Insurance 101 risk mgmt workshop march 4

COCHRANE WEALTH MANAGEMENT

---------------------------------------------------------------

Honest Ideas – Successful Solutions

LEARNING ABOUT LEARNING ABOUT INSURANCE AND RISK INSURANCE AND RISK

MANAGEMENTMANAGEMENT

Richard Foy

Certified Financial Planner

CHANGING NEED FOR LIFE INSURANCE

RISK MANAGEMENT - Are you covered?

MANAGING RISK FOR BUSINESS

Attracting and retaining employees Ownership, conflict or change Loss of key person Economic risks Consumer spending Supplier risks Protecting intellectual property Credit risks Operational risks Catastrophic risks

FINANCIAL PAIN RELIEF

PURPOSE:

TYPE:

REASON:

Creation of estate Protection of estate

Term insurance Permanent insurance

Love Fear

GENERAL USES OF LIFE INSURANCE

Create an estate Pay taxes at death Income replacement Capital loss due to death Fairness at inheritance time Provide for retirement funds Excellent for business transfers Gifts to charities Payoff mortgages, guarantees, loans

FOR BUSINESS OWNERS

Life insurance creates immediate liquidity for business continuation

Replace a key employee Restructure financing arrangements Repay creditors Facilitate business succession to buy

partners shares upon death

THE INSURANCE WORLD

What if you die too soon…?

What if you live too long…?

What if your health fails…?

What if you cannot earn a living…?

THE INSURANCE WORLD

Too much insurance…

Not enough insurance…

Paying too much for your insurance…

Not the right kind of insurance…

I am bullet proof

Self insure

Share the burden

INSURANCE MANAGEMENT STRATEGIES

“WILL I RECEIVE BENEFITS?”

At time of claim??

At time of Application??

TERM INSURANCE

TERM INSURANCE

Term insurance is designed to last a specified amount of time such as one year, five years, ten years or up to a certain age

At the end of this time, the policy expires Temporary Ideal for young families Low cost

TERM INSURANCE

Term 10 and 20 Renewable until age 85 Joint protection Preferred rates based on lifestyle and medical history Guaranteed premiums for future renewals Option to convert into permanent insurance

until age 65

TERM INSURANCE IS USED FOR…

Insure mortgage and other personal loans Provide for children’s education Preserve your estate Cover costs of final wishes and inheritance Share buy back for deceased shareholder Hire a replacement or offset losses resulting

from the death of a key employee

FOR EXAMPLE…*

TERM 10$500,000

TERM 20$500,000

1 – 10 years $464 $778

11 – 20 years $2,770 $778

21 – 30 years $6,637 $9,580

31 – 40 years $18,981 $9,580

*Annual Premiums based on:40 year old male, non-smoker

Private Mortgage Protectionvs. Bank Mortgage Protection

Refer to handout

WHOLE LIFE

INSURANCE

WHOLE LIFE INSURANCE

A traditional policy with level premium payments designed to remain in force over the lifetime of the insured

Early premiums tend to be higher than required

This builds a base reserve along with accumulated interest which enables the premium to remain level in later years

WHOLE LIFE INSURANCE

Offers permanent coverage with guarantees on premiums and values

Way to pay for taxes when an inheritance is transferred

WHOLE LIFE

Types of Coverage:Whole life 100Whole life limited pay, age 65, age

75, 20 years, 25 years, 30 years

COVERAGE AVAILABLE

Single

Joint last to die

Joint first to die

OTHER FEATURES Cash surrender value: The cash surrender value begins

around the 10th policy anniversary year and builds the longer the policy is in effect

Automatic premium loan is only available if there is cash surrender value, interest will be charged on the amount of the loan

Reduced paid up option entitles the client to stop paying the insurance premiums provided there is a cash value to do so

Once this option is elected, the client cannot pay back the premium and have the sum insured increased to the original amount

……and more features

Guaranteed insurability benefit

Medical underwriting can become an issue

FOR EXAMPLE…*

TERM 10$500,000

TERM 20$500,000

WHOLE LIFE$500,000

WHOLE LIFE$100,000

1 – 10 years $464 $778 $5,897 $1,250

11 – 20 years $2,770 $778 $5,897 $1,250

21 – 30 years $6,637 $9,580 Paid Up Paid Up

31 – 40 years $18,981 $9,580 Paid Up Paid Up

*Annual Premiums based on:40 year old male, non-smoker

LIFE PROFILES

Refer to handout

UNIVERSAL LIFE INSURANCE

UNIVERSAL LIFE INSURANCE

Flexible premium

Adjustable benefit policy

Blends term insurance and a savings account earning current interest rates

Unlike whole life, premiums can be adjusted provided the policy value is adequate to maintain the cost of insurance

Universal Life Insurance

Minimum funding

Maximum funding

Maximum tax actuarial reserve (MTAR)

UNIVERSAL LIFE

Refer to handout

LIFE INSURANCE

INVEST

PREPAY

LOW COST

UNIVERSAL

WHOLE LIFE

TERM LIFE

COMMON QUOTES……..

