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What’s the Difference between Universal and Whole Life

Financial terminology is crystal clear for those folks who work in and are exposed to the financial industry on a regular basis; everyone else finds the definitions and implications difficult to understand. “Universal” and “Whole Life” life insurance is not exempt from this reality.

What you need to Know

Whole Life

Whole Life Insurance is also called ‘permanent’ as it provides a lifetime of coverage. As long as the premiums are paid, the insurance stays in-place permanently. At the beginning of the Whole Life policy the death benefit and premiums are usually guaranteed, and remain fixed.

Whole life policies pay the death benefit when the insured person passes away. They can also accumulate additional cash value inside of the policy. The invested premiums fund the death benefit, and whenever excess premiums occur they are then invested by the insurance company on your behalf and create a Cash Value.

Typically, Whole Life insurance is less expensive to purchase than Universal Life, and is the ideal option for those people who desire level premiums and a predetermined death benefit.

Universal Life

Universal Life Insurance is a slightly more complicated financial solution as it is considered both a Whole Life policy and a tax-preferred savings account, combined together. At the beginning the death benefit is set, and then any premium payments above what the life insurance policy requires can be used to increase the death benefit or be held in a tax-preferred savings account.

This last point is important for those people who may have maximized allowed RRSP contributions and are looking for additional ways to shelter income and wealth from taxation.

The Bottom Line

To understand the differences between Whole Life and Universal Life Insurances be sure to consult with your Advisor.

Click HERE to book an appointment with us today!

What Does Having a Pre-Existing Condition Mean for Your Life Insurance?

It’s a common misconception that having a pre-existing condition means that you automatically do not qualify for life insurance. The good news is this is not always the case and armed with a good life insurance agent, many individuals with pre-existing conditions get approved for insurance. The path to being insured just may look a little different for someone with a medical condition.

What You Need to Know

1.Work with a Broker

There are many life insurance carriers in Canada and each company has a different set of underwriting guidelines and level of flexibility. It is crucial to reach out to a number of companies when trying to get a pre-existing condition covered. Working with a broker is the most efficient way to research companies as most life insurance brokers have the ability to work with any company they choose. This also means they will have knowledge of which companies work best for hard-to-insure clients.

2. Understand Traditional Underwriting vs Non-Medical Underwriting

Many companies now offer non-medical underwriting. This usually means that applicants will be asked a number of medical questions and if the questions satisfy the insurance company then the insurance will be approved. If they don’t, the application will be rejected. This can work in the favor of someone with a pre-existing condition if the questions either:

a) do not ask about that particular condition

b) the question asked about that condition is forgiving (example: you are diabetic but the application only asked if you are an insulin dependent diabetic).

However, sometimes traditional underwriting can be the best option for someone with a pre-existing condition. Traditional underwriting can allow you the opportunity to make a case for a well-managed pre-existing condition through in person exams and doctors statements. If the applicant doesn’t qualify for non-medical insurance because of a condition there is usually no wiggle room with the insurer.

3. Manageable Condition vs Severe Condition

Not all pre-existing conditions are treated the same by insurers. Life insurance companies put each applicant through an underwriting process that uses in person medical exams, claim histories, and underwriting guides to determine whether or not they will insure someone. There is a big difference to an insurance company between someone with a manageable condition and someone with a severe condition.

For example, having high blood pressure is considered to be a pre-existing condition. However, it is a condition that can often be managed by medication and lifestyle choices. Therefore, an insurer may look at someone with high blood pressure and determine that their condition is well under control and be willing to make an offer to insure.

Conversely, someone who has been diagnosed with a terminal cancer would be considered to have a severe and unmanageable condition that would cause the insurer to reject the application.

4. Guaranteed Acceptance Products

Many companies offer guaranteed acceptance life insurance products and sometimes this is the only option for applicants with a pre-existing condition.  These products are typically offered with high premiums and small face amounts.  As well as higher premiums, they usually contain a deferred provision. This means that the insured is expected to pay premiums for two years before the insurer will pay out the death benefit. In the event the insured dies within the first two years, the premiums are most often paid back to the beneficiary. This can be a good option for those who are otherwise uninsurable but would like to have something to cover final expenses.

The Bottom Line

Knowledge is power when it comes to getting approved for life insurance and so is having a good advisor to guide you along the way. Be sure to bring a complete list of medical conditions and any medications you are on when meeting with a life advisor so that they can help you sort through companies and products to find the best fit for you.

Book an appointment with us to discuss your Life Insurance needs! Click Here

Why I bought Millions of Dollars in Life Insurance (and an absolutely incredible disability policy)

I’ve been reading a lot of material in the past few weeks about posting content on Linked In. The last few articles that I have written, have been received with moderate success from the financial planning community. I absolutely love getting onto a topic that I’m passionate about, and helping people connect with what might be a new way of looking at things! Ottawa local and Linked In guru Michaela Alexis preaches vulnerability in her article 5 Must Read Tips for Writing a Killer Linked In Article If you haven’t had a chance to read this article – and are interested in writing content – it’s a really great start.

