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June/July 2008

Commentary - Hans H. Mathisen

The truth about term insurance - The July issue of LIFE LETTER brings out an interesting statistic: Only 1 (ONE!) percent of term life insurance policies are paid as a death claim! This explains why term insurance is so "inexpensive"!

But I'm invincible - LIFE LETTER for August emphasizes the reason why we need Critical Illness Insurance. With Critical Illness Insurance, you can avoid being a financial burden on others, disrupting your standard of living, or jeopardizing your retirement. Do you have your Critical Illness Insurance in force?

LIFE LETTER MATURE - Role reversal - the new reality - As we (and our elders) live longer, who will pay for our (their) long term care? As you can see, the costs can be high. Knowing heart attack symptons can save a life - We all have "some idea" of what the symptoms are. But, please, read this and remember. And remind someone you love.

THE STOCK MARKETS - My regular feature of major indexes year-to-date performance is not available this month. It will be available next month, as usual.

HAPPY INVESTING!
Sincerely,
Hans Mathisen


 

 

 

LIFE LETTER

The truth about term life insurance

You may not be ready for this. Despite all you may have heard, term life insurance is not better than permanent life insurance! And what's even more confusing, permanent life insurance is not better than term life insurance!

Mathematically speaking, they're equivalent.

Term insurance is cheap initially, but its premiums usually increase at regular intervals, generally every ten or twenty years. It's like renting your accommodation. Most term insurance policies only provide coverage to a certain age.

Unfortunately, as you get older, your term insurance can become so expensive that you may not be able to afford to continue it. That explains why only about 1% of term policies ever pay off.

In the early days of life insurance, term insurance was all there was. This was heaven for the life insurance companies. It meant most policyholders had to cancel their no longer affordable policies before they died. This left the companies with very few death claims to pay out for the many premiums they'd collected.

After about half a century of this inequitable arrangement, some Londoners got together about 245 years ago to form the Equitable Life Insurance Society. Their idea was a level premium policy. You'd pay a higher premium than for term insurance in the early years in order to pay a lower one in the later policy years. This would allow you to carry it for the whole of your life, hence the name, whole life insurance. Today, because of a variety of innovative policy types, these types of policies are generally known as permanent life insurance.

If term life insurance is similar to renting your living space, permanent life insurance is like buying a home. You pay more in the early years to pay less later on. Meanwhile your equity is building up. This gives you something to use as collateral if you need a loan. Or to exchange for cash when you no longer need to own a home (or a permanent life insurance policy).

Unlike those pre-1762 life insurance buyers who could only buy term, we have a choice. We can use term for our temporary, or short term needs, and permanent life insurance for our long term requirements. Or we can use term inurance as a short term stop gap until we can afford permanent life insurance.

We may seem to have many more choices today than just these two. There are now such names as Universal Life, Permanent Term, and the like to confuse our decision making. They are all mere variations on the same basic themes - temporary or permanent life insurance, and variable or fixed premiums.

For information purposes only and not intended to provide specific life insurance advice. Individual life insurance needs vary. Work with a life insurance professional to determine the right type and amount.

Want help with your life insurance planning ?

Call Hans Mathisen today at (306)242-7042.
or email -
hans@mathisen.ca

 

Copyright © 2008 Life Letter. All rights reserved

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LIFE LETTER

But I'm invincible!

Most people have a false sense of security by believing that they will not be victims of a critical illness like cancer, heart attack or stroke; and if they are, that the healthcare system will look after them. Nothing could be further from the truth.

The reality is, according to the Heart and Stroke Foundation, that 1 in 4 Canadians will contract some form of heart disease in their lifetime, and one third of stroke victims are under age 65. The Canadian Cancer Society says that approximately 6,500 cancer victims this year will be between the ages of 19 and 39. On top of that, waiting times to get treatment is one of the top concerns of Canadians today.

The financial consequences of surviving a critical illness can be greater than dying. Almost 50% of home foreclosures are due to illness or injury. Some 43% of RRSP withdrawals are due to the same cause, which amounts to over $200 million per year.

Advances in medical technology have greatly increased our chances of surviving a critical illness. Along with survival, however, comes the financial impact of recovering.

It took Darren, 36, almost 3 years and several hundred chemotherapy sessions to beat his cancer. His wife, Jolene, covered most of the bills during his recovery period. He was too weak to return to his old job and had to take a lesser paying position. It has been very stressful for Darren and Jolene to make ends meet on less income and to pay off the debts that piled up while Darren was recovering.

The good news is the opportunity exists for you to prevent the financial drain from happening to you and your family should you become seriously ill. It's called Critical Illness Insurance, which can provide tax-free cash you can use for your recovery.

If you contract one of the diseases or conditions specified in your Critical Illness Insurance policy, you receive a lump sum of up to $2,000,000. The exact amount will depend on the coverage you choose. Critical Illness Insurance pays a benefit even if you are still able to work and can cover a long list of illnesses and conditions.

There are no restrictions placed on how you use the insurance proceeds. You decide on how best to use the money. If you don't need it for new or unexpected expenses, maybe a vacation will help you recover from your ordeal more quickly. Would not having the burden of mortgage payments for a few years help make your recovery less stressful?

The possibility exists for you to avoid being a burden on others, disrupting your standard of living or jeopardizing your retirement should you be struck with a critical illness. Why not use some of your gratification budget to protect the lifestyle you have worked so hard for with Critical Illness Insurance?

For information purposes only and not intended to provide specific Critical Illness Insurance advice. Individual insurance needs vary. Work with an insurance professional to determine the type and amount that's right for you and your family.

Want help with your Critical Illness Insurance planning?

Call Hans Mathisen today at (306)242-7042.
or email -
hans@mathisen.ca

Copyright 2008 Life Letter. All rights reserved

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Mathisen Financial, Inc.
335 Redberry Road
Saskatoon, Saskatchewan S7K 4W5
Bus. (306) 242-7042 Fax. (306) 242-4314
Email:
hans@mathisen.ca