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Record Debt Levels and Their Impact on Life Insurance Companies

June 30th, 2015
debt canada life insurance company

You’ve probably heard about how we’re dealing with record debt levels in Canada, but how does this impact life insurance companies and you as an individual or family?

To help answer this question, we’ll take a look at how the debt level is calculated, how it affects Canadians, and how it impacts life insurance companies.

How Debt Level is Calculated

The two factors used in the debt level equation are household credit and disposable income.

• Household credit: Credit such as mortgages, credit cards and other loans
• Disposable income: The money left over each month to either spend or save

It’s important to note that the percentage of disposable income is used by governments and economists to measure the state of an economy, overall. Debt imbalances are chiefly measured by the ratio of total household credit compared to disposable income - and in the fourth quarter of 2014 that ratio hit 163.3%.

Another factor considered is the rate that debt and income grows. In the last quarter, debt moderated to 1.1%, but disposable income only grew 0.5%. Which is partially being blamed on the effects of lower oil prices.

The good news is that experts think Canadians will be able to handle their debt, in part because of lower interest rates and a surge in real estate. As well, household savings (in broad terms) has grown – net financial assets, have almost doubled to $3.7-trillion. This sum is calculated by taking household debt and subtracting all cash, deposits, bonds, stocks, pension assets and life insurance.

Record Debt Levels and Their Impact on Life Insurance Companies – the Solution

The solution to the issue of slow income growth that also saves Canadians money each month, is to purchase individual life insurance instead of paying for mortgage, or line of credit insurance. As you will see below, there are many benefits to buying individual life insurance instead of mortgage insurance.

Purchasing Mortgage Insurance vs. Individual Life Insurance

• The bank owns the mortgage insurance policy; but with individual life insurance, you own the policy and can choose your beneficiary.
• With the bank’s life insurance policy you pay for declining insurance – because as you pay off your mortgage the amount owing decreases, and so does the insurance payout. With your own policy you have a level benefit for the life of your term.
• With a mortgage insurance policy most of the underwriting is done at the time of the claim; which essentially means that they will decide if they will payout the policy when the claim is made. With individual life insurance policies, the underwriting is done in advance.
• If you change lenders you lose your mortgage insurance with them, but you can keep your individual life insurance policy, because it isn’t tied to your lending institution.

As you can see, the impact of record debt levels on life insurance companies is beneficial to Canadians - individuals and families. Which directly effects our economy in a positive manner.

Weekly Personal Finance Roundup For June 26th 2015

June 26th, 2015
Weekly RoundUp 11

This week on the LSM blog we featured life insurance expert Rob Gawthrop's recommendations on life insurance.

On Wednesday, we asked the question, are all medical marijuana users considered smokers for life insurance underwriting purposes?

The Globe and Mail featured a story on poor tax planning that led to a big headache for one deceased's heirs.

Romana King of Moneysense, shared a fun list of items you wouldn't expect to be covered under home insurance plans but actually are.

The Motley Fool tipped readers off on 4 reasons to keep an eye on Manulife Financial Corp.'s dividend-paying stocks.'s Frugal Trader shared his parent's story of immigrating to Canada and how they managed their finances.

The Greater Fool discussed the risks consumers face from a credit-fueled housing crash, especially those of us who mainly invest in only one asset.

The Canadian Budget Binder shared one reader's concerns of their kids becoming embarrassed after the family had to downsize to a $400,000 home.

Hope you enjoy these reads, have a great weekend everyone! 

Are All Marijuana Users Considered Smokers?

June 25th, 2015
medical marijuana non smoker life insurance

Ever since a landmark court ruling struck down the prohibition on medical marijuana, the drug has grown in popularity in Canada with over 40,000 currently licensed patients allowed to consume cannabis as a form of medical treatment.

Medical marijuana is often used by patients to help deal with chronic pain and other serious diseases. Despite the apparent medical benefits of medical marijuana, Health Canada and much of the country’s medical community have stressed that more research is needed before they can fully endorse the drug’s usage.

Because of this, medical marijuana is still not considered to be a mainstream treatment drug and does not have a drug identification number (DIN) like other prescription medications. But, with medical marijuana being so popular among patients, an important question has been raised.

