Insurance Financial foundation Investment Emergency Funds Debt Management Protection Financial foundation Protection • Protection or Income replacement strategy or simply Insurance • The foundation of financial planning is to have proper protection in the event of disability, critical illness or premature death. Financial foundation Protection • Strong foundation means solid house. • To have adequate protection in the event of disability, critical illness or premature death is to have a strong financial house • A weak foundation means a soon to fall house. • A weak or no financial foundation indicates chaos, fear and unhappiness in case the ATM of the family suddenly dies or get disabled. Financial foundation Debt Management • Debt is modern slavery • Reduce your liability and get out of debt as soon as possible. • Debt can turn into a disease. It could control your life, diminish your happiness and limit your freedom. • Remember! No one can be free until he is financially free! Financial foundation Emergency Funds • Emergency does not mean car accidents • You need to set aside 3 to 6 months of your income to deal with sudden changes in your job or business or to pay for unforeseen accident or repairs example a leaking roof or a bad furnace in a winter month Financial foundation Investment • A good roof will protect the content of the house. • The roof of your financial house is saving and investing for the long run Financial foundation Now that you understand how to build your financial house, why wait! Take the first step and build it gradually. Insurance What is Insurance? • Insurance simply means the replacement of an economic loss as a result of an eventuality; death or disability. It is also called Income replacement strategy. • Life insurance does not insure your life. • It insures your family's ability to move on without being financially devastated. Insurance Insurance Vs Investment • As a priority, you should consider protection first. Why? If you try to save a few hundred dollars a month but have no insurance, when you get sick, disabled or die suddenly, this savings won't last very long. • Imagine Mr A that pays $500 per year premium to buy insurance that pays $500,000 death benefit to his family if he dies suddenly. • Now, let's look at Mr B who invests $500 a year in a mutual funds. Let assume, both of them pass away at the end of the first year. Whose family is well protected? Obviously Mr A. This demonstrate the importance of insurance over investment. Insurance Types of Insurance There are majorly two different types of life insurance. • Temporary or Term insurance • Permanent insurance Insurance Term Insurance • A term insurance may be for 10, 20 or 30 years. • This insurance protect the insured for the specific term and terminate if there is no death. • It may be renewable for another term without a proof of insurability to the life insured. • It could also be convertible to a permanent insurance at any time, but it would be at the attained age. • Term insurance is very cheap in the short run but very expensive in the long run. The premium must be paid until expiration of the term, else the policy terminates after a grace period of 30 days. • The reason being that it doesn't have any cash value. Insurance Permanent insurance are basically three types • Term 100 • Whole Life • Universal Life Insurance Term 100 • Term 100 is a pure insurance that covers the life insured till age 100. • The cost of insurance in this type of policy is very high. It is becoming unpopular because of its high premium Insurance Whole Life • Whole life insurance is the oldest form of cash value life insurance. • Instead of paying just the cost of insurance, you pay higher premiums. • The difference between the cost of insurance and the premium goes into your cash value. • This kind of policy gives you a guaranteed rate of return. Some companies may provide dividends, but dividends are not guaranteed. • Whole life is typically not flexible. The interest is guaranteed, premium and death benefit is fixed. • Since the insurance companies guarantee the interest for the whole life, they tend to give a conservative rate. There are fees associated with early surrender. Insurance Universal Life • Universal life is a flexible type of permanent insurance. • You can pay more in one month or less in the next or skip a few premium payments, as long as the cash value inside the policy is enough to pay the cost of insurance. • It usually terminates at Age 100. Insurance Features of a Universal Life (UL) • Permanent insurance. Expires at age 100 • Has 2 components; insurance if the insured dies so soon and investment if he lives long • It is very flexible. The life insured can buy affordable coverage and increases it at any time without proof of insurability. He can also determine the pay period. • Premium payments may be stopped in 10, 20 or at age 65 • The life insured can use the non taxable growth to enhance his retirement income Insurance Determining the amount of coverage needed • The DIME Method- An hypothetical illustration. Debt $50,000 Income $360,000(3K/month or 36K/yr) Mortgage $200,000(mortgage balance) Education $120,000(assuming $15K/yr for a 4yr college for 2 kids) Total $730,000 protection needed. Insurance Insurability /Suitability/ affordability • Are you insurable? • Most life insurance requires medical, blood test and or health records before a policy is approved and issued. • This however depends on the age and amount of coverage. A lot of people are not insurable, but they don't know. • Buy insurance when you are young and healthy. Insurance Additional Life insurance product Segregated Funds. • This is an investment in a life jacket. It is sold by insurance company because of the death benefit and maturity guarantee(75 or 100%). It provides creditors protection, and you can also name a beneficiary. The MER for a seg fund is a little higher than mutual funds because of its guarantee. There are also reset options Insurance Determining the amount of coverage needed • Our uniqueness as a financial services distribution company • We are a one stop shop to our clients for their financial needs because of our dual license • We represent about 40 reputable companies in the financial industry Insurance Determining the amount of coverage needed • Our client will always be protected no matter what. Example is providing between 25K and 500K coverage to the sick or clients that have been previously declined by the traditional insurance company because of their health issue. Insurance Determining the amount of coverage needed • Canada protection plan is one of our partners. CPP is the the leading company in non medical writing • We tailor our unique services to meeting individual clients needs at a very competitive pricing. Insurance Thank You
