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Be a June Bride, but not a Bridezilla!
Poor and lowly couples mourn, so plan ahead
You’re about to tie the knot with your soulmate. Congratulations! 🎉 You’ve probably spent a lot of time and energy planning your perfect wedding day. But have you spent enough time and energy planning your perfect financial future together?
According to a study*, the best advice that happy couples have for newlyweds is to avoid getting into debt and to start saving for retirement as soon as possible. That may sound like boring and sensible advice, but it’s actually very smart and practical. Debt can cause a lot of stress and conflict in a relationship, which could turn any beautiful bride into a bridezilla! On the other hand, saving for retirement can give you peace of mind and freedom in the long run.
But how do you avoid debt and save for retirement while still having fun and enjoying life? Here are some tips to help you and your partner balance your money goals and your happiness goals.
Before the wedding:
Have an open and honest conversation with each other about your finances. Don’t be afraid to ask each other some personal questions, such as:
- How much do you earn, owe, save, and spend?
- What are your financial assets and liabilities?
- What are your current financial obligations, such as alimony, child support, or RESP?
- What are your financial goals, such as travel, retirement plans, or buying property?
These conversations can help you understand each other’s money habits and expectations, and avoid any unpleasant surprises later on.
For example, when I got married, I discovered that my husband had a passion for comic books and Lego that he had been collecting since he was a kid. He had spent thousands of dollars on them over the years, and he was hoping to sell them someday for a huge profit. I was shocked at first, but I also respected his hobby and his vision. We agreed that he could keep his collection, as long as he also contributed some money to our joint savings account every month.
After the wedding:
Now that you are officially a team, it’s time to protect your assets and secure your family’s future. Here are some things you should consider doing:
- Life insurance: Get some coverage in case something happens to one of you. Life insurance can help you pay off debts, cover funeral costs, or provide income for your spouse or kids. There are different types of life insurance for different purposes and durations; they also have different pros and cons.
- Change of beneficiary: Update the beneficiaries for all your insurance and savings products, such as RRSPs, TFSAs, or group plans. You don’t want your ex, or a deceased relative to get your money if you die, do you?
- RRSP: If you want to buy your first home together, start contributing to an RRSP. You can use the Home Buyers’ Plan (HBP) to withdraw up to $35,000 each from your RRSPs tax-free. That’s a lot of cash for your down payment! You should also start a FHSA plan as soon as possible.
- Will: Make a will. It may sound morbid, but it’s actually very responsible and caring. A will can help you decide who gets what if you die, and who takes care of your kids if you have any. It can also save your loved ones from a lot of legal hassle and stress trying to settle your estate without a will!
So there you have it. Some simple steps to help you start your married life on the right foot financially. Remember, money doesn’t buy happiness, but it can make things easier if you manage it well. And if you need any more advice or guidance, book a coffee chat with us.
*2021 Fidelity Investments Couples & Money Study
** Agence de la consommation en matière financière du Canada.
Related Links:
What does the average wedding cost in Canada?
The wedding business is booming. But higher prices mean smaller ceremonies, industry says (CBC news)
Even being a bridesmaid could get you in debt!
The information contained is as of date of publication, and may be subject to change. This article is intended as general information only, please contact Insurance Kit regarding your specific situation.
An Insurance Program that Rewards the Healthy
Research shows people prefer their insurance came with rewards and lower premiums.
One of our clients recently commented how insurance companies punish smokers, but do not reward those who are health conscious and exercise regularly. Voila, it is as if his prayer has been answered.
That’s where Manulife Vitality comes in – the innovative and unique program that provides real value to policy owners in addition to insurance coverage, by enabling them to earn rewards and save on premiums through healthier living.
A new insurance conversation
Grounded in the science of behavioural insurance, it shifts the conversation from the negative topics of illness and death that are associated with life insurance, to a more positive conversation about improved health and wellness. And, with a greater focus on added value instead of cost, it could incentivize you to take a more active role in your insurance.
