insurance 101 risk mgmt workshop march 4
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COCHRANE WEALTH MANAGEMENT
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Honest Ideas – Successful Solutions
LEARNING ABOUT LEARNING ABOUT INSURANCE AND RISK INSURANCE AND RISK
MANAGEMENTMANAGEMENT
Richard Foy
Certified Financial Planner
CHANGING NEED FOR LIFE INSURANCE
RISK MANAGEMENT - Are you covered?
MANAGING RISK FOR BUSINESS
Attracting and retaining employees Ownership, conflict or change Loss of key person Economic risks Consumer spending Supplier risks Protecting intellectual property Credit risks Operational risks Catastrophic risks
FINANCIAL PAIN RELIEF
PURPOSE:
TYPE:
REASON:
Creation of estate Protection of estate
Term insurance Permanent insurance
Love Fear
GENERAL USES OF LIFE INSURANCE
Create an estate Pay taxes at death Income replacement Capital loss due to death Fairness at inheritance time Provide for retirement funds Excellent for business transfers Gifts to charities Payoff mortgages, guarantees, loans
FOR BUSINESS OWNERS
Life insurance creates immediate liquidity for business continuation
Replace a key employee Restructure financing arrangements Repay creditors Facilitate business succession to buy
partners shares upon death
THE INSURANCE WORLD
What if you die too soon…?
What if you live too long…?
What if your health fails…?
What if you cannot earn a living…?
THE INSURANCE WORLD
Too much insurance…
Not enough insurance…
Paying too much for your insurance…
Not the right kind of insurance…
I am bullet proof
Self insure
Share the burden
INSURANCE MANAGEMENT STRATEGIES
“WILL I RECEIVE BENEFITS?”
At time of claim??
At time of Application??
TERM INSURANCE
TERM INSURANCE
Term insurance is designed to last a specified amount of time such as one year, five years, ten years or up to a certain age
At the end of this time, the policy expires Temporary Ideal for young families Low cost
TERM INSURANCE
Term 10 and 20 Renewable until age 85 Joint protection Preferred rates based on lifestyle and medical history Guaranteed premiums for future renewals Option to convert into permanent insurance
until age 65
TERM INSURANCE IS USED FOR…
Insure mortgage and other personal loans Provide for children’s education Preserve your estate Cover costs of final wishes and inheritance Share buy back for deceased shareholder Hire a replacement or offset losses resulting
from the death of a key employee
FOR EXAMPLE…*
TERM 10$500,000
TERM 20$500,000
1 – 10 years $464 $778
11 – 20 years $2,770 $778
21 – 30 years $6,637 $9,580
31 – 40 years $18,981 $9,580
*Annual Premiums based on:40 year old male, non-smoker
Private Mortgage Protectionvs. Bank Mortgage Protection
Refer to handout
WHOLE LIFE
INSURANCE
WHOLE LIFE INSURANCE
A traditional policy with level premium payments designed to remain in force over the lifetime of the insured
Early premiums tend to be higher than required
This builds a base reserve along with accumulated interest which enables the premium to remain level in later years
WHOLE LIFE INSURANCE
Offers permanent coverage with guarantees on premiums and values
Way to pay for taxes when an inheritance is transferred
WHOLE LIFE
Types of Coverage:Whole life 100Whole life limited pay, age 65, age
75, 20 years, 25 years, 30 years
COVERAGE AVAILABLE
Single
Joint last to die
Joint first to die
OTHER FEATURES Cash surrender value: The cash surrender value begins
around the 10th policy anniversary year and builds the longer the policy is in effect
Automatic premium loan is only available if there is cash surrender value, interest will be charged on the amount of the loan
Reduced paid up option entitles the client to stop paying the insurance premiums provided there is a cash value to do so
Once this option is elected, the client cannot pay back the premium and have the sum insured increased to the original amount
……and more features
Guaranteed insurability benefit
Medical underwriting can become an issue
FOR EXAMPLE…*
TERM 10$500,000
TERM 20$500,000
WHOLE LIFE$500,000
WHOLE LIFE$100,000
1 – 10 years $464 $778 $5,897 $1,250
11 – 20 years $2,770 $778 $5,897 $1,250
21 – 30 years $6,637 $9,580 Paid Up Paid Up
31 – 40 years $18,981 $9,580 Paid Up Paid Up
*Annual Premiums based on:40 year old male, non-smoker
LIFE PROFILES
Refer to handout
UNIVERSAL LIFE INSURANCE
UNIVERSAL LIFE INSURANCE
Flexible premium
Adjustable benefit policy
Blends term insurance and a savings account earning current interest rates
Unlike whole life, premiums can be adjusted provided the policy value is adequate to maintain the cost of insurance
Universal Life Insurance
Minimum funding
Maximum funding
Maximum tax actuarial reserve (MTAR)
UNIVERSAL LIFE
Refer to handout
LIFE INSURANCE
INVEST
PREPAY
LOW COST
UNIVERSAL
WHOLE LIFE
TERM LIFE
COMMON QUOTES……..