So let me be vulnerable.

In May 2011 on a day long ATV ride ride with some friends, colleagues and clients in the Calabogie area – I had a terrible accident. It was probably our fourth or fifth annual ride with about ten riders. I had just spotted a beautiful long hill in a sandy field, and I was determined to drive my ATV up to the top to have a look. Half way up this rolling hill the ground just ended – it was a cliff. With absolutely no time to react – I went over the side of the tall cliff first (large unforgiving 800lb ATV came second), and the ATV fell with me landing hard right on top of my back. Immediately, I knew I was badly injured. At the end of the day – I had broken 5 vertebrae, 3 ribs, and split my liver.

So I’ve gotten the accident out of the way, and this helps with the setup of this article. I’m really trying to let you in on what was happening for me the moments after that accident. I was absolutely terrified. Not only was I worried that I may not survive this incredible accident, I was worried as I had a family that I wanted to get back to. I had three kids to raise, and when my beautiful girlfriend (now my amazing wife) walked in the hospital room – it gave me all the energy I needed to get charged up to start my mending!

Once the dust settled, and I had days and days of lying and healing – there were a few things that I really had on my mind;

  • If I end up not being able to walk again – will I have enough income from my group and disability plans?
  • Was my will set up the way that I wanted it? Does it contain my last set of instructions in the way that I really intended?
  • What would I change about my life insurance and risk plan if I could?
  • Would I be able to climb Mt Kilimanjaro with my girlfriend? (we had just made plans and booked our trip)

Months later – I had healed and made a recovery.

So I’ll be honest with you – I didn’t have enough set up for my disability plan (and would have probably had to live a life I wouldn’t have enjoyed), and my will and life insurance program needed some tweaking. Sometimes, we get a good bounce in life – and this was my second chance.

I’m going to share with you the reasons why I reviewed these questions, and set up a robust insurance program after my accident;

  1. I have a family that I absolutely love. My wife and my kids are what gets me up in the morning, and what keeps me inspired every single day. Sometimes we’re busy, sometimes we’re laughing and goofy, and sometimes we’re all doing separate activities (especially as the kids get older). At the end of the day – what we have in our home is my entire life.
  2. It’s the best way to have a couple Million dollars sitting on the sidelines when you need it. I once had a client ask me to build him a financial plan – “but please don’t use life insurance – I don’t like it. So I did. I built a beautiful financial plan – and it showed a need to save $17,000 / month for five years (and assumed that he didn’t get sick or die for that period). It wasn’t a hit. He ended up liking the insurance in the plan – and it ended up saving him a lot of money. I enjoy having knowledge that when I need it – regardless of how much I’ve saved, or where I am at in my life cycle – the money will be there.
  3. I don’t like spending money when I don’t have to. Structuring my plan right made it cash flow neutral. It may be a monthly expense – but having return of premiums or some cash value features allowed me to have a plan that returns this to me later on. A typical 35 yr old could easily spend $20,000 – $30,000 on premiums between now and retirement age (as an net negative expense) or they can re-arrange what they are doing and make this neutral, or an treat it like an investment, and come out with thousands in savings, and a nest egg.
  4. I’m a business owner. I like risk, and growing my business. Some elements of my world I can’t afford risk. My business, and my income is one of them. Walt Disney wouldn’t have been able to keep trucking on his Disneyland idea without it – a good read here What? Walt Disney used Life Insurance?
  5. I enjoy travelling, having goals, and just simply not worrying about uncertainty. It’s incredibly re-assuring to be able to book that scuba dive trip, or take a hike on a beautiful Caribbean island without worrying about mortality.

6. It’s immediate. Sometimes you just don’t get that second chance. It’s the ATV day with your pals, or it’s that golf game with your friends. It may just feel like another day, and give you no second thoughts. Sometimes and somewhere – your day doesn’t end the way you wanted. On an average, we are supposed to be here until 85 yrs of age, but sometimes we get sick, a medical result comes back we didn’t expect, or someone runs into our car. It can be totally unplanned, unexpected, and change of world forever. It might mean your income ends, or it could mean you don’t go home (ever). Having an insurance plans allows me to know that (a) the money is all there (b) every person that I love has something I wanted them to have (c) if I live through whatever terrible day I’ve had – I’m going to have an income (and then I can start with my game plan on recovery and overcoming whatever has just happened)

By the time I was done healing I had renewed my insurance strategy. I talk about this day with my clients – because sometimes people have a hard time imagining something terrible happening to themselves. I don’t mind sharing my story – it has a good ending. I made some great changes – and I also was also able to climb that mountain with Michele!

I’m excited about my life and the future adventures coming, and excited about knowing that I have a strong plan to support me. Think about your plan, and make those changes you’ve been thinking about. It’s one of the best steps you could take (and then consider travelling to Africa and hiking Mt Kilimanjaro – it’s incredible! “Go Climb a Mountain: – my buddy said. Click here to get this on your bucketlist.

Just my thoughts for the day,