Insurance

Get acquainted with segregated funds: An insurance-based investment that for some, is a perfect fit.

December 14, 2020 by Darcie Doell and Laurianne Osmak

The financial world uses a language that can be confusing for people who don’t have a deep understanding of investing. It can be more difficult when it comes to a particular product they may have heard of, but don’t have a firm grasp on its intent or how it works. Segregated funds are a unique kind of investment product and getting acquainted with a few key terms can help boost your knowledge.

Segregated fund contract: A pool of investments held by an insurance company and managed separately from its other investments. A segregated fund contract combines the growth potential offered by a broad range of investment funds with the unique wealth protection and estate planning features of an insurance contract. Segregated fund contracts can help transfer wealth to the next generation quickly, privately, and cost effectively. They can also minimize exposure to risk through various guarantees, such as death and maturity guarantees, and provide potential creditor protection – all from a single product or insurance contract. But what do each of these terms mean? Let’s break it down:

Estate planning benefits: Because segregated funds are technically insurance contracts, they let investors name a beneficiary to allow the investment to bypass probate and the estate at death. Probate is a legal process that certifies the validity of a will and the authority of the executor(s) to facilitate the transfers of assets to heirs. It can take time – months, or even years – and in many cases, there are fees. With segregated fund contracts, the money goes directly and quickly to the person who inherits the money (the beneficiary of the contract). While poor estate planning can erode your wealth for the next generation and cause distressing, potentially expensive delays, segregated fund contracts can help make sure your beneficiaries will receive their inheritance quickly and cost-effectively. They may also help to preserve confidentiality: wills can become public documents, and the information in them can be easily accessed. Segregated fund contracts are private.

Creditor protection: Segregated fund contracts have the potential to protect your assets from creditors. If a family class or irrevocable beneficiary to the contract is named, the segregated fund contract may be protected from the owner’s creditors during his/her lifetime. Also, the death benefit is excluded from the owner’s estate as it is paid directly to the beneficiary, usually placing it beyond the reach of estate creditors. You can read more about estate planning and creditor protection and about how the regulations particularly apply in Quebec. More insights on the creditor protection for business owners is available here.

Maturity guarantee: With a segregated fund contract, you’re guaranteed to receive at least 75 per cent of your deposits (or 100 per cent, depending on the contract), reduced for any withdrawals, when the contract matures. This is known as a maturity guarantee, and it applies at the maturity date (which occurs after a minimum number of years has elapsed or at a contract set date – for example, age 100 of the annuitant), even if markets decline during the contract period. And if markets rise, your savings grow. Some contracts even let you “reset” your maturity guarantee to lock in growth. This way, you get the opportunity to protect your capital along with growth potential.

Death benefit guarantee: Segregated fund contracts also include a death benefit guarantee. The guarantee can be up to 100 per cent of your deposit, again reduced for withdrawals, depending on the type of contract selected and the age of the annuitant when the product is purchased. Your named beneficiary, who can be anyone – a family member, friend or charity – receives the death benefit in the event of death. As with maturity guarantees, some contracts “reset” the death benefit guarantee to lock in growth.

Segregated fund fees: The guarantees and benefits of a segregated fund contract are a type of insurance, which you’re paying for. Segregated fund costs include management fees, insurance fees, operating costs and applicable sales tax. A contract might also include a charge for early withdrawal.

Segregated fund contract who’s who

Contract/policy owner: The person who enters into and owns a segregated fund contract.

Annuitant: In provinces other than Quebec, this is the person on whose life the maturity guarantee and death benefit guarantee are based. In Quebec this person is called the life insured (‘insured’) and the word ‘annuitant’ instead refers to the person who will receive the payments. For registered contracts, the contract owner and annuitant/insured must be the same person. For non-registered contracts, they can be the same, or the contract owner can decide to designate another person as the annuitant/insured. The contract owner is the person who will receive the funds at maturity of the segregated fund contract. The beneficiary is who will receive the funds when the annuitant/insured dies.

Beneficiary: The person(s) named on the segregated fund contract by the contract owner to receive the death benefit when the annuitant/insured passes away. Your beneficiary can be anyone – a family member, a friend, or a charity.

Insurance company: This is the company that you enter into a contract with and that backs the guarantees of the provisions in your contract.

Advisor: Your key contact! Advisors who are licensed to sell insurance (including segregated funds) can help you determine the segregated fund contract that’s suitable for your needs. An advisor can also help you decide on specific funds that are available in the contract.

The appeal of segregated fund contracts depends on a few key factors, such as time horizons, fees and estate benefits that differ from typical mutual funds or exchange traded funds. But what makes them unique could be what makes them the right type of investment for you. Speak with your advisor to see if a segregated fund contract is suitable for your investment strategy or needs.

