covered conditions are life-threatening cancer, heart attack, stroke and major organ transplant, however most policies cover eighteen or more other illnesses. People are living longer and medical advances now provide the potential for more to survive. One of the greatest values of critical illness insurance is the fact that the choice of how to use the benefit is yours and the funds are advanced tax-free. It can be used to pay for experimental medical treatment, to fund child-care, to pay off debt, or to allow a spouse to take time off work to support you. Another important benefit is to assist in asset preservation. You may already have accumulated substantial savings that could be used to fund your recovery, but is this how you envisioned spending money you’ve worked hard to build for your retirement?

Is Critical Illness Insurance expensive? What if I pay and don’t make a claim?
Critical illness insurance is more expensive than traditional life insurance coverage. However, many companies offer an optional rider that will return your cumulative premiums when the policy expires (typically age 75) if you are fortunate to have avoided any of the policy’s specified illnesses.

A decade or two ago, the chances of surviving major illnesses such as stroke, heart attack or cancer were significantly lower than they are today due to medical advances. Having critical illness insurance in place ensures that if you do fall ill, financial considerations will not compound your worries. Critical illness insurance ensures you are able to focus on getting well and being with your loved ones.

Bev Moir is a financial planner with The Moir Team at ScotiaMcLeod in Toronto. ScotiaMcLeod is a division of Scotia Capital Inc., a member of the Scotiabank Group. Member CIPF.

This article is for information purposes only. It is recommended that individuals consult with a financial or tax advisor before acting on any information contained in this article. The opinions stated are not necessarily those of Scotia Capital or The Bank of Nova Scotia. When discussing Life Insurance Products, ScotiaMcLeod Investment Executives are acting as Life Underwriters representing ScotiaMcLeod Financial Services (Ontario) Inc.

Q. We have recently bought a larger home using the appreciated value in our first property to make a substantial down payment. However, we still have a large mortgage and we’re concerned about what would happen should either of us die prematurely. What do you recommend? Marianne and Bill N.

As perhaps your largest investment, protecting your home should you become ill or die prematurely is prudent. Creditor insurance is an insurance policy that pays out your borrowing balances (credit card, bank loan, line of credit, or mortgage) should you become critically ill, seriously injured, or die. The most common type is for loss of life protection that will pay the principal and interest remaining on your mortgage should you die before paying it off. Creditor insurance premiums are based on your age and the amount of coverage you are seeking. Similarly, mortgage life insurance, based on your joint lives and first to die, is a life insurance policy that pays your outstanding balance in full should either of you die. An alternative approach is to investigate the purchase of stand-alone insurance in an amount that would cover the balance of your mortgage and possibly an additional amount to replace income should either of you pass prematurely. This is especially important if you have young children or other dependents. When a stand-alone policy is purchased, frequently term insurance is used (rather than permanent insurance which costs more). When buying term insurance, consider getting the options to renew when the term ends and to convert to permanent insurance. This gives added flexibility to obtain new insurance even if you no longer qualify medically or if your circumstances change and you want the benefits associated with permanent insurance.

What are the implications of missing the deadline to file my income tax on Monday, May 1st? David. B

If you owe the government any taxes, interest may apply. Interest is compounded daily at the prescribed rate (currently 8%). If you have overpaid your taxes throughout the year, the interest rate paid on overpayments is 6%. As these rates can change every three months, get the current rates by going to the website, www.cra.gc.ca/interestrates or call 1-800-959-8281. Best to meet the deadline to avoid additional payments and, if you have overpaid, seek professional advice to avoid this scenario in the future.

Bev Moir is a financial planner with The Moir Team at ScotiaMcLeod in Toronto. ScotiaMcLeod is a division of Scotia Capital Inc., a member of the Scotiabank Group. Member CIPF.

This article is for information purposes only. It is recommended that individuals consult with a financial or tax advisor before acting on any information contained in this article. The opinions stated are not necessarily those of Scotia Capital or The Bank of Nova Scotia.

Q. As a retired person concerned about preservation of retirement savings, I am wondering if “seg funds” are an appropriate investment to get both diversification and security? – Bob H.

A. Segregated funds are pooled funds similar to mutual funds with an insurance feature. Segregated funds offer a guaranteed return of principal after a specific holding period, usually 10 years, or a death benefit guarantee of the principal or the current market value, whichever is greater. The guarantee comes with a cost in the form of a higher management expense (MER). This is offset by the peace of mind that comes with the guarantee; it is a mechanism for an individual who would normally not qualify for insurance to obtain an insured investment. Finally, seg funds may provide creditor protection, especially helpful to business owners and entrepreneurs.

Q. I was recently downsized from my job and face a period of unemployment. I will have about $40,000 after-tax from the sale of a capital asset and I’m wondering if I should use some of these funds to make an RRSP contribution or invest these funds in a secure investment in case I need them to support my lifestyle while I am unemployed? – Jennifer M.

A. It is important for you to have access to some of your cash reserves while you are unemployed, especially as you don’t know how long it will last and you may incur additional expenses throughout the year ahead. However, there are advantages to making even a small RRSP contribution. You may owe additional taxes if you received a severance benefit, and may be required to make a homebuyers or lifelong learning plan repayment so as not to have the withdrawal considered taxable income. Lastly, by making an RRSP contribution, you may obtain a tax refund which could be used to support your lifestyle. It would be advisable to consult with a professional accountant to get advice specific to your situation and to determine an appropriate contribution amount to maximize your benefit without investing all of your cash reserves.