Who is an ideal Vitality customer?
Manulife Vitality is designed so that just about anyone, regardless of their fitness level or health, can enjoy the benefits. But some key customer types include those who are:
- Interested in influencing the cost of their insurance
- Open to improving their lifestyle, health and wellness
- Motivated to actively engage with the program
Manulife Vitality is truly for everyone
Do you have an existing health concern like diabetes, high cholesterol or obesity? You might just be ideal candidate. Even with a substandard rating, you qualify for a discount right out of the gate. It could be the motivation you need to continue making healthy changes, little by little.
This article is based on the tips provided by one of our partners - Manulife Financialand is not an exclusive recommendation for clients. The information contained is as of date of publication, and may be subject to change. This article is intended as general information only, please contact Insurance Kit regarding your specific situation.
Learn A Little More...
Now that you know there is a program that allows you to live healthy, earn rewards and save on premiums, would you be interested in learning more? Not yet? How about an Apple Watch or a Fitbit?
A compelling incentive to quit smoking!
Foresters Financial's Quit Smoking Incentive Plan
How it works
When purchasing a Forester's Advantage Plus Participating Whole Life(1) or Non-Par Whole Life(2) products, smokers automatically receive lower rates for the first two years of their certificate. If they quit within this time period, those lower premiums can continue!
It’s a powerful incentive to stop smoking, giving smokers like you the chance to potentially save thousands of dollars as well as to live a healthier lifestyle.
Depending on the product and premium payment period you chose, the savings could apply to up to 20% of your total premiums, even if you decide not to quit.
Plus, Foresters offers members a wide range of unique and complimentary benefts.3
Contact us for your quote and to start your journey to a healthier lifestyle!
1.Underwritten by The Independent Order of Foresters.
2 Underwritten by Foresters Life Insurance Company.
3 Descriptions of member benefts that you may receive assume that you are a Foresters member. Foresters member benefuits are noncontractual, subject to benefit speciifc eligibility requirements, definitions and limitations, and may be changed or cancelled without notice or are no longer available.
Click the photo to contact us for your quote and to start your journey to a healthier lifestylel
How Does Insurance Help With Retirement?
The CRA Approved Tax-advantageous Tool
In our last blog, we talked about how a whole life policy for children could serve as a tool to set them on the path to an income stream for retirement (or other needs for cash at other times). Some had asked: what if I am already close to retirement? Good news for those who have planned ahead - you could still enjoy the benefits of a whole life policy for yourself and your next generations. Here is how.
If you are single, you can do this on your own. If you are a couple, and your focus is income rather than immediate family protection (final expenses, survivor's living expenses etc), then a joint-last-to-die policy that pays out only when the last of the couple passes on, could be a better option because it is usually less expensive than having individual policies.
Let's say you are a 50-year-old couple, and you could set aside a $50,000 annual premium for 10 years (or whatever number you are able to comfortably set aside, may it be more or less than that). Your total premium over 10 years would be $500,000. At age 65 (when most of us would be retiring, or at least trying to retire), you could use the cash value in the policy to fund your retirement. The earlier you start, the bigger the accumulation that can be expected. That means whether you can retire comfortable depends on how much you "sow".
There are 3 ways you could access the cash value – make cash withdrawals, (which could trigger tax consequences); take out a policy loan from the insurance company (also could trigger tax consequences; or take out a collateral loan (usually no tax consequences) with a financial institution. The payout at death would then go to the financial institution first and any balance if available would go to the beneficiaries. For example, you could be able to borrow $50,000 annually (about $4,150 a month) based on the cash value in the policy at age 65, all the way up to your 90s. (We are living longer and longer, so it is not an unlikely occurrence!) There are significant tax savings that could be achieved with this strategy.
