X

Protecting your Retirement Income from an Unforeseen Health Risk

---

We know most people will make it to retirement without suffering a major illness but if you are one of the unlucky ones, what happens now?

Would you forego 1% of your annual rate of return to eliminate this risk?

Sure, you could use your savings or take out a loan to cover the unexpected costs, however, both options will have a significant impact on your retirements plans.  If you need to access your registered funds, they are taxed in the year you use them. Accessing those funds prior to retirement is not part of your plan.

Pass on that risk to an insurance company.  They will take care of the rest with an illness recovery benefit.  This is a tax-free lump sum payment to cover any number of unforeseen expenses. No need to submit receipts or to justify the costs.  

Keep your retirement goals on track

If you are diagnosed and survive a major illness like cancer, heart attack or stroke, you receive an illness recovery benefit payment. This will keep your retirement goals on track.

Below is an example of a typical 40-Year-old, on track, saving for retirement.

After diagnosis, he/she needs to access 100k from their registered account at age 55 to cover additional costs associated with fighting an unfortunate cancer diagnosis. The impact is significant:

Take 1% of your annual rate of return to pay the premium.  Your future self and family will be grateful if the worst happens.   

X

Generational Wealth Transfer - Using permanent insurance

---

You already have excess wealth that you plan to pass on to the next two generations.  You want them taken care of financially and have likely earmarked a portion of your investment portfolio for them.

One issue that arises is that all non-registered investment growth is eroded by taxation. 

A tax-free permanent insurance policy can make sure your financial legacy extends all the way to your grandchildren.

Have you considered a generational wealth transfer using permanent life insurance? You can take out an insurance policy on your adult children and investment growth in these plans is not subject to annual taxation, increasing your overall wealth.  As the owner of the plan, you control money growing inside and can access it during your lifetime if needed.

Your Child

When you purchase the plan and insure your child, they have a valuable asset right away: life insurance protection.  You can transfer the policy to them at any time tax free, however most people will transfer the policy at the time of their passing.  This is done seamlessly by naming them as a contingent owner on the plan.  As the new owner, they now have access to all the money that is growing inside the policy.  This money can be used to help buy a home, supplement their retirement, or help fund their child’s education.

Your Grandchild

By naming them as the beneficiary on the policy, you have helped put a foundation in place they can build on.  As the named beneficiary on the policy at the time of your adult child’s death (hopefully well into the future) your grandchild will receive the death benefit proceeds tax-free.

This is a great way to help extend your financial legacy.  You worked hard to earn it.  Make sure your loved ones are the beneficiaries.

X

Protecting your Retirement Income from an Unforeseen Health Risk

---

We know most people will make it to retirement without suffering a major illness but if you are one of the unlucky ones, what happens now?

Would you forego 1% of your annual rate of return to eliminate this risk?

Sure, you could use your savings or take out a loan to cover the unexpected costs, however, both options will have a significant impact on your retirements plans.  If you need to access your registered funds, they are taxed in the year you use them. Accessing those funds prior to retirement is not part of your plan.

Pass on that risk to an insurance company.  They will take care of the rest with an illness recovery benefit.  This is a tax-free lump sum payment to cover any number of unforeseen expenses. No need to submit receipts or to justify the costs.  

Keep your retirement goals on track

If you are diagnosed and survive a major illness like cancer, heart attack or stroke, you receive an illness recovery benefit payment. This will keep your retirement goals on track.

Below is an example of a typical 40-Year-old, on track, saving for retirement.

After diagnosis, he/she needs to access 100k from their registered account at age 55 to cover additional costs associated with fighting an unfortunate cancer diagnosis. The impact is significant:





Take 1% of your annual rate of return to pay the premium.  Your future self and family will be grateful if the worst happens.   

X

Simplifying insurance coverage - Rent, Lease or Own

---

At times, it can feel like Life Insurance Companies have overcomplicated the products they provide by using fancy names and acronyms.

This has left many Canadians feeling confused. Fundamentally, there are only three plan types to choose from when purchasing life insurance. You can rent, lease or own the insurance. Below is an explanation of the merits of each which will hopefully provide clarity and make decision making easier. 