Small business safeguards: Understanding the importance of having a creditor protection strategy

November 30, 2020 by Darcie Doell and Laurianne Osmak

The Canadian economy is fuelled by the enthusiastic hard work of the small business owner. The Business Development Bank of Canada estimates that 70 per cent of the country’s private labour force is employed by small businesses, and the diversity is amazing – from make-your-own jewellery storefronts to microbrew pubs to the dental clinic in your neighbourhood.

A small business venture may be a deeply personal dream come true, but even dreams don’t always work out. Surprisingly, many owners, officers and directors don’t realize their personal assets can be at risk of creditor claims in the event that something goes wrong with the business. The coronavirus pandemic is certainly a challenging time, and it points to the importance of having a solid creditor protection strategy to help minimize the impact in the event your venture doesn’t continue to flourish.

Make your business creditor-proof

The best time to implement a creditor-proofing strategy is either when the business is starting up or while it is healthy and not facing creditor claims. It’s almost impossible to establish a creditor protection plan when a business is in trouble. Tax and legal professionals, with the assistance of your advisor, can help you in developing a plan that covers all the bases. The following tips can help to serve as a guide in the process:

Think about incorporating your business if it is either large or at risk of litigation. Professional practices should carefully consider this option.
Not all debt is created equal. Always pay your statutory debt on time; directors and officers can be personally liable for these debts (see A note on liability below).
Ensure sufficient personal liability coverage (e.g., director’s home and auto coverage). In the event of a serious accident, your personal assets (e.g., home, car, boat) could be seized to pay any shortfall in insurance coverage.
Ensure that your spouse is outside the reach of creditors in the event that anything goes wrong in the business. If your spouse is a director or officer, they can carry liability for debts. If your spouse is an employee, or not involved in the business, you will have much more flexibility in your creditor protection plan.
Make use of spousal Registered Retirement Savings Plans (RRSPs) to transfer wealth to a spouse – and away from creditor risk.
If your spouse is not involved in the business, consider moving your personal assets – such as your house and your savings – to your spouse’s name. You can transfer home ownership to your spouse tax-free.
Hold life insurance contracts personally (not corporately). Name a “family class” beneficiary on life insurance contracts and list yourself as both the owner and the annuitant/insured. Doing so may prevent creditors from seizing the assets, as well as ensuring the assets transfer immediately to your beneficiary at the time of your death. Remember that if the death benefit is payable to your estate, it can get tied up in probate and may be subject to fees and seizure by creditors of your estate.
Place your savings into investment products sold by insurance companies. A segregated fund contract or a Guaranteed Interest Contract (GIC) product purchased through an insurance company offers potential creditor protection when you name a “family class” or irrevocable beneficiary.

Hoping for the best while preparing for the worst is just good planning if you are a business owner. You are investing a great deal financially, emotionally and physically to create a successful venture. Your advisor can help you to create a plan that will protect your hard-earned assets from creditors.

What is a “family class” beneficiary?
A family class designation is a spouse, child, grandchild or parent of the annuitant in all provinces except Quebec. In Quebec, a family class designation includes the spouse, ascendants and descendants of the policy owner.

A note on liability
Business owners, officers and directors can be personally liable for:Any debts they have given a personal guaranteeAny statutory debts, such as wages and vacation payAny source deductions and commodity taxesHealth and safety violations, including environmental damage

Living benefits insurance: Taking the worry out of what-if

November 16, 2020 by Darcie Doell and Laurianne Osmak

The sudden emergence of the COVID-19 pandemic has affected people’s lives in unexpected, if not unimaginable, ways. When Canadians suddenly needed to assess their ability to protect themselves and their loved ones against a serious health threat, many realized how unprepared they were for the effect it would have on their finances, lifestyle, relationships and employment, not to mention their general health and well-being. At times like this, people think, “What happens if I’m not prepared?”

Global emergencies aside, unexpected circumstances, such as an illness or injury, can impact your income and the lifestyle you’re accustomed to. If that illness or injury makes it impossible for you to work or forces you to rely on others to take care of you, it will affect your financial health as well.

Protect what’s important

Canada has a universal health care system, but that doesn’t mean everything is free. All sorts of treatments, therapies, tests and prescription drugs aren’t covered by the system. That’s why taking action to ensure you’re better prepared to cover potential out-of-pocket health care costs with living benefits insurance can be a vital investment in your future. You can also extend that protection to your family and the life you’ve worked hard to build.

Experts recommend purchasing living benefits insurance earlier in life, even though thoughts of illness and disability may seem like more remote possibilities. The advantages include lower monthly premiums and the comfort of knowing you’re protected over the course of your life, not just at an advanced age.