Should all medical marijuana users be considered smokers or non-smokers for life insurance underwriting purposes?

This question is noteworthy from a life insurance standpoint since smokers are usually charged higher premiums on their life insurance policies and have to go through a tougher underwriting process.

There isn’t a really clear answer to this question at the moment. Instead, you’ll find that the definition of “smoker” varies depending on where you live and what insurance carrier you talk to.

For example, a recent survey found that 29% of life insurance carriers in the United States consider marijuana users to be non-smokers.

In Canada, there are no life insurance carriers that will classify marijuana users as non-smokers. This means that anyone in Canada who uses marijuana for either a medical or recreational purpose will be included in the same group as tobacco smokers and be charged higher premiums.

While applying for a life insurance policy, carriers will ask you if you have specifically used marijuana products either within the last five years or the last year. People who answer in the affirmative will be charged higher premiums.

Premiums for marijuana users are usually based on the amount of marijuana a user consumes. Each case is different, but an average marijuana user will typically be charged a standard smoker’s rate. Excessive marijuana users could be charged a higher premium since they are deemed to be more risky to cover.

Some marijuana users that either use the drug too much or can’t properly justify their usage could be declined a life insurance policy altogether.

Recently, the Supreme Court of Canada ruled that medical marijuana users will be able to use marijuana in ways other than smoking. This includes consuming marijuana through cookies, oils, lip balms and other extracts and derivatives.

If a medical marijuana user is consuming 100% of their marijuana through a non-combusting method, then they are technically not smoking. Not only can marijuana be eaten but many users will vaporize the raw cannabis or oils, creating no combustion or smoke.

If vaporizing or consuming edibles does not cause any more damage to the human body then eating a Big Mac or drinking a can of pop for example, it could be argued that these insureds should not be classified along with cigarette smokers.

It’s worth noting that many marijuana users have tried to lie about their usage during their life insurance underwriting process in order to avoid paying higher premium rates.

This is a really risky move, as an insurance carrier could rescind the policy or deny a claim if they find out that the policyholder is an undocumented drug user. Remember, proof of marijuana usage can be picked up easily via blood or urine samples which are usually collected whenever an individual applies for life insurance.

If you’re using medical marijuana in any way (smoking or non-smoking method), it’s best to disclose your usage during the life insurance underwriting process. Either way, it’s a lot better to have your marijuana use documented so you don’t risk losing your policy in the future.

The question remains, should you be able to get a policy at the non-smoker premium rate if you’re not smoking the marijuana?

Tell us what you think in the comments below.

Life Insurance Policies The Experts Own – Rob Gawthrop CFP. CLU. EPC.

June 23rd, 2015
Life Insurance Expert Rob Gawthrop CFP. CLU. EPC.
Rob Gawthrop of Gawthrop Financial Group

Rob Gawthrop

President of Gawthrop Financial Group, LLC

1. What Type of Life Insurance do you own?

I own Universal life, whole life and term life insurance.

2. What factors did you consider when determining the coverage amount?

Current net worth, total income, total debt, number and age of dependents, current and future tax liability and any estate wishes.

3. Do you believe in Life Insurance for Children?

Yes. If done properly it can be a good foundation for future planning.

4. What is The Biggest Life Insurance mistake people make?

Not reviewing and re-assessing their needs on a periodic basis with a qualified insurance advisor.

5. Outside of Life Insurance what other types of individual insurance are often over looked?

Critical Illness insurance, Disability insurance (especially for a self-employed person) and Long Term Care Insurance.

Rob Gawthrop is an international speaker and the co-author of Paycheques & Playcheques: Retirement Income Solutions for Canadians. He is an independent Certified Financial Planner (CFP), Chartered Life Underwriter (CLU) and Elder Planning Counselor (EPC). Rob has built up a thriving insurance and financial planning practice in Vancouver, BC where he has been assisting individuals and professionals with their finances for 30 years. He is also involved in educating clients and colleagues on debt elimination, retirement income and estate planning concepts. As a believer in lifelong learning, Rob became a life and qualifying member of the Million Dollar Round Table (MDRT). Rob is also a professional musician who plays in several bands including an international MDRT band called Roundabout made up of musicians from around the world. He has been married to Leslee for 32 years and they have 4 grown daughters.