This way of using your insurance policy could allow you a more efficient way to generate your retirement income than a regular/conventional investment. This also explains why "buy term and invest the difference" may not be the golden rule that some believe. Also, remember the balance that would go to your beneficiaries? Under most circumstances (repeat: most circumstances), the insurance payout will be higher than the debt accumulated over the years. So, you could enjoy your retirement income stream without sacrificing your planned gifts for your loved ones or organizations. We would call it a win-win situation.
You could use the same strategy with the more investment-based universal life but many of us (or most of us) do not like the volatility of the market these days. Perhaps this strategy could be used to supplement your current portfolio. Please contact us to find the right policy for you,
1 Limits are set on the amount of deposits you can make to ensure the policy remains tax-exempt under the Income Tax Act (Canada)
2 Based on the dividend scale in effect at that time remaining unchanged for the life of the policy. Dividends are not guaranteed and are paid at the discretion of the Board of Directors. Dividends may be subject to taxation.
This article is based on the features of a whole life policy and is not an exclusive recommendation for clients. The information contained is as of date of publication, and may be subject to change. This article is intended as general information only, please contact Insurance Kit regarding your specific situation.
Learn A Little More...
We have marketing materials from various insurance companies that are available upon request. They are also available in the other languages such as Chinese and Punjabi. If you want to learn more about a specific company's offering, just ask!
Whole Life Insurance - A Gift of Many Blessings
One of the well-known traditions of Lunar New Year is the giving out of red envelopes (or Leisee, lucky money etc.) Children nowadays could get cash gifts from grandparents as well since it is easier than trying to figure what to buy for the child. Many parents would just let the child keep the money in a piggy bank. While a very good habit to nurture, there might be a better way to use those money. Children and grandchildren have just about everything they need today, so why not look farther ahead and set them on the course to a secure future by getting a life insurance policy FOR YOUR CHILD? (vs. on your child)
Whatever your child's future holds, a participating whole life insurance grows with them. It protects their insurability, provides access to cash value that they can use to help fund their education, purchase a home, start a business, supplement their retirement income, or eventually provide for their own family's financial wellbeing. It could be one of the smartest investments you make in your child's future.
HOW IT WORKS
In a market where guarantees are increasingly rare, a traditional whole life policy such as one provided by Equitable Life provides benefits including:
Guaranteed premiums, cash value and death benefit
Choice of two plan types to meet short or long-term goals
Choice of paying for life or as short as 10 years
The ability to maximize the tax-advantaged growth within the plan by making additional deposits. 1
Eligible to participate in the earnings of the participating account through dividend payments. 2
For example, a 20-year payment of a total of $48,000 ($2,400 per year) could provide you (or your new-born child) the access to withdrawals of up to $288,000 over 60 years, in addition to the protection of a permanent life insurance. 3
There are a variety of optional riders and plan features available to help tailor your child's plan to ensure it continues to meet their need.
If you are interested in learning more about a personalized plan, please contact Insurance Kit now.
1 Limits are set on the amount of deposits you can make to ensure the policy remains tax-exempt under the Income Tax Act (Canada)
2 Based on the dividend scale in effect at that time remaining unchanged for the life of the policy. Dividends are not guaranteed and are paid at the discretion of the Board of Directors. Dividends may be subject to taxation.
3 Equimax Estate Builder 20 pay participating whole life insurance with paid-up insurance dividend option. Monthly payment is $200 based on rates in effect on July 1, 2021 for a male, ae 0, initial face amount is $175,000.
This article is based on the tips provided by one of our partners - Equitable Life and is not an exclusive recommendation for clients. The information contained is as of date of publication, and may be subject to change. This article is intended as general information only, please contact Insurance Kit regarding your specific situation.
A Smarter Way to use those Cash Gifts
Even better is that while you use the cash gifts from the piggy bank to pay for the premiums of the initial years, you could use your Child Tax Benefits to fund the policy, and use the money within the policy to fund the child's RESP Plan. This could be a much better way to use those money than just putting them into the piggy bank, or to contribute to their RESP directly.
