The balance and worth of a financial plan is in part a function of the personalized process used in assembly. The products behind the plan are many and each is looked at as a tool used to solve a particular problem.
Life Insurance comes in many different forms, each with its own contractual benefits and features. Term insurance may be a solution for short term problem such as to cover loans, mortgages, and other problems which have an end date. Longer term problems often never go away, and as such require a permanent product like Whole Life, 20 pay life, Universal life or even a term to 100 product. An in-depth “discovery” conversation often helps determine the best product, or combination of products to best fill the need.
Otherwise known as income replacement coverage is a product which is used to help maintain a person’s income while disabled. Every contract in this category can be different based on the occupation, income and health of the individual. A contract can be as specific as an “own Occupation” where a benefit is paid based on a physical inability even if there is no loss of income. For other policies, a definition would create a payment only if income is actually lost. The choice is different between business owners, professionals, Physicians and brick layers.
Critical Illness Insurance
Sometimes a major health issue creates a need for an unrestricted lump sum of tax free cash paid directly to the life insured. Critical Illness is a product which does just that. A Lump sum payment can be used following the diagnosis of any one of 27 covered illnesses. Most often associated to Heart Attack, Stroke or Cancer, a Critical Illness can also refer to MS, Blindness, Parkinson’s, Major Burn, Alzheimer’s, and many other illnesses. Critical Illness is unique in that a client can own the produce, be protected for years, and then receive 100% of their payments back if a claim is not made within a specific period. This is referred to as a “Return of Premium Benefit” often found as an option to some plans.
Long Term Care Insurance
People of any age can find themselves in a position where their health fails due to an injury or sickness. If the result is an inability to perform 2 of the 6 daily living actives, then a benefit is paid from a Long Term Care policy. Dollars can be used to cover Care in your home, or Care in a facility. Contracts are flexible enough to provide the coverage needed to give you proper care, and to protect your family’s assets at the same time.
Guaranteed Life Insurance Option/Benefit
This is a feature generally for children which can be added to a life insurance policy. The benefit behind this feature is to provide a guaranteed future option to protect the insurability for that child. Since our children grow up and enter many different financial obligations, providing them with an opportunity to purchase coverage when they need it in the future is a true gift. In other words, we can borrow a child’s good health status today, to qualify them for coverage to be purchased in the future.
Savings and Investment Accounts
Registered Retirement Savings Plan (RRSP)
Registered Retirement Savings Plan is a type of Canadian account for holding retirement savings and investment assets. Rules specified in the Income Tax Act determine the maximum contributions, the timing of contributions, the assets allowed, and the eventual conversion to a Registered Retirement Income Fund (RRIF), which must take place by age 71. Approved assets include, but are not limited to, savings accounts, guaranteed investment certificates (GICs), bonds, mutual funds, segregated funds, corporate shares, and labour-sponsored funds. Contributions to an RRSP are fully tax deductible, growth within an RRSP is tax-deferred and withdrawals from an RRSP are fully taxable.
Tax-Free Savings Account (TFSA)
Tax-Free Savings Account is a type of Canadian account which can be used for short or long-term savings. A TFSA can hold any investments that are RRSP eligible, however, unlike RRSPs, contributions to a TFSA are not tax deductible. Another key difference between TFSAs and RRSPs is that investment income, including capital gains and dividends, earned in a TFSA is not taxed while held in the TFSA or when withdrawn. TFSAs are a relatively new initiative by the Canadian government, established Jan 1, 2009.
Mutual funds are a collection of stocks, bonds, or other securities owned by a group of investors and managed by a professional investment company. When you put money into a mutual fund, it is combined with money from similar-minded investors. This large pool of money gives you much greater purchasing power than you could possibly have investing on your own. Mutual funds are operated by money managers, who invest the fund's capital and attempt to produce capital gains and income for the fund's investors. A mutual fund's portfolio is structured and maintained to match the investment objectives stated in its prospectus.
Segregated funds are a type of pooled investment product, similar to mutual funds, administered by Canadian insurance companies. Although they are an investment product, by law, they are technically considered life insurance. Unlike mutual funds, segregated funds offer certain guarantees on maturity and death to the unit holders. Also, value in segregated funds does not become part of an individual’s estate upon death, if there is a named beneficiary, thereby avoiding probate fees. Similar to mutual funds, segregated funds are managed by professional money managers who seek to produce capital gains and income, doing so in accordance with the investment objectives stated in its information folder.
Registered Education Savings Plan (RESP)
Registered Education Savings Plan (RESP) is a type of Canadian account for holding education savings. Contributions to an RESP are not tax deductible and withdrawals from an RESP are fully taxable in the hands of the beneficiary, who in many instances is a young adult earning modest income. If certain conditions are met, RESP contributions are eligible to be matched up to 20% by the Canadian government through a Canadian Education Savings Grant (CESG). Additional grants and incentives are available depending on the annual income of the RESP owner(s) and the province in which they reside.
Registered Disability Savings Plan (RDSP)
Registered Disability Savings Plan (RDSP) is a type of Canadian account designed to enable individuals with disabilities to save for their financial future. The Canadian Government assists people to save through the Canada Disability Savings Grant and Canada Disability Savings Bond. A person who establishes an RDSP can make contributions to the plan up to a lifetime limit for the benefit of the person named the beneficiary. Contributions are not tax-deductible, and earnings and growth accrue on a tax-deferred basis until withdrawn – at which time a proportion of the plan (earnings and growth received) is taxable and will need to be declared as income in the hands of the beneficiary.