Video Recap: Outline Financial and Urbanation – 2018 Condo Market Outlook Event

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Gallery: 2018 Condo Market Outlook Event

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Thank you to everyone that joined us for our 4th annual Condo Market Outlook Event.  Please enjoy the pictures, and also be sure to check out the video recap in an upcoming post.

Group Life Insurance – Only Part of The Solution

Ownership of individual life insurance at its lowest level in 30 years:

The Life Insurance and Market Research Association (LIMRA) 2013 study shines a light on a developing problem for Canadian households:

  • Individual ownership of Life Insurance was at its lowest level in 30 years;
  • 3 in 10 households did not have individual life insurance at all.

Why Group Life Insurance may not be all that you need:

If your goal is to replace income for your family for more than 2 years, you may want to add an individual policy to your group insurance coverage.

According to the same LIMRA study, on average, households with only group coverage can replace the household’s income for less than 2 years.  Households with both group and personal life coverage can replace income for more than 5 years.

While group life insurance provided by an employer is a valuable benefit, it does have limitations when used as the only source for life insurance protection.  Some of the reasons group insurance should not be relied on solely for family life insurance include:

  • Group Insurance is not totally portable:  If you leave your job, your group life insurance typically does not go with you.   While it is true that some of your group benefits may be converted to an individual plan when you leave, the plans available for conversion for life insurance are often extremely expensive and are quite limited.   Given that a recent Financial Post survey reports that only 30% of respondents stayed in their jobs for more than four years, this could be problematic. Having additional personal coverage offers a safety net if you find yourself between jobs.
  • Group Life Insurance coverage is often inadequate:  Most employee benefit plans provide group life insurance as a multiple of earnings up to a maximum.  A common schedule is two times salary and the maximum may leave you under-insured.
  • Renewal of Group Insurance is not guaranteed:  It is important to be aware that the contract to provide employee benefits is one between the employer and the insurance company.  The employee has little or no control.  The coverage may be cancelled by either the company or the insurer.  Another concern is that future premiums may not be guaranteed.
  • Group insurance is not flexible for planning:  While group coverage is usually a low cost source of life insurance, it should be looked upon as a top-up to personally held life insurance which provides the necessary protection.  Proper financial planning will determine how much coverage is required to protect your beneficiaries in the event of your death.

5 reasons why consumers don’t act:

The LIMRA study also lists five difficulties that consumers have when making decisions about their family protection options.

  • Difficulty in understanding policy details;
  • Are unfamiliar with life insurance;
  • Difficulty in deciding how much to buy;
  • Uncertain about what type of life insurance to buy;
  • Worried about making the wrong decision.

Please contact our team at any time as we are on standby to help you review your goals and options to determine if you have an adequate mix in your insurance portfolio.

 

 

 

Copyright © 2017 Outline Financial & FSB – All Rights Reserved

Pay Attention to Your Beneficiary Designation

It’s more important than you think

Naming a beneficiary is a valuable feature of life insurance and segregated funds policies so it is important to carefully choose your beneficiaries.

Estate – the default choice

Many people choose to name their “estate” as their beneficiary.  Although this is an easy short-term solution, it is important to review the risks of doing this.  If you are stuck for a significant “other” beneficiary, don’t forget to change it to a more appropriate option later.  Why?

  • The proceeds will be subjected to probate fees and the benefits received will be co-mingled with all the other estate assets which may be exposed to various third parties.

What’s in a name? 

Simply naming an individual or trust as beneficiary will keep the proceeds out of the insured’s estate and also protect the death benefit from the claims of creditors or litigants.

VIP Beneficiary 
A “preferred beneficiary” is a spouse, parent, child or grandchild and receives VIP treatment in the form of protection.  All the proceeds of the life insurance product (including Segregated Funds) are protected against claims of the creditors or litigants of the life insured not only upon his or her death, but any cash values in that policy are also protected during the lifetime of the insured. 

  • A minor “preferred beneficiary” will require a trustee for their portion until they reach the age of majority.
  • Note that the preferred beneficiary status does not apply to siblings.

Trust your trustee

Think carefully about to whom you assign the task of trustee.  It can be a difficult role to fill, often challenged by trying relationships. Be sure to discuss the role with your intended trustee and make sure they are comfortable with it and understand the responsibilities of the role.

Contingency Plan

Often parents of minor children are concerned about what would happen should they both tragically pass away at the same time.  For this reason, the children are often named as “contingent beneficiaries”.  If the children are minors, the trustee named to act on their behalf will receive the proceeds directly upon the death of their parents avoiding any estate considerations.

As life changes, so do beneficiaries

If you have an older life insurance policy it is probably a good idea to review the named beneficiary as your circumstances may have changed.

It may be time for a change if……

  • You have divorced – if you have a divorce agreement that required you to maintain your spouse as the beneficiary, have the conditions of that requirement now expired (e.g. children are now of age) and is no longer required?
  • If you have remarried – is your ex-spouse still named as the beneficiary?
  • If a policy was assigned to the bank or other lending institution – have the assignment removed if the loan is paid off.
  • If you have new dependents – children, grandchildren or even dependent parents.
  • If your children are now grown up – and have families of their own, does this change how you want your life insurance proceeds to be paid?
  • If your children are married, their spouses may have access to these proceeds too. Is their relationship solid, or is there a risk of half of your life insurance proceeds being paid out as part of a divorce settlement?  Perhaps you should consider naming your grandchildren as beneficiaries instead?

