Category Archives: Insurance

The Importance of your Life Insurance Agent

Life insurance is a major financial commitment.

Just as you seek out expert advisors for other financial needs – bankers, stockbrokers, and the like – your choice of a life insurance agent is a key decision.

Your life insurance agent plays an important role in the financial planning process. He or she:

  • Helps you assess your life insurance needs through a financial needs analysis.
  • Arranges for the purchase of a policy.
  • Provides on-going service, such as beneficiary changes, review and updating of

life insurance policies.

  • Assists the beneficiary in making the claim.
  • Assists you with other financial planning needs (disability insurance, retirement

planning, estate planning).

Agents are licensed and regulated by the provincial government to sell and service life insurance. They may also sell disability insurance, RRSPs, group insurance and segregated funds. Those who also sell mutual funds or other financial services like stocks or property and casualty insurance require a separate license. Not all agents handle every product.

Most agents are paid a commission by the insurance company issuing the product.

Policy dividends: How to make the best use of them

Dividends occur in participating life insurance policies. How you make use of them is vital to getting the best value from your life insurance.

These are the most common dividend options:

Increase your coverage: Use your annual dividends to add extra amounts of cover- age to your policy, at no cost to you. The most popular use of dividends, this option is called paid-up additions or bonus additions. This option also increases future cash values. Alternatively, dividends could be used to purchase one-year term insurance.

Enhanced protection: You can combine the two options mentioned above by
using dividends to purchase a combination of paid-up insurance and one-year term insurance to provide additional protection equal to a pre-determined amount. As dividends increase over time, they are used to replace the term insurance with paid-up insurance so the additional protection becomes permanent. This can be a cost-effective way of purchasing whole life insurance.

Reduce the cost of your insurance: Use your dividends to reduce your premiums on the policy every year.

Take as cash: You can, of course, take policy dividends in cash.

Leave to accumulate: Leave dividends on deposit with the insurance company to earn interest or to be invested in an equity growth (segregated) fund. Returns on the latter are not guaranteed. Dividends left in the policy to accumulate can be withdrawn at any time and, on your death, accumulated dividends, unlike cash values, are added to the face amount payable to your beneficiary or estate. Interest earned on dividends left on deposit is subject to income tax.

Premium offset: This concept, also called premium offset, is a combination of the premium reduction and the paid-up additions options. Typically, after premiums
have been paid for a number of years, say, 10-15 years, future dividends are used to pay part of the premiums and the balance of the premiums is paid by surrendering some of the paid-up additions. Remember that policy dividends are not guaranteed and that projections about when your premium offset date will take effect may have to be adjusted if dividends are lower (or higher) than anticipated. This option could result in tax reporting to you as the policyholder, if cumulative dividends exceed cumulative premiums paid. Be sure to get a full explanation from your agent.

How to make your Life Insurance work for you

Beneficiaries: Who is the life insurance for?

The beneficiary is whoever is named (designated) under the policy to receive the insurance money on your death.

Do you want to name a beneficiary (e.g., spouse), or leave the money to your estate or to a trust? If the money is left to your estate, it will be subject to probate fees when the estate is settled. If you choose a trust, be sure to seek tax advice.

Creditor Protection

The beneficiary designation affects whether or not insurance proceeds are protected from your creditors. Provincial insurance laws provide that where a spouse, child, grandchild or parent is named as the beneficiary, the insurance money is exempt from seizure by any creditors you may have.In Quebec, the beneficiary must be related to the policyholder. In other provinces, such a beneficiary must be related to the person whose life is insured.

This special protection includes adopted children in most provinces, but it does not apply to an ex-spouse unless he or she has been named an irrevocable beneficiary.

Irrevocable Bene ciary

You may name an irrevocable beneficiary or an irrevocable trust. This means that you, as the policyholder, can’t change or revoke that beneficiary without the latter’s consent. The money is protected from your creditors and doesn’t become part of your estate. (In Quebec, a spouse is considered an irrevocable beneficiary, and divorce automatically cancels that preferred status.)


Note that a designation in a will does not override an earlier beneficiary designation under an insurance policy, unless the will specifically identifies the insurance policy in question. (However, even a specific will would not override an irrevocable beneficiary designation.) In one court case, a man, in his will, had named his present wife as sole beneficiary to his estate. But he hadn’t changed the appointment of his former wife as beneficiary in his life insurance policy or identified the policy in his will. The court ruled that the former wife should get the money.


Term Life Insurance

Term arrangements give protection scope to a predetermined period (e.g., a settled number of years, or to a set age) and after that lapse. A demise advantage is paid just on the off chance that you pass on amid the term of the arrangement.

Term strategies are regularly accessible for terms of one, five, 10 or 20 years, or to age 60 or age 65. The premiums for the most part stay level amid the predetermined term however increment if that term is restored (e.g., premiums would expand at regular intervals on a five-year sustainable term approach).

Most term arrangements are non-taking an interest and do exclude money esteems or other non-relinquishment esteems. Thus, premium expenses are lower than for lasting strategies – at any rate when you’re more youthful.

Term to 100

Frequently classified as a lasting arrangement, term to 100 strategies give extra security scope through to age 100. Normally they don’t pay profits or incorporate money esteems, however some may give other non-relinquishment esteems. As needs be, premiums are lower than for conventional entire life approaches.

Permanent Life Insurance

Permanent Life Insurance has a few varieties: entire life, widespread life, variable life. All are intended to give protection insurance to your whole lifetime, as long as you keep the arrangement in compel.

Essential highlights of changeless approaches

Level premiums: Most changeless approaches have premiums that stay level over the lifetime of the arrangement, despite the fact that the danger of death increments with age. To accomplish this, the premiums charged in the underlying years are higher than the hazard you speak to at that point and are contributed to shape strategy holds that finance the premiums paid in later years when you are more established and the hazard is higher.

Money esteems: These stores gather as a money esteem, or money surrender esteem. The money esteem is accessible to you on the off chance that you need to obtain against your

arrangement or to cross out (surrender) it. (Generally, the money esteem isn’t added to the face measure of the arrangement, which is paid out on your demise.)

Non-relinquishment alternatives: These are decisions accessible to a policyholder on the off chance that he or she ends premium installments on an approach. They enable the policyholder to keep the approach in constrain or to take a money settlement. (For additional, see page 14.)

Taking an interest approaches and arrangement “profits”: A taking an interest strategy partakes in the money related understanding of the insurance agency, and strategy “profits” are announced every year and paid to policyholders.

Premiums depend on preservationist evaluations of future costs, demise claims and premium or other speculation income. At the point when encounter is more good than these evaluations, a surplus is made, which enables the organization to acknowledge taking an interest policyholders for profits. Since profits depend on future experience, for example, expenses and income, they are not ensured.

Profits can be paid in real money, left in the strategy to collect, used to pay some portion of the premiums, or used to buy extra protection. (See page 15.)

Non-taking part approaches: A non-taking part arrangement does not partake in the safety net provider’s profit and does not get any profits.