The right life insurance solution for you depends on your immediate needs and long-term goals. Term life insurance and permanent life insurance are two very different kinds of protection that satisfy different needs.

Renting Life Insurance

The first and most important decision is to cover off your debt and lost income if something were to happen in the short to mid-term. This is called term insurance. Think of this like anything you rent (Car, House, Boat, Skis). You pay a lower amount than purchasing the item outright and when you don’t need it anymore or your rental time is up, you give it back. That is it. Term insurance is the exact same. You pay a lower amount for access to a higher amount of coverage because you hope you don’t have to use it. You can lock in term (rental) rates anywhere from 5-50 years depending on your situation. 

Highlights:

• Low initial cost
• Pays out only if the insured dies
• Rates usually go up after the term
• Plan expires at a certain age

---

Leasing Life Insurance

The next option is to look at permanent insurance. This plan is guaranteed to pay out at some point in the future. Think of this as a lifelong lease. When leasing a property, you might lock in a 5-year lease. Here you are locking in a rate today (more expensive than the rental option) for the rest of your life. 

Highlights:

• Level premium for lifetime
• Coverage never expires
• You control the policy: company can’t change or terminate it

---

Owning Life Insurance

The third type of insurance is where you own an equity portion inside the policy. Think of it like owning a house. When you take out a mortgage on a property you pay the bank a monthly amount until your mortgage is paid off and you “own” your house free and clear. With this type of insurance, you pay a monthly/annual premium (higher than the lease option as part of your deposit is invested). Each year, the investment component grows tax-sheltered and that is what you “own”. Think of it as the "equity" in your life insurance, similar to the equity in your home. You can structure the plan to have a “limited” payment period (usually 10-20 years) or choose to pay for life. This “Cash Value” is yours and will continue to grow over time. 

Highlights:

• Guaranteed 10, 15 or 20 pay
• Coverage never expires
• Cash values and loan values
• You control the policy: company can’t change or terminate it

As a recap, there are only 3 structures when it comes to life insurance (Rent, Lease, Own). If you would like to discuss this in more detail, please feel free to reach out and we can find a solution that meets your family’s needs.  

X

Which job would you choose? Job A or Job B?

---

You have been offered a job and get to pick between two different compensation structures.  Which one are you choosing?

Job A will pay you $80,000/year while working and $0 if you are unable to work due to an injury or illness.

Job B will pay you $78,500/year while working and $53,000 (tax-free) if you are unable to work due to an injury or illness.

With an Income Replacement Benefit, you create a safety net around you and your family.  You own and control the policy and the rates are guaranteed until you turn 45. 

This chart illustrates your earning potential during your working years.  If you are unable to work due to an illness or injury, you still need a regular monthly income.  Put the insurance company’s money to work so your family can maintain the same standard of living.

Your Earning Potential by age 45: 

Annual Income	At Age 25	At Age 35	At Age 45
$35,000	$2,359,089	$1,536,595	$894,063
$50,000	$3,370,128	$2,195,135	$1,277,233
$65,000	$4,381,166	$2,853,676	$1,660,403
$90,000	$6,066,230	$3,951,243	$2,299,019
$120,000	$8,088,306	$5,268,324	$3,065,359
$150,000	$10,110,383	$6,585,405	$3,831,699

• Assumes an annual increase of 2.5%
  

This strategy works for all income levels and most occupations.  If you want to learn more, please reach out to discuss further.

X

Why and When to own Corporate Owned Permanent Insurance

---

When should you consider Participating Whole Life Insurance inside your Corporation?

• You're a significant shareholder in a Canadian Controlled Private Corporation
• Age 40+ and healthy
• Corporation has excess annual cash flow and/or investment assets not needed for business purposes. Typically, been in business for at least 5 years.
• Want to maximize your estate and transfer assets in a tax-efficient manner
• Looking for stable and predictable asset growth (asset diversification)

Suitability Reasons

The more checkmarks the greater the need for this strategy.