Q. I am confused about how an RRSP contribution affects my tax bracket. – Sunny S.

A. Saving for retirement in a RRSP is one of the few tax breaks available to employed Canadians. The government allows us to contribute up to 18% of the previous year’s income (less pension adjustment if applicable and up to the prescribed maximum contribution amount set each year). The impact of the contribution to an RRSP is to lower one’s taxable income and hence the amount of income tax payable. As a Canadian taxpayer, you have the choice of paying the income taxes or saving for your retirement! The choice is obvious and it is the reason it’s so important for individuals to take advantage of this government-supported opportunity. Maximize your RRSP contribution each year and benefit from the chance to grow your RRSP savings in a tax-sheltered RRSP account.

Bev Moir is a financial planner with The Moir Team at ScotiaMcLeod in Toronto. ScotiaMcLeod is a division of Scotia Capital Inc., a member of the Scotiabank Group. Member CIPF.

This article is for information purposes only. It is recommended that individuals consult with a financial or tax advisor before acting on any information contained in this article. The opinions stated are not necessarily those of Scotia Capital or The Bank of Nova Scotia.

I’ve had a number of questions since my last column on critical illness insurance about protecting oneself and one’s family, should the breadwinner become disabled and unable to work. Can anyone get disability insurance? Is it costly? Does one even need it? What is it and what does it cover?

Knowing the answers to these questions and taking appropriate action depending upon personal circumstances, can mean the difference between the peace of mind that comes from having a financial safety net in place, or potential hardship due to a lack of financial planning.

Insurance is a cornerstone of any financial plan. In the event that an insured individual becomes disabled and is unable to work, disability insurance provides a benefit, usually 60% to 70% of salary, after a predefined waiting period. Depending upon the type of coverage one has, the benefit period could last months or several years. Additionally, disability policies vary based on their definition of total or partial disability. Benefits also vary depending on the insured person’s ability to perform the duties required in their own occupation.

Group disability insurance coverage is provided by many employers as a benefit for employees. It’s important that employees understand what coverage they have and how it can be accessed, including any time requirements for application. Self-employed individuals, or those not covered by their employers, need to ensure that they have adequate coverage to ensure that their living expenses are covered while they are unable to work. Additionally, there are resources available through federal and provincial benefit plans, and various advocacy groups and philanthropic organizations exist to provide education and support for the disabled.

In Ontario, many, but not all employees are covered by the Workplace Safety and Insurance Board (WSIB). Contract workers and some part-time employees may not be covered. In the situation of an employee working for an employer covered by the WSIB, the worker is entitled to a range of benefits if the illness or injury is directly related to the workplace and various other conditions.

Disability can happen to anyone at any time. Unless the benefit is in place prior to injury, it’s too late to apply once one can no longer work. A book by Janet Freedman provides first-hand experience and insight, Hit by an Iceberg: Coping with Disability in Mid-Career is a useful resource and will get you thinking about what you would do if you were temporarily or permanently disabled. Would you have adequate savings and resources to meet your living expenses for six months…let alone several years?

Bev Moir is a financial planner with The Moir Team at ScotiaMcLeod in Toronto.

This article is for information purposes only. It is recommended that individuals consult with their own financial or tax advisor before acting on any information contained in this article. The opinions stated are not necessarily those of Scotia Capital or The Bank of Nova Scotia. When discussing Life Insurance Products, ScotiaMcLeod Investment Executives are acting as Life Underwriters representing ScotiaMcLeod Financial Services (Ontario) Inc.

Many readers have been following the recent media reports about the high cost of specialized breast cancer medications that have been unavailable up until recently for Canadian women. I’ve recently had some questions from women about what would happen to them and their financial situation if they needed expensive treatment or care and did not have readily available cash.

Unfortunately, many of us do not have to look far beyond our circle of family, friends and co-workers to find someone who has suffered a major illness or injury. Recovering from a critical illness can leave one devastated both emotionally and financially. Financial stress can result from the inability to continue working, medical costs not covered through provincial or personal medical insurance plans, or the financial setback to one’s long-term savings strategy.

Fortunately, there are options. More and more Canadians are discovering the value of critical illness insurance, and how it can protect their hard-earned financial resources if they’re diagnosed with a critical illness. This type of insurance allows those who are ill to focus on what’s most important – getting better.

Critical illness insurance is a fairly new type of insurance protection that pays a benefit upon the diagnosis of a critical illness – unlike traditional insurance that pays a beneficiary upon death. Upon diagnosis of a critical illness, the insurance company imposes a waiting period. Once it has expired, the policy provides the policy owner with a lump-sum cash benefit. The choice of how to use the benefit is yours and it is tax-free.

Some things to consider when investigating critical illness insurance plans:

your current financial plan
flexibility of the product
strength of the coverage offered for the conditions that matter most to you,
range of features and options, and the company’s reputation.

A decade or two ago, the chances of surviving major illnesses such as stroke, heart attack or cancer were significantly lower than they are today due to medical advances. Having a critical illness insurance plan in place ensures that if you do fall ill, your worries will not be compounded by financial ones. Critical illness insurance will ensure you are able to concentrate on getting well and being with your loved ones.

For more information about critical illness and other types of insurance visit: www.insurance-canada.ca

Bev Moir is a financial planner with The Moir Team at ScotiaMcLeod in Toronto.

This article is for information purposes only. It is recommended that individuals consult with their own financial or tax advisor before acting on any information contained in this article. The opinions stated are not necessarily those of Scotia Capital or The Bank of Nova Scotia. When discussing Life Insurance Products, ScotiaMcLeod Investment Executives are acting as Life Underwriters representing ScotiaMcLeod Financial Services (Ontario) Inc.