<Back to Life Insurance – What The Experts Own

Weekly Personal Finance Roundup For June 19th 2015

June 19th, 2015
Weekly RoundUp 03

To kick the week off on the LSM blog we rounded up 5 Of The Biggest Life Insurance Policies Ever Sold. The largest policy was insured for a staggering $212 million face amount!

Later in the week, we listed our favourite twitter chats and hashtags in the Canadian personal finance twittersphere. Hopefully our readers can benefit from the gems of advice sitting in those chats.

One of our advisors and director of marketing, Syed Raza, was quoted in a piece from Life Health Pro magazine, talking about class-based insurance pricing.

On her blog, Gail Vaz-Oxlade discussed the importance of understanding your 'burn rate' and how to get a grip on spending.

The Greater Fool's Garth Turner discussed the impact that the falling energy sector has on everyday Canadians.

Boomer and Echo gave readers actionable steps on how to feed a family on $5 per day.

Sarah Milton at examined how psychology affects your financial landscape. explored some ways that Canadians can benefit from the dropping loonie.

To close out this week's roundup, Young and Thrifty has a great offer for 50% off of your first 4 months of Globe and mail Unlimited.

Enjoy your Fathers' Day weekend everyone!

6 Personal Finance #Hashtags You Should Be Following

June 18th, 2015
Personal Finance Hashtags

Need some advice on your personal finances? Twitter might be a great place to look, as members of the personal finance community are increasingly engaging on the social media platform through twitter chats.

What’s that? Well, a twitter chat, also known as a tweet chat, is a real-time twitter event that focuses on a specific topic. Through the use of a hashtag, tweets are linked to create a conversation, creating a powerful medium for free advice.

This usually takes place at a specific time, so that a moderator or guest can lead the discussion. You can browse through the feed by simply searching the hashtag. To join in, all you need to do is tweet using the same hashtag.

Don’t know where to start? Here is a list of 6 personal finance twitter chats you should follow:

1) #CdnMoney - Tuesdays at 7 pm EST

Top personal finance blogger, Hollie Pollard (@commoncentsmom), hosts a weekly twitter chat on the hashtag #CdnMoney featuring a wealth of saving and spending tips.

Hollie does a great job of keeping the audience engaged through simple, yet meaningful questions.

Find out more about everyday personal finance topics, through this interactive twitter chat.

2) #ManulifeReady

Insurance carrier Manulife (@Manulife) occasionally holds a ‘twitter party’ on the hashtag #ManulifeReady, which offers a repository of useful advice to consumers.

Alongside creating a great place to chat about finances and opportunities, just by joining in and answering a few questions there are chances to win some awesome cash prizes.

With its well-organized chat, #ManulifeReady has a lot of great advice to offer.

@Manulife offers many great prizes to be won.

Keep an eye out for the next #ManulifeReady twitter chat for your chance to ask questions, gain insights and hopefully win a cash prize.

3) #FPM2015

The Financial Consumer Agency of Canada (FCAC) dedicates the month of March as Fraud Prevention Month (#FPM2015). The @TorontoPolice @bankofcanada @FSCOTweets @InsuranceBureau & @CompBureau are a few of the organizations that have taken part and contributed some excellent tips and tricks on how to thwart fraud.

Simply follow the hashtag #FPM2015 to find lots of great fraud prevention tips.

How many times have we gotten a spam email, with a 'too good to be true' offer? Catch a scammer, before they get you. Protect yourself from fraud with advice posted in the chat, such as:

#FPM2015 offers expert key advice from the @InsuranceBureau:

4) #FraudChat

#Fraudchat is a weekly Twitter chat held each Thursday at 1PM EST by @FSCOTweets, @ReganFCU @HegartyFCU & @FraudchatCanada to discuss financial crime topics. The chat aims to inform people on how to protect themselves from scams.

Topics covered include everything from Social Media to insurance frauds, and everything in between.

Be prepared by being informed though #fraudchat twitter chats.

5) #RetireRich15

The live coverage of the #RetireRich15, an event aimed to inform people on how to generate savings for retirement, is hosted by Canada’s best-selling investment and lifestyle magazine, @MoneySenseMag.