“Insurance is a waste of money if we never use it”

“Insurance is the best thing we’ve ever done when we need it”

INSURANCE

Is not about ourselves…………

It is about:our survivorsour caregivers

Don’t forget to ask your survivors or caregivers what they think!

HOW MUCH LIFE INSURANCE DO “THEY” NEED??

$100,000 @ 6% $6,000/year

$500/month

$200,000 @ 6% $12,000/year

$1,000/month

$500,000 @ 6% $30,000/year

$2,500/month

$1,000,000 @ 6% $60,000/year

$5,000/month

DISABILITYINCOME

PROTECTION

DISABILITY INCOME PROTECTION

Self-employed

Trade professions

Medical professions

Business owners

Corporate employees

DISABILITY INCOME PROTECTION

Guaranteed Premiums

Renewable Premiums

DISABILITY INCOME PROTECTION

Any occupation

Regular occupation

Own occupation

HOW WILL YOU PAY FOR YOUR DISABILITY?

Spouse’s income Government programs Emergency savings Investments RRSP withdrawals Loan Friends and family Downsize your lifestyle

CRITICAL ILLNESS

INSURANCE

CRITICAL ILLNESS INSURANCE

Provides a lump sum cash benefit if a medical condition is diagnosed

Assists with needs such as mortgage and debt protection, supplementing gaps in other insurance protection, asset preservation

CRITICAL ILLNESS INSURANCE

It’s about peace of mind

It’s about recovery

Getting better costs money

Treating and coping with illness can mean significant and often unexpected costs

CRITICAL ILLNESS INSURANCE

The money is yours to use any way you want

Find the best health care available – anywhere

Hire a nurse or caregiver to help you at home

Make mortgage payments

Replace lost income

CRITICAL ILLNESS INSURANCE

Coverage available from $25,000 to $2 million

Policy is available with level premiums, renewable premiums payable to age 100 or limited pay

Lots of bells and whistles …

CRITICAL ILLNESS INSURANCE

Getting your money back

If you don’t ever need a critical illness payout, there are return of premium riders available at an additional charge

WHO NEEDS CRITICAL ILLNESS INSURANCE??

Everyone…

A single woman…

A single parent…

CRITICAL ILLNESS INSURANCE

Refer to handout

LONG TERM CARE INSURANCE

LONG TERM CARE INSURANCE

Provides benefits to cover the costs of long term care either home based or in a

nursing care facility

LONG TERM CARE INSURANCE

Long Term Care Insurance is a horribly named

product and should be called:

“Bathing and toileting insurance so your kids won’t have to do it for you!”

LONG TERM CARE INSURANCE

Retirees and pre-retirees who are concerned about:Maintaining the qualify of lifeProtecting retirement savings Estate preservation

LONG TERM CARE INSURANCE

When the insured person is functionally dependent, cannot do two or more activities of

daily living, which includes bathing, eating, dressing, toileting, maintaining continence

or

cognitive impairment

CHANGING NEED FOR LIFE INSURANCE

BUILD A TEAM OF TRUSTED CONSULTANTS

FINANCIAL ADVISOR

BIG PICTURELIFE PLAN

BANKERINSURANCE

AGENT

ACCOUNTANT LAWYERTAXES

BOOKKEEPINGREAL ESTATE

WILL & PROBATE

CAR INSURANCEHOME INSURANCE

LOANS / MORTGAGESSAVINGS / CHEQUING

8 KEYS TO BUILDING WEALTH

What does wealth mean to you? Identify key issues that need your attention Research solutions that will work Am I adequately protected? Who should be on the “trusted advisor” team? Schedule my next financial checkup Don’t procrastinate HAVE FUN!!!

REMEMBER YOUR FINANCIAL CHECKUP

BE HONEST WITH YOURSELF

Procrastination is painless……

until hindsight kicks in

THANK YOU!

QUESTIONS?

The opinions expressed at the seminar will be those of Richard Foy and not necessarily those of Raymond James Ltd.  Statistics and factual data and other information presented at the seminar are from sources RJL believes to be reliable but their accuracy cannot be guaranteed.  It is furnished on the basis and understanding that Raymond James is to be under no liability whatsoever in respect thereof.  It is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Securities are offered through Raymond James Ltd., member CIPF.  Financial planning and insurance are offered through Raymond James Financial Planning Ltd., which is not a member CIPF.