✔️  Business Succession plan in place?  

✔️  Reduce tax on corporate investment income?   

✔️  Desire to pass corporate assets to a beneficiary?  

✔️  Have a corporate life insurance need?  

✔️  Own taxable passive investment assets?  

✔️  Own corporate investments with a deferred capital gain?

✔️  Want a certain amount of estate value guaranteed? 

 

Comparing a traditional investment to participating whole life insurance while living and at death

Traditional Investment While Living:

• Taxes payable on investment income: Interest, dividends, realized capital gains
• Passive investment income: Pay the highest corporate tax rate, no small business deduction

Traditional Investment At Death:

• Taxes payable on deferred capital gains
• Taxes payable on transfer to shareholders estate

Participating Whole Life Insurance (Alternative asset class) While Living:

• Policy earnings grow tax-exempt up to government prescribed limits

Participating Whole Life Insurance (Alternative asset class) At Death:

• All policy proceeds are paid tax-free to the corporation (no deferred gains)
• Death benefit minus adjusted cost base paid out tax-free to shareholders estate through a notional Capital Dividend Account 

Life insurance is Wealth Protection

Total Wealth = human capital + financial capital

X

Leverage a Permanent Insurance Policy - Immediate Financing Arrangement

---

Do any of the below resonate with you?

• I hold traditional investments inside my holding/operating company
• I am looking to diversify my holdings towards an alternative tax advantaged asset class
• I want to increase the internal rate of return on my estate plan. 
• I want to maximize the Capital Dividend Account balance (corporate IFA). 
• I have an existing permanent insurance plan with cash value and want access today. 
• I want to set up a charitable giving strategy without affecting cash flow.  

Did you know that you can leverage permanent life insurance policies using immediate financing arrangements?

This is a sophisticated strategy for high-net-worth individuals or corporations that involves leveraging your permanent insurance plan so annual cash flow is not adversely affected.

 

How an IFA works

1. You enter into a contract for a permanent life insurance policy which creates significant Cash Surrender Value (CSV) in the policy’s early years.
2. The policy is assigned to a Bank as collateral to secure a line of credit.
3. You pay the annual recurring insurance premium.
4. You borrow back up to 100% of the CSV. (Or borrow back the entire premium by providing additional collateral security.)
5. You use the line of credit for investment purposes – for example, to fund an operating business, purchase real estate or invest in a nonregistered investment portfolio.
6. Steps 3-5 are repeated annually.
7. When you pass away, the outstanding loan is repaid out of the death benefit and the remaining proceeds are paid to your beneficiaries.

The two most common IFA structures

100% Cash Surrender Value Lending 

With this strategy, you borrow only 100% of the CSV of a policy each year which is, of course, less than the premium payment. The advantage to this structure is that the CSV of the policy creates a rapidly increasing borrowing capacity over time. The drawback is that there is a significant net funding requirement from you in the early years of the policy.

 

100% Replacement of Premium

With this strategy, you pay the annual premium then provide extra collateral security – in addition to the CSV of the policy – in order to borrow back 100% of the premiums each year. The advantage of this structure is that you experience only a modest net cash outflow (net annual interest costs) in comparison to the death benefit, which increases the rate of return of the structure. The drawback is the requirement to provide additional collateral security. (However, the additional collateral security requirement may well fall and eventually disappear over time.)

X

Individually Owned Life Insurance vs. Mortgage Insurance

---

When taking out a mortgage with a lending institution you should cover off that debt with an insurance policy. Not all coverage options are created equal. Let’s look at the highlights of the two options available to you. 

