Affiliated with Sentinel Life & Sentinel Financial Management Corp.
Commentary - Hans H. Mathisen
Is Mail-Order Insurance a Good Deal?- Please read this LIFE LETTER for May, 2003: no guarantees, no convertability, high premiums. This is certainly not what you want or need.
Group Insurance for Employees & "Dollar-Cost-Averaging- For June, 2003, LIFE LETTER covers two subjects: Whether an employer or an employee, Group Insurance Benefits are all too often not fully appreciated or utilized by either party. This way, an employer can enhance a key person's compensation, and that employee can get coverage he or she may not be able to get on an individual basis. And at a very reasonable price.
A Proven Investment Strategy - "Dollar-Cost-Averaging" is a way of investing that we often tend to overlook. While markets go up and down on a daily basis, the average investor gets excited when the market goes up and tends to buy at the top (remember Nortel at $125.00 per share?). And then sells at a loss.
THE STOCK MARKETS - As of May 30, 2003, the major indexes have done very well for the first 5 months of the year: Dow Jones is up by 6.10%; S& P 500 has gained 9.50%; The Nasdaq 100 has grown 19.50%, and the TSX Composite has increased 3.71%.
Using Other People's Money - When we "Dollar-Cost-Average" into the market, - say, with $100.00, $500.00 or $1,000.00 per month - even under the best market conditions, it will take us a long time to make substantial gains.
But how about starting with an initial
investment of $25,000.00; $50,000.00, or $100,000.00, using Other People's
Money? In this case, you can use the money of MANULIFE BANK. And the
best part of this approach is: Canada Revenue and Customs will pay 50%
of your cost of borrowing. Please read the article, "Using
Other People's Money", for details. And you can contact me
at any time for more information about this unique investment opportunity.
Is Mail Order Life Insurance a Good Deal?
Sam got an offer in the mail for group term life insurance with his credit card statement. The colorful brochure boasted "Low Cost Protection" for him and his wife with "no medical examination normally required." He thought it might be a good deal and looked at the details.
Sam discovered the following shortcomings of this mail-order insurance scheme:
Amounts limited - The maximum coverage he can get under the mail-order plan is only $200,000. At current rates, this amount invested by his family would only provide about $700 of monthly interest income. With a personal policy, Sam can get all the coverage he wants to provide for his family.
Premiums not guaranteed- The brochure clearly states, "... premiums shown cannot be increased unless the same premium change is made for all ... [Cardmember] certificates." No mention was made of a possible premium decrease. With a personal policy, the insurance company can't change its mind about the premiums they charge.
Coverage not guaranteed - The mail-order insurance is provided by a group contract between the credit card company and a life insurance company. The brochure states that as long as you remain a Cardmember, pay premiums when due and the Master Policy remains in force, your coverage cannot be cancelled..." With a personal policy, Sam wont lose his coverage if he cancels his credit card or if the credit card company cancels the plan.
Coverage not convertible - The mail-order insurance plan cannot be converted to a permanent or personal policy and coverage will expire at age 70. Sam's personal term policy can be converted to a permanent plan if he wants coverage for life. Personal term plans typically provide coverage up to age 75, or even longer.
Premiums are high - Despite the claim of low-cost coverage, the premiums for the mail-order plan are actually quite high. And they increase every time Sam enters a new five-year age bracket. Currently age 34, his premium will actually increase in just one year. Personal term plan premiums are adjusted every five or ten years from the policy issue date, not when a new age band is reached.
The insurance companies must pay the credit card companies for mailing their pitch pamphlets with the statements. After all, postage isn't free and the credit card companies are always looking for ways to offset their costs. Also, the insurance companies expect more claims from mail-order life insurance.
The sole advantage of buying mail-order life insurance, not dealing with an agent, is also its disadvantage. It's easier for a company to reject a claim when the original applicant is dead and there is no qualified, objective witness to the true state of his health at the time he signed the application. If Sam wants the benefit paid without quibbling, then he should deal with a licensed agent After all, the reason he's buying life insurance is so that his family can avoid financial hassles when he dies.
Want a better deal than mail-order insurance? Call today!
Call Hans Mathisen today at (306)242-7042.
Copyright © 2003 Bowen Financial Inc. All rights reserved
Should I Provide Group Benefits for my Employees?
Neil owns a small business. He pays competitive wages and provides good working conditions. It takes several weeks and many hours of his time to train a new employee.
He finds it difficult to keep some staff for more than a year or so. Neil is upset that some move on to work for a competitor. He has had trouble attracting and keeping someone who can handle the key position of assistant manager. Neil wonders if there is a better way to attract and keep quality people.
A good salary is certainly high on any employee's list of reasons to stay with an employer. But staff are also concerned about what happens when they get sick or hurt, need dental work or perhaps die.
Group Employee Benefits might be the answer to control costly staff turnover. Typically, a group plan will provide all employees with life insurance, disability protection, extended health care benefits and dental coverage. A Group Retirement Plan can also be part of the package.
The employer and the employee generally share the cost of a group plan. If an employee pays entirely for certain benefits, such as disability insurance, any benefits received as a claim are tax-free. Employee contributions to a retirement plan are tax-deductible.
By providing a group plan, Neil can benefit by attracting and keeping top notch employees. And his costs of providing the plan are tax-deductible.
A Proven Investment Strategy to Lower Risk and Improve
Fortunately, there is a better way for Sally to invest and avoid the risk of timing the markets incorrectly. It's called Dollar Cost Averaging. This proven, long-term investment strategy can actually make market downturns work in her favor.
Investment funds are sold in units. The value of each unit increases and decreases over time. These fluctuations determine what the investment return is.
Sally decided on a fixed dollar amount to invest each month. This amount should remain constant throughout the year, regardless of what happens to unit values. When prices are high, she automatically buys fewer units. But when prices go down, her regular monthly investment buys more units. These lower priced units will give Sally the greatest returns when unit values rise.
To keep pace with inflation. Sally will increase her monthly deposits each year at "raise" time. She will continue to keep her monthly commitment the same for another year.
Dollar Cost Averaging can work over all market cycles. Now Sally doesn't need to time the markets, she just needs time in the markets.
Want to know more about group benefits or regular investing?
Hans Mathisen today at (306)242-7042.
Copyright © 2003 Bowen Financial Inc. All rights reserved
How an Investment Loan can help you invest
For more information, contact Hans Mathisen
Mutual confidence is the power that binds together all harmonious human relationships.