There are two types of life insurance; term and permanent. Term insurance is temporary and for a short “term.” Permanent insurance is lifetime coverage and can provide for a long term need, estate and tax issues, legacy issues and can be used as an asset class.
Before you start looking at the “type” of insurance, make sure you have the right amount of insurance to meet your needs.
Term insurance is temporary in nature and has no cash value. This is sometimes referred to as rented insurance. Rates increase every ten or twenty years (the “term”), eventually becoming prohibitively expensive and policies expire with no cash value.
There are two types of permanent insurance; universal life and whole life.
Universal life insurance
Universal life insurance offers lifetime coverage and long-term protection. Similar to a mortgage on your home, you can pay the policy off over a period of time or you can pay the premium for life. Traditionally this type of policy is for a pure insurance need. .
Whole life insurance
A participating whole life insurance policy is an asset accumulation, estate, and retirement planning vehicle. It is designed to enhance the cash value in a long-term dividend interest rate earning asset class while providing guaranteed cash value and permanent life insurance. This policy is currently classified by the Canada Revenue Agency (CRA) as a tax-exempt life insurance policy for taxation purposes and we assume that the current Income Tax rules regarding life insurance will remain the same. In Canada, the opportunity to earn policyholder dividends is unique to participating policies where the policyholders share in the experience of the pool of life insurance policies through the payment of policyholder dividends. Often clients will use a participating whole life policy as an asset class due to the preferred tax treatment.
Whole life as an asset class
There are four reasons clients use participating whole life as an asset class.
- Tax free growth. Similar to an RSP, money inside a whole life policy is deemed by Revenue Canada to be tax-exempt and therefore grows tax free.
- Performance. Dividends are guaranteed to be paid and the increased annual cash values and death benefits are guaranteed. The current dividend interest rate is 25%.
- Asset allocation. Sun life is the third largest debt provider in North American investing in Hospitals, Bridges and Roads making its asset allocation conservative with a history of robust performance in a participating insurance policy which means by law, the insurer must return 97.5% of the profit of the insurance portfolio to its policy holders (you).
- Diversification. Perhaps most important is the fact that the traditional investment portfolio of stocks and bonds is no longer working and whole life is an alternative asset class.
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How to Prepare For Your Medical
To assist in preparing for your nurses/doctors visit, we recommend that your appointment be scheduled in the morning, preferably before breakfast and that you are fasting.
What is a paramedical exam?
A paramedical examination is an interview with you to collect information about your medical history. This information allows the insurance company to perform a comprehensive evaluation of your current health. The exam usually includes recording of height, weight, blood pressure and pulse. The exam may also include the collection of blood, urine, oral fluid, and an EKG and/or X-ray, depending on the insurer’s underwriting guidelines for the applicant’s age and insurance amount.
Estimated examination time
10 to 20 minutes for blood draw and urine 20 to 30 minutes for paramedical exam, blood draw and urine; 30 to 45 minutes for paramedical exam, blood draw, urine and EKG.
What if blood has to be drawn?
If a blood sample is required by the insurance company, a medically trained professional will perform the draw. Most companies use single-use sterile, disposable needles to collect the specimen and vinyl gloves are worn.
What is an EKG?
If an electrocardiogram (EKG) is required by the insurance company, it may be performed at the time of the examination. An EKG records electric impulses of the heart and testing is usually complete in less than 10 minutes.
What happens when the exam is complete?
The paramedical examination and any additional requirements are forwarded to the insurance company. Specimens obtained during the examination are sent to a designated laboratory and the results forwarded to the insurance company for review.
In order to obtain the best possible results, it is recommended you:
- Fast at least 8 hours prior to the appointment.
- Limit salt and high-cholesterol foods 24 hours prior to the exam.
- Avoid strenuous exercise 12 hours prior to the exam.
- Refrain from drinking alcoholic beverages for at least 12 hours prior to the appointment.
- Drink a few glasses of water prior to the appointment.
- Provide any history of problems associated with providing a blood sample.
- Have available names, addresses and phone numbers of any doctors or clinics visited in the last 5 years as well as current medications.
- Ladies, please mention to the examiner when making your appointment if you will be menstruating at the time so that a better time may be arranged.