 

Control

Individually Owned Term Life Insurance: You own the coverage and choose who receives the death benefit

Mortgage Insurance from Lender: Lender owns the policy and they are the beneficiary

 

Guaranteed Premiums

Individually Owned Term Life Insurance: Your rates are guaranteed for the life of the policy

Mortgage Insurance from Lender: Mortgage insurance rates are not guaranteed and can increase

 

 

Portability

Individually Owned Term Life Insurance: Coverage remains intact if you switch lenders

Mortgage Insurance from lender: You need to reapply for coverage if you move lenders

 

 

Level Coverage Amount

Individually Owned Term Life Insurance: Coverage amount stays the same even as your mortgage decreases

Mortgage Insurance from Lender: Coverage declines as your mortgage is paid off. Premiums stay the same

 

 

Comfort

Individually Owned Term Life Insurance: Underwritten at the time of application. No surprises at the time of claim

Mortgage Insurance from lender: Underwritten at the time of death

 

Reach out to me today if you want to explore the benefits of individually owned life insurance.

X

Critical Illness Insurance - A Forced Savings Plan

---

Protection from a major health event and a little forced savings for your healthy future self.

One of the unique features in the Canadian living benefit insurance market is the ability to receive all your premiums back if you don’t claim on the contract.

 

Did you know?

With this product, you get a cheque from the insurance company for every premium dollar you paid over the life of the contract. There is no other insurance product that allows you to receive all your premiums back if you don’t use it.

 

EXAMPLE

In the below example, during the 35 years of coverage, you are entitled to $100,000 if you survive a major illness such as Cancer, Heart Attack, or Stroke. There are many more covered conditions, however, these three are the most common that people will claim on.

 

Major Illness Recovery Benefit	Female age 40
Coverage to age 75	$100,000
Annual Premium	$1,700/year
Total Premium returned @ age 75	$59,500

X

Invest in Your Child’s (Grandchild’s) Future

---

When building a house, you start with a solid foundation before you start framing the structure. Below are two ways your child’s (grandchild’s) financial foundation can be set up for success.

Option 1A - RESP

A Registered Education Savings Plan (RESP) can be part of every family’s financial plan.  The Government will contribute 20% of your contributions up to $500/year.  You contribute $2,500 and $3,000 is invested in a tax-deferred account.  A 20% rate of return before the funds are even invested.

A $7,200 cap on government contributions up until your child turns 18.

You can contribute up to $50,000 per child and have 35 years to use the funds.

When your child goes to post-secondary school the income received is taxed in their hands (little or no tax consequences as they are not likely earning much while attending school).

One minor drawback, if your child does not attend a qualified post-secondary institution and you want to close out the account all grants received and any investment growth those funds received are returned to the government.  

Your contributions are not taxed, however any investment growth earned on those funds is considered interest income and is taxed accordingly.

Option 1B - Permanent Life Insurance

Purchasing a cash value life insurance policy also has a tax deferred investment account built into the plans structure.  While there is no government grant, there is also no $50,000 lifetime contribution limit or restriction on what the funds can be used for.

• Help Start a business (Walt Disney (Disneyland), Ray Kroc (McDonalds) both leveraged their WL policies and they did alright)
• Down payment for their first house.
• Funds to travel.
• Buy their first car.
• Help pay for any type of education.

Also, your child now has the added benefit of being insured no matter their health, occupation, or hazardous hobbies they take on in the future.   This factor is often overlooked until too late for some.  Giving the gift of guaranteed insurability is priceless. 

Example: 

Contribute $2,500 per year for 17 years from birth into each product.  Assume a 5% annual rate of return and no additional contributions.

 

RESP plan with $42,500 in contributions will be worth $86,000 (Including $7,200 Government Grant) by the time your child goes to school.  This is the best option available to pay for tuition and other eligible expenses. 

An example illustrating Participating Whole Life Values are noted below using $42,500 in total contributions. The cash value can be accessed at any time for any purpose. This is your asset and you have control over the use of the funds. In addition your child has a death benefit that continues to grow every year.

 

Year	Participating WL Cash Value	Participating WL Death Benefit
18	$44,163	$322,171
25	$63,351	$369,600
30	$78,677	$409,467
35	$99,828	$447,076
40	$126,036	$483,383
45	$158,365	$519,503
50	$197,538	$556,579
55	$245,828	$595,278
60	$304,427	$636,505
65	$373,813	$681,334

• 20 pay WL product max funded for 17 years. Current -1% Dividend Rate

Please reach out to discuss your child’s financial foundation. 

