The Independent Consultant’s Newsletter


Planning Ahead For 2005


Money Management


Stay out of the “Red” this holiday Season


Tis the season… for shopping.  To avoid busting your budget this holiday season, try to minimize your time in stores – particularly when you’re tired and prone to buying anything just to get it over with.  Before heading to the mall, make a list of each recipient and potential gifts – noting size, colour, and target price.  That will help to avoid impulse splurging.  Eat before you start shopping, and take along a magazine or some music to keep you calm while waiting to check out.  To save a few dollars, why not give online shopping a go?  For those on your list who already have many things, why not make a donation in their name to a favourite charity?


Financial Planning


Make 2005 a year to remember


Got your new year’s resolutions ready?  Here are some more.  January’s a great time to document your net worth, as year-end account statements arrive.  What about your financial goals?  Do you have a coherent strategy for eliminating high-interest debt and optimizing your tax-deferred saving for retirement and your children’s education?  Now’s also a good time to gather all your documents for your 2004 tax return and look for ways to reduce taxes for next year’s return.  Have you reviewed your beneficiary designations in light of changes to your




marital or family status?  Review your will and power of attorney at the same time.  Professional advice can help you get your financial plan on track for the New Year.





A Significant Risk


Most people consider Life Insurance important. Yet many overlook Disability Coverage – even though they are more likely to become disabled before retirement than they are to die.  According to insurance industry data, there is a one-in-three chance of being disabled for a period of at least 90 days before the age of 65. That’s eight times the risk of premature death. Full or partial recovery from an injury is common.  But without adequate insurance, even the temporarily disabled can exhaust their savings very quickly.


If you are in a group plan at work, you can’t assume it’s adequate to meet your needs.  Benefits might run for just two years and be capped well below your income level.  Coverage also usually ends if you leave your job.  For complete protection, even if you have disability coverage at work, you may want to get a individual policy now that will let you boost coverage if you need it in the future, without a new medical screening.  If you are self-employed, disability insurance is even more critical because you have no employee benefits to fall back on.  As more insurers recognize the growing trend towards self-employment, new types of disability plans are helping to meet the special needs of home-based and part-time workers and business owners.   If this sounds like you, our professional advise can help you find the policy that is best suited to your situation.


Estate Planning


Use Insurance to Leverage a Gift


If you are like four out of five Canadians, you give money to charity, averaging a little over $200 a year.  By leveraging your donation with insurance, you may be able to increase the benefits many times over, both to the charity and to yourself.


An insurance-based planned giving strategy provides three key advantages:


1.       You’ll be able to leave a significant and lasting legacy to your favourite cause, without depleting retirement or estate assets.

2.      Your gift can go directly to the beneficiary, avoiding any probate and executor fees that might otherwise apply.

3.      You or your estate may enjoy substantial tax benefits.


You can gift a new or an existing policy.  If you buy an insurance policy and designate the charity as irrevocable owner and beneficiary, you will receive a tax credit for the premiums paid each year.  Or, you may gift the insurance proceeds to the charity through your will.  The charitable tax credit at death can offset estate tax liabilities.  You can also take an existing life insurance policy that has outlived its original purpose and name your favourite charity as irrevocable owner and beneficiary.  You’ll get a tax receipt for the net cash surrender value (less any outstanding policy loans) and any subsequent premiums paid.


Plan a gift to suit your goals, financial situation, and tax-relief objectives.  It’s the gift that keeps on giving the whole year through.





Insurance Planning



Building your Business on a Secure Foundation


When you start a business, you and your family have opportunities for long-term financial rewards.  You also face some increased risks.  At this critical early stage, it’s important to objectively assess your financial protection needs and provide an adequate safety net as you build the business.


Replace Group Benefits

If you left a company that had a group plan, you may need to replace group Life, Disability, and Extended Healthcare Benefits. Insurance companies have introduced new, flexible insurance products to meet the needs of self-employed individuals and new business owners.  Ask about cost-effective ways to get the coverage you need.


