Risk is exposure to the chance of loss.

Some risk are “Insurable Risks”

Chance of Loss :

Let’s start out by identifying the areas in which you may be exposed to the chance of loss. Perhaps the most obvious is loss of property. Property would include your house, cottage, car, or your personal belongings. Thus, one example of loss of property would be having your house burn down.

Loss of Future earnings:

Another type of loss, one which we hear more and more about today, is the loss of money or future earnings resulting fromyour personal liability for: personal injury you caused to someone else (someone slipped on your front steps); destruction of another person’s property (your son smashed your neighbour’s bay window); or an error in the discharge of professional responsibilities (as an accountant you made a mistake in working on an audit which resulted in a $500,000 lawsuit!)

Exposure to medical expenses :

Another possible exposure is for medical expenses outside Canada (for example, you are hospitalized in Florida for two weeks as a result of a car accident and get a bill for $40,000). Each of these examples illustrates losses of money or future earnings. Fortunately, most of these “chances of loss” are insurable risks.

Loss of income due to sickness or injury:

As catastrophic as some of these losses may seem, many people face the risk of a much greater loss each day: the potential loss of income caused by sickness or injury resulting in pro-longed disability or pre-mature death. Consider for a moment what your ability to earn income might be worth.

What Your Ability to Earn Income Might be Worth

While we don’t always associate pre-mature death with loss of income, if the deceased was gainfully employed, the loss is very real. Aside from the emotional trauma, thankfully, loss of income as a result of loss of life is an insurable risk, with some exceptions and limitations. The magnitude of the financial loss can be very dramatic as the following chart illustrates.

Years Left To WorkMonthly Income $3,000Monthly Income $5,000Monthly Income $10,000
10 Years$ 432,220$ 720,366$1,440,733
20 Years$1,072,011$1,786,685$3,573,369
30 Years$2,019,058$3,365,096$6,730,193

Assumes 4% inflationary increases each year.

No doubt the value of your home pales in comparison to the potential loss of your future ability to earn income.

THE NEED FOR PERSONAL LIFE INSURANCE

  • Young Singles/Young Couples- cover off any debt including debts with co-signers,  final expenses, does your family history have significant health issues?
  • Young Family – debts, mortgage, final expenses, ongoing income needs, education fund
  • Maturing Family- debts, mortgage, final expenses, ongoing income needs, education fund
  • Pre-Retirees- debts, mortgage, final expenses, ongoing income needs, final taxes
  • Retirees – debts, final expenses, leave a legacy, final taxes

CORPORATE LIFE INSURANCE

The need for corporate life insurance. The video outlines the 4 stages of a business and demonstrates the need for insurance in each stage.

    • Launch stage – Cover off any debt, Founder/Key Person, Buy Sell
    • Growth stage – Cover off any debt, Founder/Key Person, Buy Sell, Business Overhead Expenses, Buy Sell
    • Mature stage – Cover off any debt, Founder/Key Person, Buy Sell, Business Overhead Expenses, Buy Sell
    • Transition stage – Founder/Key Person, Buy Sell, Business Overhead Expenses, Buy Sell, Retirement, Succession/ Exit Planning, Estate Equalization

Risk Management Principles

Embodied in your Wealth Management plan

Insuring Your Life

Loss of income through pre-mature death would pose a threat to your family’s financial security, transfer the risk to an insurance company, by buying life insurance (if possible). We emphasize considering the loss associated with the death of a spouse who doesn’t work outside of the home. There may be considerable financial consequences in terms of loss of services that have to be replaced such as childcare. Also there could be loss of future pension benefits, or even the loss of an inheritance that was being counted on as part of an overall financial independence strategy.

Although the risk may be minimal, insurance coverage on children should also be considered if parents have concerns for a child’s future insurability and/or could benefit from tax sheltering investment income.

