Life Insurance:

There are three basic types of Individual Life Insurance

Term
Traditional Permanent and
Universal

Term insurance is life insurance issued for a specific period of time and is often referred to as temporary insurance.

Examples are :

• Insurance issued for one year but renewable at a higher rate for a number of additional years [e.g. Term to age 70 or 80] - often called Yearly Renewable Term [YRT]
• Insurance issued for a level premium for five [or ten or twenty] years renewable at a higher level premium for a number of additional, five [or ten or twenty] year terms at a higher level rate. The renewable rates may or may not be guaranteed.
• Insurance issued with a level premium to a specific age - e.g. age 65 or age 100.
• Renewable term insurance does not usually illustrate cash values however those policies issued to a specific age may.
  

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Traditional insurance usually calls for a level payment to be made by the policy owner that is higher than necessary in the early years and lower than needed in the later years. In its simplest form, a policy issued to age 100 may be very similar to a Term insurance policy issued to age 100 and may or may not illustrate cash values. Many traditional policies will illustrate [and guarantee] a cash value equal to the face amount of the policy at age 100.

Traditional policies take many different forms including:

• policies issued for the whole of life [usually defined as age 100] which may not need premium payments past a certain age - e.g. Life paid up at age 65, 75 or 85.
• policies issued to a certain age [e.g. 60 or 65] with a cash value at that age often equal to the insurance amount of the policy, these policies are said to 'endow' when they reach that age of the insured - e.g. endowment [cash, equal to the insurance amount] at age 65.

In days gone past, fathers would buy these types of policies for their daughters, [especially spinsters] so they would have an income upon reaching a certain age [hence the expression, 'dowager']. In recent years we see these being sold as Retirement [Freedom?] at age 55, 60 or 65 - or, as contracts to provide 'Living Benefits' for people after they have left their businesses.

It is important, I think, to be aware that whether illustrated or not, cash values do exist in a level premium policy [term or traditional permanent] and are used to reduce the actual amount at risk by the insurer.

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Traditional
Universal
Participating or Non
Disability
Critical Illness
Long Term Care
Segregated Funds
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If cash values are illustrated, [and therefore presumably payable to the owner on request] the insurer will usually have charged a [slightly] higher premium than if not illustrated.
e.g. the premium charged to obtain a cash value of 'b' will be higher than to obtain the lower value of 'a'

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Universal Life insurance differs from traditional insurance in that

• it invites the policy owner to direct the investments within the policy rather than leaving the investing to the insurer.
• it usually discloses the risk [mortality] costs to the policy owner and allows them to choose from various types of streams of risk charges - e.g. yearly renewable, 5, 10 or 20 year level, or level risk charges to 100.
• it may allow the client to elect guaranteed or non guaranteed risk charges - the latter initially costing less.
• it often discloses the current cost of administration and may allow the client the option to elect guaranteed administration costs

The policy itself is usually issued to age 100 [for life] but it is up to the client to decide

- the actual age to which they wish to assume and illustrate coverage for
- the kind of stream of risk charges offered, the yield they will expect to get on the investment mix they are offered and choose to use-be it equities or fixed income or a mix of the two.
- the amount of cash value the client would like to see at various points in the duration of the contract
- the amount of regular premium they wish to pay and the length of time they want to pay it for. Note that this is usually determined for the client by the first three choices but there is often the ability and the need to change the premiums as circumstances require

Today's computer systems allow the company, it's agents and their clients the ability to illustrate a myriad of portraits of what the policy can do - custom designing the contract for them. The policy has inherent flexibility as a strength but it requires more, proactive, involvement by the client who is cautioned to review the policy regularly to ensure that changes are made to the contract as needed to keep it on track to match the expectations originally illustrated.

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Participating or Non Participating Life Insurance?

Any of these types of policies may be offered as participating [par] or non participating [non par] in the investment results of the insurance company. Non participating, traditional products may tend to have lower downside investment risk but also lower upside investment gains than participating, but that is due to the company guaranteeing all facets of the policy while fewer guarantees are included in the 'par' products.

Participating policies in fact show guaranteed values and premiums as well as non guaranteed values. The non guaranteed values are generated by regularly [usually annually] reviewing the results of investment, mortality and administration costs and crediting a portion [if not all] of that profit to the policyholders as a policy dividend.

It is fair to say then that the participating policies illustrate values on a prospective basis [much as do universal life policies] and then adjust the values of a policy on a retrospective basis to reflect actual experience.

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Disability Insurance

From a financial perspective, your most important asset is your ability to earn an income. Without it, everything you have worked so hard to earn could begin to disappear. Statistically this year, one in seven Canadians will be disabled. And while not all disabilities are permanent , a disability of more than 90 days will last an average of three years.

We offer a full range of disability products including those with Guaranteed premiums which are non cancelable as well as those policies with Non Guaranteed premiums which may be cancelled by an insurer..

Our insurers offer a broad range of options on their contracts to help us design one which meets your needs.

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Critical Illness

Critical Illness is a relatively new coverage to Canada. Marketed under a number of different names it provides a lump sum payment normally 30 days after you are diagnosed with a defined critical illness.

A basic plan might cover Heart attack, Life threatening Cancer and Stroke while a more comprehensive plan will cover a number of other illnesses such as:

• Alzheimer disease
• Paralysis
• Blindness
• Parkinson's disease
• Loss of Speech
• Coma
• Renal failure
• Loss of Limbs
• Severe Burns
• Coronary Artery Disease
• Multiple Sclerosis
• Vital organ Transplant
• Occupational HIV Infection

The benefit of a Critical Illness coverage is that it provides a claimant immediate cash to readjust their lifestyle, seek immediate medical help in another country or spend otherwise as they wish.

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Long Term Care

This coverage is marketed by a number of reputable companies in Canada and provides a regular monthly income to the individual so they may afford nursing and other medical attention either in their home or in a long term care facility of their choosing.

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Segregated Funds

Simply speaking segregated funds appear to be similar to mutual funds.

Looking more closely at the product we see they are actually an insurance product payable to the owner. The annuity payments are deferred to a point in the future finally defined by regulation unless the owner makes earlier election, and the amount of the payment will not usually be defined until a later date.

While the management fee for a segregated fund will often be marginally higher than a similar mutual fund they offer some significant comparative benefits including:

• A guarantee of return of premium under certain circumstances
  
• When specific criteria are met - creditor protection
• A beneficiary designation which clearly bypasses the estate of the insured