Cover New Obligations

Have you taken out business or personal loans, or increased your line of credit to launch your new venture?  If so, you may want to ensure that you have enough Life Insurance to cover these loans and potential obligations to employees, suppliers, and other creditors.


Protect the Business’s Potential

New Business owners also need to be realistic about their families’ income needs.  What would your business be worth if something happened to you tomorrow?  Although the business may have the potential to be worth a great deal in 5 or 10 years, could the estate realize fair value without the owner?  Could your family live on the proceeds for the next 15 or 20 years?   You may also need disability coverage not only to protect your income, but also to hire a replacement to keep the business going if you are unable to work for an extended period of time.





Cash Reserves

One of the most common and potentially serious problems for new business is under-capitalization.  In the first few years, there probably won’t be much excess cash and the owner may not be able to take much income out of the business.  Family budgeting should allow for cash reserves, if possible, to help weather any financial storms.


Looking Forward

Once you’ve taken steps to protect your family and your business, you can focus on building the business and reaping the rewards that lie ahead.  Professional advice can help you move in the right direction.




You can design a group plan


GROUP BENEFITS ARE no longer the sole preserve of large companies.  Various cost-sharing arrangements and benefit options allow even small companies to tailor a group insurance and retirement plan to fit both your employees’ needs and your company’s budget.


Group insurance plans can provide benefits for your employees and reduce management costs.  For example, some group plans exclude certain medical and dental benefits.  Others impose a maximum on annual payments or charge deductibles.  Features like these help lower the cost of insurance for the entire group.


Some flexible benefit plans give each employee the options of choosing only those life, disability, health, travel, or dental insurance benefits that he or she values.  Some plans are voluntary, with no mandatory benefits and no minimum participation requirements.  Employers can choose which benefits they want to fund.


How to Secure your RRSP Investments


Your Registered Retirement Savings Plan (RRSP) is likely to be one of your most valuable retirement assets outside your business.  However, business owners face special risks, such as loan obligations or business reversals that could expose personal retirement assets to creditors.


Protection from Creditors

Segregated funds allow you to keep your RRSP assets secure from creditors.  However, certain conditions apply.  Creditor protection is available only when the designated

beneficiary is a spouse, parent, child, or grandchild of the person insured.  In Quebec, the beneficiary must be related to the policyholder.

Segregated funds can pass directly to your heirs without the need for probate and are generally protected from creditors.

If you were in financial trouble while you purchased the contract, it could lose its protected status.  If you hold one of these investment vehicles in a self-directed RRSP, the beneficiary may have to be the trustee, which may remove the creditor protection.

Protect your capital

By law, at least 75% of the capital invested in a segregated fund will be guaranteed at maturity – usually 10 years – or death.  In return for the guarantee, you will pay a slightly higher annual management fee.

For a strong RRSP portfolio

With our professional guidance, you can build a fully diversified RRSP that features guaranteed capital and built-in protection from creditors.

Prepare for a Longer Retirement


Thanks to healthier lifestyles and medical advances, people now live longer and are more active than their predecessors.  They are also more likely to retire at a younger age.  Whereas previous generations could expect to spend 15 to 20 years in retirement, retirees now require savings that will last for upward of 30 years.

 Health care costs are rising.  In recent years, provincial health care budgets have been growing faster than government revenues.  Individuals and employers now foot 30% of the country’s total health care bill.  You can expect to pay still more as provincial health care plans trim coverage and governments impose or increase related taxes.


Housing costs are rising.  Recent years have seen a strong trend among retirees toward condominium living.  Condos offer convenience and security, but they also have monthly maintenance fees.  And while homeowners can defer repairs and shop for bargains, condominiums typically have work done on a scheduled basis, including costly refurbishing, regardless of what individual owners might want.  If there’s a condo in your vision, remember to factor in these costs.




The Consultant’s Insurance Consultants

#1206 - 90 Burnhamthorpe Road West

Mississauga, Ontario

L5B 3C3


(905) 276-5505     1 (800) 604-0040

Fax (905) 270-1177