The need for life insurance no longer exists

Often, older individuals find they have no one to whom they wish to leave their insurance proceeds.  In this situation, naming a registered charity will provide a charitable tax deduction in the full amount of the proceeds at death.

Please contact a member of Outline Financial’s insurance team to let us review your beneficiary designations and make sure your life insurance proceeds end up where you want them to be.  As always, feel free to use the share button to forward this article to someone who might find it of interest.

 

 

 

 

 

Copyright © 2017 Outline Financial & FSB – All Rights Reserved

What is a credit score, and how to improve yours.

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What is a Credit Score:
Your credit score is a number that illustrates your financial health at a specific point in time. It also serves as an indicator of your financial past, and how consistently you pay off your bills and debts. This is one of the factors mortgage professionals consider in qualifying you for a mortgage.

How to Check Your Credit Score:
To find out your credit score, contact Canada’s two credit-reporting agencies: Equifax Canada at www.equifax.ca and TransUnion Canada atwww.transunion.ca. For a fee, these agencies will provide you with an online copy of your credit score as well as a credit report – a detailed summary of your credit history, employment history and personal financial information on file. You can also obtain a free copy of your credit report by mail. If you find any errors in your report, notify the credit-reporting agency and the organization responsible for the inaccuracy immediately.

What If You Do Not Have a Credit Score:
It’s important to begin building a credit history as early as possible. You can begin to build one by applying for – and responsibly using – a credit card. Your financial institution or mortgage professional can help.

How to Improve Your Credit Score:
Demonstrating your ability to manage credit is key to maintaining a good credit score. There are a number of things you can do to improve your credit score. These include: Always pay your bills in full and on time. If you cannot pay the full amount, try to pay at least the required minimum shown on your monthly statement. Pay off your debts (such as loans, credit cards, lines of credit, etc.) as quickly as possible. Never go over the limit on your credit cards, and try to keep your balances well below the limits. Reduce the number of credit card or loan applications you make. Once your credit score has improved, work with your mortgage professional to obtain a mortgage that works for you.

Find Out More:
To find out more about credit scores and reports, visit the Financial Consumer Agency of Canada website and download or request a free copy of their guide, Understanding Your Credit Report and Credit Score. This guide provides practical, straightforward information on how to obtain and understand your credit report and score, as well as how to build and maintain a good credit history.

Mortgages & Life Insurance – how do they fit together?

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Congratulations!  You’ve just purchased the home of your dreams, and your advisor has secured you a great mortgage to make this dream a reality.

Now that you have a mortgage, it can make a lot of sense to insure it.  While owning a debt free home is a financial goal for many, putting plans in place to make sure your mortgage is paid off in the event of your death can be a critical part of estate and family planning.

A good rule of thumb to follow when searching for advice?  Ask an expert.  If the analysis points to a need for mortgage insurance, the question then becomes should you purchase the lending institution’s product that is offered with your mortgage, or should you explore term life insurance that is available from a life insurance advisor/company?

While both options have their pro’s and con’s, other than potentially more paperwork, the life insurance company option typically offers more overall value as outlined in the 8 key points below:

1 – Cost

Term life insurance available from a competitive life insurance company is usually less expensive than mortgage life insurance provided through the lender.  This is especially true if you qualify for non-smoker rates.

2 – Availability 

If you have some health issues, the lenders mortgage insurance may not be available to you.  This may not be the case with term life insurance where competitive underwriting and substandard insurance are more readily attainable.

3 – Declining coverage

Be aware that the death benefit of creditor/mortgage insurance declines as the mortgage is paid down.  Meanwhile, the premium paid or cost of the coverage remains the same.

With term life insurance the death benefit does not decline. You decide how much coverage you want to have.  This gives you the flexibility to reduce the amount of coverage and premium when the time is right for you.  Or keep it should another need arise or in the event you become uninsurable in the future.

4 – Portability  

Term Life insurance is not tied to the mortgage giving you flexibility to shift it from one property to the next without having to re-qualify and possibly pay higher rates.

5 – Flexibility

Unlike creditor/mortgage insurance, term life insurance can be for a higher amount than just the mortgage balance so you can protect family income needs and other obligations but pay only one cost-effective premium.

When you pay off your mortgage you will no longer be protected by creditor/mortgage insurance but term life insurance may continue. Also, unlike mortgage insurance, you are able to convert your term life insurance into permanent coverage without a medical.

6 – The beneficiary controls the death benefit

With creditor/mortgage insurance there is no choice in what happens to the money when you die.  The proceeds simply retire the balance owing on your mortgage and the policy cancels.

With term life insurance your beneficiary decides how to use the insurance proceeds. For example, if the mortgage carries a very low interest rate compared to available fixed income yields, it might be preferable to invest the insurance proceeds rather than to immediately pay off the mortgage.