Match solutions with your needs

Regardless of how prepared you are to handle an unexpected event, facing the reality of it can be a very different experience, especially when it comes to your health. If you became disabled or were diagnosed with a critical illness, could you afford the added expenses? In many cases, these expenses go beyond what government-sponsored health coverage provides.

Living benefits insurance offers the flexibility to suit your specific needs. These plans can be tailored to work in tandem with employee benefit plans or recognize the fact that you own and operate a business or work independently. There are two kinds of living benefits insurance:

Critical illness insurance pays a lump sum if you’re diagnosed with an illness or condition that’s covered by your policy. The benefit can help finance health care treatments, cover household and family-related costs, manage business expenses and protect what you have set aside for your retirement, so that you can focus on recovery.
Disability insurance protects your income if you are unable to work as a result of either physical or mental health disabilities. Regular payments provide you with a percentage of your income. The benefit is designed to help replace lost income and, for business owners, reimburse business expenses and fund a buy-out agreement if necessary.

Having a combination of critical illness and disability insurance may be a good solution for you. This way, additional coverage can be matched with your circumstances. Consider someone with a $60,000 annual salary who is diagnosed with a critical illness and unable to work.

The importance of having a plan

The COVID-19 pandemic has been a unique and challenging experience for everyone, but valuable too, in that it exposed our vulnerabilities and reminded us that it’s important to be financially prepared for what can occur. Most people don’t expect to be faced with the reality of becoming disabled or being diagnosed with a critical illness, but we all know it can happen. The protection of living benefits insurance can be one of the most valuable assets you have. Speaking with your advisor is the first step towards understanding the best options available to help take the worry out of the what-if.

What’s your risk?

Your risk of becoming disabled or developing a critical illness changes based on your age, lifestyle choices and other factors. The tables below provide examples of the risks for both a man and a woman, age 35. You can find out more about your personal risk at www.insureright.ca/what-is-your-risk.

35-year-old male, non-smoker*
Risk of disability before age 65	19%
Risk of critical illness before age 65	26%
Risk of dying before age 65	6%

35-year-old female, non-smoker*
Risk of disability before age 65	26%
Risk of critical illness before age 65	19%
Risk of dying before age 65	4%

Invest in yourself: Connecting healthy lifestyle choices with insurance to achieve your goals

July 13, 2020 by Darcie Doell and Laurianne Osmak

We’ve all heard about the importance of healthy living, but let’s face it – becoming a fitness buff or nutrition guru isn’t everyone’s cup of tea. Maybe you don’t feel the need to change your habits. Perhaps you have a medical condition and aren’t sure how it fits with your healthy living goals. Or maybe you have a full schedule and can’t commit to a disruption to your routine.

Change can be a good thing

It’s been proven that our overall wellness is affected by the lifestyle choices we make – we also know habits can be hard to break. But what if there were a way to get rewarded for making better choices? Good news – there are life insurance solutions that do just that. By offering incentives for healthy behaviour, this new kind of insurance motivates people to achieve their goals, making it feel more engaging and fun. Need some inspiration? Read on to learn how others are making positive changes.[1]

Wellness, not weight

Joanna is a successful business owner and a busy mom of three young children. While she enjoys physical exercise, finding the time in her tight schedule is a challenge. A new life insurance program has given her the incentive she needs to stay active.

“This program gives you the coverage that you need, but also encourages you to live a healthy lifestyle and gives you lots of little perks for doing so.”

Now Joanna pays more attention to the choices she makes – eating well, getting enough sleep and incorporating physical activity – generally taking good care of herself so she can be around for her family. “If I had to describe myself before the program, I would say that I was more weight conscious. Now I think of myself more as wellness-minded.”

Energized and encouraged

Kevin was ready for something different.

“I felt it was important to get myself back into shape. I was feeling quite sluggish at work, sluggish at home. That’s when I decided to make the change.”

Kevin’s advisor let him know about an insurance program that could help encourage him to make healthy choices. Kevin immediately saw the benefits of joining – along with insurance coverage, he got a fitness tracking device so he could see his progress. He was able to set goals and found that keeping up a healthy lifestyle was easy and even fun.

Since signing up for the program, Kevin is more active, feels energized and is inspired to keep on going.

Focus on motivation

Leslie has always been the kind of person who challenges herself. But when a lump on her thyroid turned out to be cancer, she worried that her diagnosis would make it difficult for her to get insurance coverage.

After speaking to her advisor, Leslie found that despite her medical history, she was a good fit for an insurance program that offered protection and rewards. It not only helped Leslie make better choices for herself, but her family has adopted healthier habits too.