X

Are You Insuring Your Most Valuable Asset?

---

Ask the average Canadian what their most valuable asset is, and if you are a homeowner, you would likely say your principal residence.  While that is likely true when it comes to something tangible you can buy or sell, it is far from your most valuable asset.

Your ability to earn an income is your most important asset. This chart illustrates your total earning potential until age 45 based on your annual income and current age. When illustrated this way, you can grasp the significance of how valuable you are. 

 

Your Earning Potential by age 45:

Annual Income	At Age 25	At Age 35	At Age 45
$35,000	$2,359,089	$1,536,595	$894,063
$50,000	$3,370,128	$2,195,135	$1,277,233
$65,000	$4,381,166	$2,853,676	$1,660,403
$90,000	$6,066,230	$3,951,243	$2,299,019
$120,000	$8,088,306	$5,268,324	$3,065,359
$150,000	$10,110,383	$6,585,405	$3,831,699

Assumes an annual increase of 2.5%

 

Now, if due to a prolonged illness or injury you are unable to work, would it make sense to insure your ability to earn an income?

52% of Canadians do not have any coverage through an employer and of the 48% who have a group insurance plan, is that coverage enough to cover your monthly expenses?

 

Scenarios to consider purchasing individually owned Disability Insurance:

• Uncomfortable with “definition” of disability of your group plan or the fact that your employer is the owner of the plan and can change or cancel it at any time
• A business owner who relies on uninsured income sources like corporate profits and dividends
• Have group coverage, however, are unable to insure the necessary amount of income due to plan limits

There are 3 options available depending on your situation:

1. Purchase an individually owned plan that will cover majority of your lost income (can be personal or business income)
2. Purchase an individually owned plan as a top-up for the shortfall of your group coverage (the higher your income the more likely this scenario will come into play)
3. Purchase an individually owned plan as an offset to your group coverage that can be relied upon should your group coverage end for any number of reasons (premium discounts available)

Group Top-Up Using Individually Owned Disability Insurance:

 

No Insurance or Group Offset:

Insuring the Full Amount Available Using Individually Owned Disability Insurance

X

Retirement Income Enhancer - Insured Annuity

---

You are nearing or in your retirement years. If you are like most Canadians, you may be looking for:

• Guaranteed supplemental retirement income
• Ways to guarantee you don’t lose any of your hard-earned money

A guaranteed income certificate (GIC) will work perfectly.  The problem is that GIC revenue is interest income and is taxed at your marginal tax rate.  Also, in today’s interest rate environment, you will earn approximately 4.0% before tax.

An Alternative is to take your lump sum of cash used to invest in a GIC and purchase a life annuity.  This pays you a regular income for the rest of your life.  You then use a portion of that preferentially taxed annuity income to purchase a permanent life insurance contract.  This will replace the money used to purchase the annuity when you pass away.  This strategy will typically produce a pre-tax rate of return between 5%-6% and is guaranteed for life.

Benefits of the Retirement Income Enhancer 

• Higher amount of net spendable income
• Income guaranteed for life
• Preferential tax treatment on the annuity income
• Capital replaced at death and paid directly to your heirs
• Beneficiaries can be changed at any time
• No probate fees on the life insurance death benefit 
  
  

Example:

• Male 65 non-smoker regular health
• Non-Registered Funds
• GIC rate= 4.0%  
• Marginal Tax rate= 40%
  
   

 

An increase of 31% or $1,882/year
Rates are from July 2023 and are subject to change

 

Example:

• Male 70 non-smoker regular health
• Non-Registered Funds 
• GIC rate= 4.0%
• Marginal Tax rate= 40%
  
   

 

An Increase of 34% or $2,046/year
Rates are from July 2023 and are subject to change

If you are interested in discussing this strategy to see if it works for you, please let me know.

X

Enhance Your Charitable Giving Using Life Insurance

---

According to Statistic Canada, over $10,000,000,000 was donated from 5,000,000 Canadians to charity in 2019. All these donations are eligible for a non-refundable tax credit.