7 – Can your claim be denied? 

Term life insurance is incontestable after two years except in the event of fraud.

Often creditor/mortgage insurance coverage is reviewed when a death claim is submitted.  Creditor/mortgage insurance allows for the denial of the claim in certain situations even after the coverage has been in effect beyond that 2 year period.

8 – Advice 

Your bank or mortgage broker can advise you on the best arrangement to fund your mortgage but advice on the most appropriate way to arrange your life insurance is best obtained from a qualified insurance advisor who can implement your life insurance coverage according to your overall requirements.

Your mortgage will probably represent the single largest debt (and asset) you will acquire. Making sure your mortgage doesn’t outlive you is the most prudent thing you can do for your family.

Please contact Outline Financial’s insurance group if you think it is time to review your current insurance protection or please feel free to forward this to someone you think may benefit from this information.

 

 

 

 

 

Copyright © 2017 Outline Financial & FSB – All Rights Reserved

First Time Home Buyers: how you can harness the power of your RRSPs

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RRSP season is here!

Use the first 60 days of the year to max out contributions to your RRSP.  You have until March 1st, 2017 to reduce your 2016 income and get a higher tax refund.

There are several advantages to maxing out your contributions to your RRSP.  All of the income you earn in the plan is exempt from tax (as long as the funds remain there).  Additionally, you can withdraw tax-free funds from your RRSP for qualifying home purchases.

The Home Buyers’ Plan (HBP) is a program that allows Canadians to withdraw up to $25,000 in a calendar year from their RRSPs to buy or build a qualifying home for themselves or for a related person with a disability.

Under this plan, only first-time home buyers are eligible to participate, unless the special rules for persons with disabilities apply.

Each spouse or common-law partner can withdraw eligible amounts under the HBP from any RRSP under which he or she is the annuitant. Each person can withdraw up to the $25,000 limit, or $50,000 if purchasing the property jointly.

Any RRSP contributions made must remain in the RRSP for at least 90 days before they can be withdrawn under the HBP. After 90 days, the RRSP may generate a tax refund, which can then also be applied toward the down payment.

You have up to 15 years to repay to your RRSP from the second year following the year of withdrawal. If the required repayment is not made, the owing amount will have to be included as income in the year of the shortfall.

This is an excellent opportunity to save for your first down payment, and we are happy to discuss the options.

Whole Life Insurance, A Whole New Investment Class

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The recent developments in investment markets and the volatile performance that has resulted have brought about a new appeal to an old workhorse.  For investors looking for a diversification in their investment portfolio and a more tax efficient fixed income investment alternative, a compelling argument can be made for the use of Whole Life Insurance.

Why is Whole Life Insurance a good investment?

  • The tax advantaged steady growth, combined with significant estate benefits are the primary reasons why Participating Whole Life is now being thought of as a new investment class.
  • Unlike other accumulation policies such as most Universal Life policies, mutual funds and other equity investments, the cash and dividend value of a Whole Life policy cannot decrease as long as premium payments are made.

Who should consider Whole Life Insurance as an investment?

  • Anyone looking for stable returns on their investment portfolio.
  • For those that have corporations and are accumulating surplus, the use of Whole Life in the corporation not only provides the same stable, tax deferred returns but also provides opportunities for Capital Dividend Account planning.

What is Whole Life Insurance?

  • It is permanent life insurance protection – meaning it won’t expire before you do!
  • It has level guaranteed premiums for the life of the policy. (Shorter premium paying periods are often available.)
  • It has tax advantaged cash value growth.
  • It can pay annual dividends (participating whole life).
  • Dividends can be taken in a number of different ways but the option most often selected to provide the maximum tax advantaged growth is “paid-up additions”.
  • The assets of the participating pool are professionally managed and largely in fixed income investments.  Management fees are extremely low (some as low as 0.07% management fee) and the funds have very little volatility.
  • This combination of guaranteed cash value and the non-guaranteed portion from the dividend account grows tax deferred.  At death it is paid to the beneficiary tax free.

Can I access the cash value of the policy?

  • During the lifetime of the insured, the cash values can be accessed by way of partial or total surrender, or policy loan.
  • Income tax may be payable on withdrawals. However, one alternative to avoid paying income tax is to use the policy as collateral and borrow from a third party lender.  And if structured properly, the interest on the loan may be tax deductible.

Favourably compares to a long term, high yield bond

  • Today most portfolio managers recommend that a prudent investor have a diversified portfolio with a significant portion in fixed income investments, such as bonds, term deposits, etc.
  • Many investment managers suggest one third to 40% of an investment portfolio be in these types of investments for balanced growth.

Including participating whole life in your portfolio can produce some significant results, and reduce overall volatility.

Whether investing as an individual or via a corporation, the significant results that can be achieved by using Participating Whole Life are worth investigating.

Please call a member of Outline Financial if you think you would benefit from this strategy or use the sharing buttons to share this article with a friend or family member you think may find this information of value.

 

 

 

 

Copyright © 2017 Outline Financial & FSB  – All Rights Reserved