Follow the hashtag to find insider tips on how to plan for a brighter (and richer) future. Take a look at some tweets from the last retire Rich event:

6) #FLM2014

November isn't just a time to grow mustaches, it's also a good time to increase your knowledge of personal finance through being involved in Financial Literacy Month.

Scour through the hashtag #FLM2014 to get tips from countless organizations in both Canada and the US, seeking to assist with financial literacy. FLM is in March for Canadians, in the US they hold Financial Literacy Month in April.

Apart from a questionnaire to help you gauge how literate you are, #FLM2014 also featured fun contests like the My Financial Literacy Selfie contest- offering those with the best financial plans prizes.

Take a look at some of the top tweets on the #FLM2014 hashtag:

We hope you enjoyed this list of Twitter Chats and Hashtags to help you get up-to-date information on personal finances. We will keep updating the list to stay on top of new hashtags so if we missed any good ones, please comment in the section below or let us know on Twitter at @LSMInsurance!

5 Of The Biggest Life Insurance Policies Ever Sold

June 16th, 2015
Biggest life insurance policies ever sold

The idea that wealthy people don’t need a life insurance policy is simply a myth. Since the inception of life insurance, there have been many wealthy people who have taken out policies to protect themselves and their families.

Remember, the main purpose for purchasing a life insurance policy is for the policyholder to ensure the future financial security of their family and estate. That applies to people of all income levels.

Many policyholders want their families to be able to maintain their existing lifestyles in case of their unexpected death. Therefore, it’s common to see wealthy individuals take out massive life insurance policies.

Let’s take a look at five of the biggest life insurance policies ever sold and the companies that sold them.

1. $212 Million

This policy was written by Tony Steigerwald of Dunhill Marketing and Insurance for an extremely wealthy client who declined to have their name publicly released. This is one of the biggest life insurance policies ever sold to an individual. The yearly premium for this policy cost an astounding $6,148,000.

According to Steigerwald, his client wanted this $212 million life insurance policy for two main reasons. First, the client wanted to this use this policy as part of their estate planning strategy. Next, the client wanted the payout from this policy to be endowed to their favorite institutions after their death.

2. $201 Million

The Silicon Valley is home to a lot of wealthy individuals who work in the technology industries in the area. 

Recently, one unnamed Silicon Valley billionaire took the concept of large life insurance policies to a whole another level when he took out a policy worth a whopping $201 million.

According to Steven Felsenthal, a tax and estate planning attorney at Sugar Felsenthal Grais and Hammer, the policyholder likely took out this massive policy to ensure that his family would have enough money to continue to pay taxes generated by the policyholder’s assets that were worth billions of dollars.

3. $41 Million

Many wealthy people buy life insurance policies as a way to ensure that their family will be able to use the payout money to settle any outstanding debts that the policyholder held before their death.

One anonymous individual was so worried about covering his debts that he took out a $41 million life insurance policy to make sure his debts would be paid off even if he passed away. This policy was sold by Jan Pinney of Pinney Insurance.

4. $15 Million

This $15 million policy was sold by Brian Greenberg of True Blue Life Insurance. The client who purchased this policy was a business owner who had an annual income of $1 million.

According to Greenberg, the policyholder wanted the $15 million payout from this life insurance to act as income replacement for his family in case he passed away unexpectedly.

Income replacement is a simple concept to understand in this situation. Basically, instead of this policyholder’s family getting the $15 million lump sum payment upon the policy’s maturation, this $15 million would be invested by the insurance company.

The client’s family would continue to receive $1 million annually. That’s basically the money they would’ve received if the policyholder was still alive and earning his regular income.

5. $10 Million

There are many different types of life insurance policies. One such policy is survivorship life insurance also known as a joint-last-to-die policy. This policy covers two people (usually a married couple) and pays out a death benefit only after both of the people covered have passed away.

Chris Abrams of Abrams Inc Insurance Solutions recently sold one of the biggest survivorship life insurance policies ever. This policy—valued at $10 million—was sold to a couple who owned multiple businesses involving real estate and technology.

The couple transferred ownership of their life insurance policy to a family trust. This was likely done so the trust would have the funds required to execute the actions the couple had outlined in their will.