Insurance 101
Types of Insurance In the Market
There are two main types of insurance available in the market today: One that covers you and me, we call them "People Insurance"; one that covers your possessions such as car, house, boat, or your business etc., we call them "Property or Business" Insurance.
"People Insurance" - under this category, we have Individual Insurance and Group Insurance. Your work benefits is under group insurance - the company is your contract holder, regardless who pays the payment (which we call a "premium"). So, since you are not the policy owner, you really do not have a say or any control on what happens to it. And you lose it when you leave your company.
Group insurance is a great product because it helps businesses to keep their employees feeling happy about working there (that is called "employee retention"). It commonly includes life insurance, extended health insurance - drugs, dental, vision and paramedical services, and sometimes critical illness, disability or accidental death insurance. However, while it helps with cleaning one's teeth, or fixing a sore back, it does not help with lost income should a more than routine need arise.
Companies that provides group insurance usually also provide an option for employees to convert it to a personal plan within a time limit. However, many people mistakenly believe that when they convert their plan, they are able to enjoy the same benefits at the same low rate as a "staff discount". Unfortunately, in most cases, the only advantage of converting your group plan is that you will get covered without medical evidence. There is no special rate for leaving employees, neither will the plan benefits be exactly the same as the original group plan.
Listed below are the types of "People Insurance" available in the market today.
LIFE Insurance
Term Insurance - 5 years to Life
Universal Life Insurance
Whole Life Insurance
Final expense Insurance
Living Benefits Insurance
Accident & Sickness Insurance
Critical Illness Insurance
Disability Insurance
Extend Health and Dental Insurance
Funeral Insurance/Plan
Long-term Care Insurance
Mortgage Insurance
Note: Some of these insurance cover children either individually or as part of a family plan.
Insurance 101
Life Insurance
Term Insurance -
Term insurance covers you over a fixed period of time (term), hence the name. It is usually renewable at the end of the term at a higher cost. The higher the term, the higher the premium. It is because you are locking in the lower premium for a longer period of time, similar to how a fixed mortgage rate is usually higher than a variable rate. Terms are available between 10 to 100 years depending on the age of the insured. Obviously, a 40 year term insurance plan is not likely to be useful for a 70-year-old.
Permanent Insurance -
Technically, a Term-100 insurance plan is permanent insurance, because most of us do not live to be a centenarian. Sometimes Term-100 insurance is referred to as whole life insurance because it does cover your whole life. Term-100 insurance is like your car or house insurance - you do not get any money back even if you have not made a claim ever. You paid for the peace-of-mind while owning the policy. So even though you do not see it, you already enjoyed the benefits that it provides every day you go to bed.
However, in here we use the term "whole life" specifically for the other types of permanent insurance which are commonly known as Whole Life and Universal Life insurance. These two types of insurance both have a cash value build up so that it serves the purpose of asset accumulation and transfer within a possible tax-free vehicle under specific steps.
Universal Life
Universal life insurance is an insurance protection and optional savings program 2-in-1. You can choose your cost of insurance payment options, monthly deposit levels, choose a level or increasing death benefit option, or make your own investment choices within a tax sheltered account. In other words, you have more control of how this type of policy will accumulate the cash for you. That also means you need to be more hands-on and have a little more know-how in this policy. No, this does not mean you need to be an investment guru; but you should still read the policy statement more diligently than just putting it in a drawer every month.
Due to the somewhat more investment-return related nature, universal life insurance does not have a set term of premium-paying period. If someone only pays the minimum amount of premium, the policy may lapse prematurely. Caution, caution!
Whole Life
Whole life insurance has gained popularity in recent years because of the certainly of premium level, as well as the potential of cash value growth with a relatively lower risk versus the other type of permanent insurance, and sometimes, even some other types of low-risk investment.