“Insurance is a waste of money if we never use it”
“Insurance is the best thing we’ve ever done when we need it”
INSURANCE
Is not about ourselves…………
It is about:our survivorsour caregivers
Don’t forget to ask your survivors or caregivers what they think!
HOW MUCH LIFE INSURANCE DO “THEY” NEED??
$100,000 @ 6% $6,000/year
$500/month
$200,000 @ 6% $12,000/year
$1,000/month
$500,000 @ 6% $30,000/year
$2,500/month
$1,000,000 @ 6% $60,000/year
$5,000/month
DISABILITYINCOME
PROTECTION
DISABILITY INCOME PROTECTION
Self-employed
Trade professions
Medical professions
Business owners
Corporate employees
DISABILITY INCOME PROTECTION
Guaranteed Premiums
Renewable Premiums
DISABILITY INCOME PROTECTION
Any occupation
Regular occupation
Own occupation
HOW WILL YOU PAY FOR YOUR DISABILITY?
Spouse’s income Government programs Emergency savings Investments RRSP withdrawals Loan Friends and family Downsize your lifestyle
CRITICAL ILLNESS
INSURANCE
CRITICAL ILLNESS INSURANCE
Provides a lump sum cash benefit if a medical condition is diagnosed
Assists with needs such as mortgage and debt protection, supplementing gaps in other insurance protection, asset preservation
CRITICAL ILLNESS INSURANCE
It’s about peace of mind
It’s about recovery
Getting better costs money
Treating and coping with illness can mean significant and often unexpected costs
CRITICAL ILLNESS INSURANCE
The money is yours to use any way you want
Find the best health care available – anywhere
Hire a nurse or caregiver to help you at home
Make mortgage payments
Replace lost income
CRITICAL ILLNESS INSURANCE
Coverage available from $25,000 to $2 million
Policy is available with level premiums, renewable premiums payable to age 100 or limited pay
Lots of bells and whistles …
CRITICAL ILLNESS INSURANCE
Getting your money back
If you don’t ever need a critical illness payout, there are return of premium riders available at an additional charge
WHO NEEDS CRITICAL ILLNESS INSURANCE??
Everyone…
A single woman…
A single parent…
CRITICAL ILLNESS INSURANCE
Refer to handout
LONG TERM CARE INSURANCE
LONG TERM CARE INSURANCE
Provides benefits to cover the costs of long term care either home based or in a
nursing care facility
LONG TERM CARE INSURANCE
Long Term Care Insurance is a horribly named
product and should be called:
“Bathing and toileting insurance so your kids won’t have to do it for you!”
LONG TERM CARE INSURANCE
Retirees and pre-retirees who are concerned about:Maintaining the qualify of lifeProtecting retirement savings Estate preservation
LONG TERM CARE INSURANCE
When the insured person is functionally dependent, cannot do two or more activities of
daily living, which includes bathing, eating, dressing, toileting, maintaining continence
or
cognitive impairment
CHANGING NEED FOR LIFE INSURANCE
BUILD A TEAM OF TRUSTED CONSULTANTS
FINANCIAL ADVISOR
BIG PICTURELIFE PLAN
BANKERINSURANCE
AGENT
ACCOUNTANT LAWYERTAXES
BOOKKEEPINGREAL ESTATE
WILL & PROBATE
CAR INSURANCEHOME INSURANCE
LOANS / MORTGAGESSAVINGS / CHEQUING
8 KEYS TO BUILDING WEALTH
What does wealth mean to you? Identify key issues that need your attention Research solutions that will work Am I adequately protected? Who should be on the “trusted advisor” team? Schedule my next financial checkup Don’t procrastinate HAVE FUN!!!
REMEMBER YOUR FINANCIAL CHECKUP
BE HONEST WITH YOURSELF
Procrastination is painless……
until hindsight kicks in
THANK YOU!
QUESTIONS?
The opinions expressed at the seminar will be those of Richard Foy and not necessarily those of Raymond James Ltd. Statistics and factual data and other information presented at the seminar are from sources RJL believes to be reliable but their accuracy cannot be guaranteed. It is furnished on the basis and understanding that Raymond James is to be under no liability whatsoever in respect thereof. It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Securities are offered through Raymond James Ltd., member CIPF. Financial planning and insurance are offered through Raymond James Financial Planning Ltd., which is not a member CIPF.