Weekly Personal Finance Roundup For June 12th 2015

June 12th, 2015
Weekly RoundUp 05

This week on the LSM Insurance blog we rounded up some of the best personal finance courses available online

Earlier in the week, we examined if life insurance actuaries should factor in life insured income levels, based on recent findings that wealthy Ontarians live longer than poorer residents. The same piece was quoted by Will Ashworth at the Life Health Professional Magazine.

Elsewhere in the media, our top 5 reasons why someone should buy life insurance was featured on BNN's website thanks to our friend Pattie Lovett-Reid.

This week in the personal finance world, Jon Chevreau discussed how longevity and money are related and how boomers can financially prepare for a longer than expected life.

Jessica Moorhouse dissected how much it really costs to be an early adopter in today's world of constantly evolving technologies. examined the praticality of borrowing money to consolidate debt.

Ellen Roseman gave The Toronto Star's readers 3 ways to hang onto their hard-earned cash.

Sheryl Smolkin delved into the recent notion that Canadians are saving enough for retirement on her blog Retirement Redux.

Golden Girl Finance gave her readers 5 financial traps hurting portfolios and one secret weapon to fix them.

Jordann Brown asked her readers at if they are truly committed to being debt free.

We hope you enjoy these personal finance reads and have a great weekend!

Enjoy your weekend folks!

Essential Canadian Personal Finance Courses

June 10th, 2015

Managing money can be a nightmare to say the least; even if you’re good with numbers.

Tracking accounts, budgeting and investing is complicated, but the good news is there are personal finance tools and online courses available to help Canadians figure it all out.

Below, we will look at the features and benefits of some of the top personal finance courses available online.

To begin our list, we will look at a free budgeting program called My Money Coach.

1. My Money Coach

My Money Coach online course1
My Money Coach online webinars

This website offers courses that are delivered via interactive webinars or workshops, and consists of:

Online Webinars:

These webinars go into financial topics including, but not limited to:

  • Money issues couples face
  • How to budget
  • The relationship between credit and debt
  • Different types of financing and how they affect you and your credit

What’s really unique about this course is they also offer a grocery component, giving tips on creating healthy and financially stable meals and ways to create economical meal plans.

Public Workshops put on by Local Libraries

This workshop is led by the Credit Counselling Society to help Canadians develop better money management skills and use credit wisely.

The education team goes to communities in Alberta, British Columbia, Manitoba, Saskatchewan and Ontario to deliver their message via webinars, train the trainer presentations and information sessions.

Participants include community agencies, employers and post-secondary institutions. 

My Money Coach is perfect for Canadians who want an overall education about personal finances and how to manage them.


2. Debt Crusher eCourse (by Money After Graduation)

Debt Crusher e Course Money After Graduation1
Debt Crusher e Course Money After Graduation

The premise behind this e-course is that everyone should have access to free knowledge that can help them climb out of debt.

The content is tailored to 20 somethings who are in debt because of steep education costs and want to learn how to make more money, pay off debt and invest to build wealth.

The course is broken down into 8 modules. The first 3 modules set users up with the basic information and tools needed to start a debt repayment plan. Much of the later modules provide motivation and inspiration to help users put their plan into motion.

There are also free downloadable Millennial Money Spreadsheets which include:

• The Budget Pie
• Debt Buster
• 2 Year Simple Savings Plan
• Save Six-Figures In 7 Years

Money After Graduation's Debt Crusher eCourse is ideal for young Canadians who want to build long-term, sustainable wealth.


3. Canadian Securities Course (CSC)

Canadian Securities Course CSC1
Canadian Securities Course CSC

The Canadian Securities Institute's (CSI) flagship Canadian Securities Course (CSC) offers basic training for those who want to work in the Canadian securities industry.

Participants who take the course will develop:

• A stronger understanding of the financial services landscape in Canada
• Increased knowledge about financial instruments such as fixed-income securities, equities, managed products, derivatives and more
• The skills needed to assess industry, market and company performance accurately
• Ability, tools and knowledge to best serve clients

The CSC is great for Canadians who want to get a general understanding of how the Canadian financial system works.