“It has certainly positively impacted my family because they’re seeing their mother make these changes and so we are making better choices all around.” Leslie is thrilled that her daughters go on walks with her now and are becoming more active themselves. “I actually got them some activity trackers so they can join me in achieving 10,000 steps.”

Leslie earns rewards for making healthy decisions and because of that she is always being encouraged to take the next step. Thanks to the program, Leslie says she is focused on living a long, healthy life.

When it comes to your health, a little can do a lot. With an insurance program that offers a variety of ways to learn about and improve your health, it’s easy to achieve your goals. Ready to start your journey towards a healthier life –and earn rewards along the way? Talk to your advisor to learn how.

[1] www.manulife.ca/personal/vitality/vitality-for-individuals/reviews.html

Hot yoga, superfoods and insurance

March 6, 2020 by Darcie Doell and Laurianne Osmak

Protect the healthy lifestyle you’ve worked hard to build.

Your health and well-being matter to you. Perhaps you play ultimate frisbee or sweat it out in high-intensity interval training. Maybe you follow fitness influencers on Instagram, meditate or meal prep on the weekends. Whatever your preference, chances are you make a commitment to feeling your best. But what if your world suddenly turns upside down?

Ironically, millennials, widely considered the most health-conscious generation,[1] often feel immune to the kinds of health problems that can derail the best-laid plans. Even if you know someone your age who has experienced a serious illness or disability, it can be hard to believe something similar could happen to you. In fact, there’s something called the “optimism bias” that makes people underestimate the risk that negative events, including injury and sickness, will affect them.[2]

The healthy lifestyle you’ve worked hard to achieve also includes your finances. Safeguarding your income can help prevent you from being caught off guard by lessening the financial impact of an unexpected illness or injury.

Ensure you have the right protection

The first insurance policy many people buy is life insurance, but if you’re in your 20s or 30s, you’re more likely to make a disability and critical illness insurance claim than you are to die prematurely. Think of it this way: If you could no longer earn a paycheque due to illness or injury, how long could you keep up your rent or mortgage payments? What other expenses would start piling up?

The fact is, when you’re younger, your risk of dying is much lower than the likelihood of illness or injury (see sidebar). Disability insurance and critical illness insurance offer protection to help replace your income if you can’t work, so you can maintain your lifestyle and focus on recovery.

A 25-year-old male non-smoker has:

37%	risk of disability before age 65
27%	risk of critical illness before age 65
07%	risk of dying before age 65

A 25-year-old female non-smoker has:

43%	risk of disability before age 65
20%	risk of critical illness before age 65
05%	risk of dying before age 65

Source: www.insureright.ca/what-is-your-risk

How does disability insurance work?

Disability insurance pays a percentage of your income if an illness or injury prevents you from working. It covers physical health as well as mental health, which is important because it is estimated that half of Canadians will experience a mental illness by the time they reach age 40.[3]

If you’re a business owner, you can get disability insurance to cover your income and your business expenses as well as to fund a buy-sell agreement. Some policies even provide discounted disability insurance protection for people who work in specific professions, such as accountants, engineers or veterinarians.

How does critical illness insurance work?

Critical illness insurance pays a lump sum if you are diagnosed with an illness or condition covered by your policy. To save money, consider term critical illness coverage, which protects you for a specific number of years. It can be renewed for the same term or upgraded to a longer or permanent duration later without further medical underwriting. That way, in case your health changes down the road, you will be able to keep your protection for a longer term in a cost-effective manner.

You can choose a policy that covers more or fewer illnesses and conditions. Some also provide additional benefits that are available without making a claim, such as reliable online health information, one-on-one telephone support and medical second opinions from top specialists.

How much protection do you need?

When deciding how much disability and critical illness insurance you need, consider how long you could be away from work before you would be in financial difficulty. Recovery from a serious injury or illness may take many months. It can also be stressful – so the fewer financial worries you have, the better.

Beyond covering your own lost income, consider other costs you might encounter, such as:

your partner or other loved ones needing to take time off to help you get better
extra help with child care for a period of time
out-of-pocket costs for things like medications, hospital parking, home care or accessibility renovations

Be health-conscious about your finances

Healthy finances are an important part of a healthy life. Both disability and critical illness insurance can help strengthen your finances and make them more resilient – and, if you have a serious injury or illness, they can provide a financial cushion that lets you concentrate on getting well again.

We want to hear “Your Story” – Let’s talk about the right balance of coverage, features and cost for your needs.

Source: manulifesolutions.ca

[1] https://campuspress.yale.edu/perspective/are-millennials-healthier-than-the-baby-boomers

[2] www.behavioraleconomics.com/resources/mini-encyclopedia-of-be/optimism-bias

[3] www.camh.ca/en/driving-change/the-crisis-is-real/mental-health-statistics