By using Life Insurance, you can increase your overall charitable donation benefiting a cause that really means something to you. Donating funds to the Canada Revenue Agency through taxation just doesn’t provide the same legacy.

Enhance Your Charitable Giving Using Life Insurance

Below are two structures that allow you enhance your donation to the charity of your choice and potentially pay less tax.

Personally Owned Life Insurance:

1. Purchase a Life Insurance policy where you are the owner/payor of the policy with your chosen charity as the beneficiary.
2. Policy growth is tax-free increasing your overall donation.
3. When you die the charity receives the death benefit tax-free.
4. Your estate receives a tax credit of up to 100% of net income for both the year of death and the year immediately preceding it.
5. You have access to the cash value during your life as the owner of the policy.
6. Can change the beneficiary at any time.

Charity owned Life Insurance:

1. Purchase a Life Insurance policy and make the charity the owner and beneficiary.  You pay the premiums.
2. Every year you receive a tax credit in the amount of the premium paid.
3. Maximum donation credit is 75% of net income per year while living.
4. Unused credits can be carried forward up to 5 years.
5. Charity has access to cash value and they control the policy.

Case Study
Personally Owned Life Insurance vs a Non-Registered Investment (Balanced Fund)
 

Comparison Age: 85 | Total Investment: $500,000 Female 60 years old contributes $25,000 a year for 20 years with the intention of donating the funds at death to her charity of choice.
Non-Registered Investment		Life Insurance
Total Donation to Charity	One time tax credit on death	Total Donation to Charity	One time tax credit on death
$907,224	$435,130	$1,027,431	$492,793
		Charitable Donation Increase using Life Insurance:$120,202

 

Using Life Insurance, you have enhanced your charitable contribution by 13.25% and increased your tax credit by $57,663 that can be used to reduce estate taxes and increase the amount your beneficiaries receive.

---

 

Case Study
Charity Owned Life Insurance VS Charity Held Investment (2% Growth rate as charities have disbursement quotas limiting the ability for compound growth)
 

Comparison Age: 85 | Total Contribution: $500,000 Female 60 years old contributes $25,000 a year for 20 years receiving an annual tax credit of $11,927 for both options.
Charity Held Investment		Life Insurance
Total Donation to Charity	Total Tax Credit	Total Donation to Charity	Total Tax Credit
$684,069	$238,531	$1,027,431	$238,531
		Charitable Donation Increase using Life Insurance:$343,363

 

Using Life Insurance, you have enhanced your charitable contribution by 33.42%.

The option you choose is dependent on your income tax situation and where you want to use the non-refundable tax credit (annually or at the time of death). With both options, the legacy that you can provide a charity has been significantly increased.

If this is something that resonates with you, please reach out to discuss enhancing your legacy.

X

X

My name is Tony Bruno and I am an Insurance Advisor and also provide Financial Services. I have almost 30 years of experience in the Financial Services Industry. I provide valuable service to clients in the area of Life Insurance, Group Benefits and Retirement Planning. I have also completed the Insurance and Advisors Training Course along with the Canadian Securities Course. I have obtained the Elder Planning Counsellor designation (www.elderplanningcounselor.com). My company, Tibra Financial Inc., is a licensed Insurance Agency in the province of Ontario and is an Associate General Agency (AGA) under the Managing General Agency (MGA) HUB Financial Inc. I was born and raised in North Bay, ON and along with my wife, have three daughters. I enjoy sports such as soccer, hockey, motor racing and of course the NFL.
 

Carriers: Manulife Financial, ivari Canada, BMO Life Assurance of Canada, Canada Life, Empire Life, Industrial Alliance Life, Equitable Life, Foresters Financial, Sun Life, Desjardins Financial, RBC Life Insurance, Assumption Life, Ontario Blue Cross, Canada Protection Plan (Owned by Foresters Financial)
 

Special Risk/High Limit Needs: Hunter McCorquodale
 

Specialty Carriers: Humania Assurance, Edge Benefits (Cl with no underwriting) My Dignity (Simplified LTC Product), Specialty Life Insurance