The course costs about $1,000 but you can save some money by signing up for the CSI newsletter, which frequently includes coupon codes for this course.

For full CSC details, visit the CSI website.

BONUS: 16 Free Online Business Classes

The Financial Post has compiled a list of free online courses related to finance from many sources including major educational institutions such as Yale, Stanford and Columbia.

The list also includes massive open online courses (MOOCs) offered for free on websites such as Udacity and Coursera.

Although they probably won’t help you get a job in the industry, they will definitely give you a well-rounded education on personal finance.

They begin the list with a course on financial markets taught by Professor Bob Shiller, an economist, academic, best-selling author, and American Nobel Laureate. Professor Shiller is famous for predicting the dotcom bust in 2000 and the U.S. housing crash in 2007.

Whether you want to budget your finances, get out of debt or build wealth, the above personal finance courses will put you in the right direction.

Should Life Insurance Premiums Be Lower For The Wealthy?

June 8th, 2015
Life Insurance Premiums Wealthy People

According to a recent study done by Global News, Ontarians who live in poor areas are more likely to die at an earlier age compared to Ontarians who live in affluent areas.

The study was done by dividing Ontario into separate sections through postal codes. Each postal code area’s median income was then taken from Statistics Canada.

Finally, this data was cross-referenced with Ontario death certificates. Deaths for those under the age of 18 and the age of 50 were tracked from 2004 to 2012.

This study found that Ontarians living in poorer postal codes were more likely to die young while people in wealthier postal codes were more likely to have a longer lifespan.

While the study didn’t actually explain why living in a richer postal code results in a longer life span, some of the obvious factors that can lead to this result include having access to better medical care, less crime and living in a cleaner environment.

Should Rich People Pay Less For Life Insurance?

The results from this study raise some important questions. Should life insurance premiums be lower for wealthier people? Moreover, should life insurance companies charge policyholders premiums based on their postal code?

Looking for answers to these questions requires us to weigh the importance of data versus ethics.

On one side, data tells us that people living in a wealthy neighborhood have longer life spans. For any life insurance company, people with longer life spans are ideal customers. They continue to pay annual premiums until old age and often don’t require an early policy payout.

Therefore, the life insurance company is more likely to break even or turn a profit by insuring wealthier people.

People who die at a younger age obviously don’t pay as much total premiums as people who live for a longer period of time. This means that the life insurance company is more likely to take a loss by insuring people with shorter life spans.

So, if wealthier people are proven to have longer life spans and pay premiums for a longer period of time, it does make sense from a numerical standpoint to charge them lower a lower cost of insurance.

Also, if people with healthy and safe lifestyles pay lower premiums, then it also makes sense for wealthier people with longer life spans to be included in that same category.

However, this is where we have to look at the other side of the argument by analyzing the situation from an ethical point of view.

Is It The Right Thing To Do?

By charging wealthier people lower premiums, life insurance companies would likely begin to charge low income earners higher premiums for the exact same product.

Considering that a life insurance policy is already a big-ticket purchase and can often be tough to afford for many people, this could easily be considered as ethically wrong.

It can also be argued that low income earners need life insurance more than wealthy people do. Low income families rely more on a life insurance policy payout if their breadwinner unexpectedly passes away. Wealthier families usually find it easier to absorb a loss of a breadwinner at a financial level.

Wait. Rich People Already Pay Less?

Another point worth noting is that wealthy policyholders already pay a low cost of insurance in many cases.

This is due to the process of insurance carriers structuring pricing levels, also known as rate banding. The concept is similar to buying goods in bulk; the more you buy at one time, the less you pay per unit.

Insurance companies will calculate premiums based on a rate per $1,000 of coverage. As the total face amount of the policy goes up, the rate per $1,000 goes down.

High net worth individuals typically benefit from rate banding since policies with face amounts over $1,000,000 are not uncommon. 

It is difficult to say whether or not life insurance actuaries should factor in the relationship between mortality and wealth. It's okay to differentiate between the genders and smoking statuses, so why not income level, net worth or postal code?

At the end of the day, any answer to this question will have to also weigh the importance of both data and ethics in order to reach a fair resolution.

Where do you stand in this debate? Let us know by leaving a comment below.  

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