Insuring Against Critical Illness

Impact of critical illness; can be immediate or sometimes gradual. Some illnesses may require special physical aids to living such as a hospital bed, ramps be installed or special transportation. Critical Illness insurance can provided needed cash upon diagnosis to help offset the costs of these special needs. It could enable you to obtain out of country treatment should treatment options in Canada be unavailable on a timely basis. With this type of protection, how you use the money is totally at your discretion.

Insuring Your Income

Earned income is necessary to attain financial independence, transferring the risk of loss of income resulting from long-term disability to an insurance company is a prudent strategy. For instance, a professional or business owner with expenses which would continue even if no income was coming in, then consideration should be given to transferring this responsibility to an insurance company by acquiring an office overhead/business overhead expense policy.

Insuring Your Estate Against Erosion Caused by Long Term Care

The cost of long term care either in your home or facility care can be very expensive, especially if you prefer a private facility as opposed to government subsidized care. While you may reason that you can afford such care, consideration should be given to your ability to transfer this risk for a small cost enabling you to protect your estate from the erosion that would take place should long term care be required. The decision to acquire such protection will primarily be driven by your desire to pass along your estate to your heirs without it being depleted by these late in life expenses.

Critical Illness Insurance*

Critical illness insurance is an insurance policy which will pay out a tax-free cash lump sum to you in the event that you suffer a major illness or health condition. As life expectancy increases due to improvements in the early diagnosis and treatment of conditions such as heart disease and cancer, those living with the after-effects of such health problems has increased and, for many, the burden of extra costs associated with such illnesses can be significant. Such costs can include the need to make up for lost or reduced income while you were too ill to work (or for your spouse to take care of you), paying for caregivers, modifying or purchasing new cars, houses or other equipment to support your needs to name but a few. With the Canadian Cancer Society recently reporting that the survival rate for cancer is now over 60%, with many other cancers far exceeding this rate, considering how you would cope financially in such a situation has become a pressing concern for many.

Below are some key features of critical illness insurance policies:

 

  • There is usually a waiting period on the policy i.e.: a time by which you must survive your illness following the initial diagnosis, before the policy will pay out.

  • This is usually very short, often between 15 and 30 days. The policies usually cover most major illnesses such as serious heart conditions, cancer, strokes, blindness, deafness, paralysis and others. 

  • There are no conditions on how you use the payment – once the lump sum has been made to you, you are free to use it as best suits you and your family. It is known as a “living benefit” as the lump sum is paid to you as the policy holder, instead of to a beneficiary.

  • In contrast to disability insurance, critical illness insurance is paid even if you are able to return to work following your diagnosis.

 

 

Disability Insurance

Your ability to earn income is your most valuable asset. Disability insurance is designed to protect you from a possible loss of income. What’s the possibility of this happening? Below are some statistics on disabilities occurring at different life stages.

It may surprise you that just over 1 in 4 of today’s 20 year-olds will become disabled before they retire.*

Why should you consider personal disability insurance?

  • Worker’s Compensation only covers work related accidents.
  • Unemployment insurance only covers 15 weeks.
  • Canada Pension Plan: Are you comfortable relying on the government for a benefit that can change?
  • Group and association coverage can fill a valuable role in long-term disability protection.

However, the benefit may be limited by the definition of disability and coverage amount. Remember, a custom designed individual disability plan will provide you with guaranteed coverage and guaranteed premiums.

Protecting Business Owner Interests

GROUP BENEFIT SERVICES

For corporations, taking care of your employees is a vital part of running your business and, like any business owner, you want to give them the best you can without spending exorbitant amounts of money. That’s why working closely with professionals like our team is a great decision for both yourself and your employees. We work hard to find you the perfect benefits solution to fit the needs of your business. We do not consider our job to be done until your business, your employees, and your finances are well taken care of.

We have worked with a wide variety of different businesses, all with their own specific needs. We customize our service to fit each of our clients’ needs, while maintaining our tried-and-true approach and proven system to yield the best possible results.

Understand how Risk Management integrates in your Wealth Management Plan