Whole Life insurance release dividends into the policy regularly for the asset accumulation side of things. The dividend rates are usually quite stable, with a lesser degree of fluctuation, due to the fact that it is not directly tied to the market performance. The value that accumulates within the policy is accessible either when you cancel the policy or if you decide to borrow against the policy value. Also because this is more hands-off, the premium for this type of policy is the highest among all.
Conclusion
If protecting your family is the destination (or goal) and insurance products are the ways to get there, Fixed-Term insurance would be like walking or riding on a bicycle. They are the most cost effective way to start the journey, but they might not be able to get your there. Imagine trying to walk across the country...possible, but not a good option for most people. Maybe you should plan for something that will get you there once you can afford more.
Term-100 insurance would be like taking public transportation. It is still relatively inexpensive, and it would be more likely to get you to your destination, which is now more reachable and with less effort and time. However, you are confined to the schedule and the routes available. You cannot get any value out of the bus you ride, unlike if you own your own vehicle, you could sell it when you want to change models. If you do it right, you might even make money on your used car!
That brings us to Universal life. It is like having your own vehicle so you get to go where you want to go, when you want to go and on which route you want to take to get there. While you have the full control of the car, you do need to go learn how to drive, pay for the driving exam, the licence and insurance, buy a car, pay for gas and maintenance, and wash the car yourself. But you get the freedom and a more rewarding experience, plus you could receive more value than you put in, alas!
You probably have guessed what Whole Life insurance is like. It is like you can now afford to hire a chauffeur who is a good driver, who knows your car and knows your route to take you to your destination. You can close your eyes worry-free knowing that you will get there safely. Not only that, you will be arriving in a car that is well-maintained, nicely washed and waxed, perhaps even scented with your favourite air-freshener! You will still need to pay for all the expenses related to the car plus the salary of the chauffeur; however, you do not need to know how to drive, and you get the luxury and the peace-of-mind. Money well-spent to some, though not necessarily the best option for everyone.
Still want to learn more? More content will be uploaded later. Stay tuned!
Insurance 101
Learn about the basics of Insurance in an easy to understand language.
Some may think insurance is a necessary evil or an unnecessary expense. However, ask the families who have received a timely payout after the untimely death of their loved ones, they certainly think otherwise. Since you are here reading this, I assume that you are interested in finding ways to protect your family and yourself. Welcome, you are in the right place. Insurance Kit aims to educate Canadian in plain English on what you need to know about insurance. You will find an overview of insurance products and how they work. If you want a customized plan to make sure you are neither under or over insuring yourself or your family, please contact us directly.
So, let us start with a brief history of insurance - who was the genius that invented insurance? (Please keep scrolling if you are not interested in this topic.)
Short answers: Villagers somewhere a long, long time ago who banded together to help the widows of fellow villagers to bury their loved ones. Their children probably had to work as child labourers, so no education fund was necessary then.
The first traceable life insurance product could very well be the one found in ancient Rome where burial societies would pay funeral costs of their members out of monthly dues. Today, we call this "Funeral Insurance", or "Final Expense Plans". This is the most basic tool used by those who wish to relieve the burden of the costs of final expenses on their family after their passing but nothing more. Final expenses usually include funeral costs, legal fees, taxes, debts and probates fees etc.
A longer story for those who are interested:
The earliest form insurance could be found in the so-called bottomry contracts among the merchants of Babylon as early as 4000–3000 B.C. Hindus and Greeks also had a similar idea and started practicing Bottomry around 600 to 400 B.C. Under a bottomry contract, loans on a shipment that was lost at sea would not have to be repaid. Move forward to the 15th century, Marine insurance became a highly developed product in the market place. That would be the first insurance product as we know it today, and it was commercial insurance. It looks like the tendency of protecting our possession first is not a modern day problem!
Learn More
We will regularly update this page and add more content in the future.
Make sure you come back to visit. Have a question you want to ask now? Email us and we will answer that as soon as we can.