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How To Get A Better Than Advertised Mortgage Rate

There are some tips that one will need to consider whenever they set out looking for a home mortgage. For those who are searching for the first time, this might pose a challenge as they may not have the right knowledge needed when searching for a mortgage. If you know with these things, then you should first consult with a person who has the technical know-how. These people will be able to advise accordingly including the different kinds of mortgages that one can apply for. Below are some important tips that should not be ignored:

Whenever you come across a home of your dreams, the chances are that the real-estate agent will direct you to lenders whom they prefer. This is probably because they have worked with them before and thus know each other well. Consider that recommended from your agent with a grain of salt. The point is, your agent may want to close your deal as quickly as possible so that they can move to the next. This is why they will go for the obvious option to save time so be sure to check Sherwood Mortgage Toronto hours

Ensuring that your credit remains in top shape is very important. This is especially for those who have decided to apply for a conventional loan. If your score is high, then you will have higher chances of getting a better interest rate, and you will also have more choices of the loans available. This is why one is advised to ensure that they always keep their score very high.

Saving money for a down payment can be painful. However, you need to understand that paying more upfront will help you nab a better interest rates It will also save you some money as you continue to pay your loan. It has also been seen to save the mortgage insurance cost. If your down payment is lower than that of the normal one, then a majority of the lenders will charge you for that. As it turns out, feeling the pain while saving the down payment money will pay off at last.

It is always important for one to consider the period that they wish to be in that home. For instance, those whose time will be relatively short should be thinking more in a line of adjustable-rate mortgages since it makes more sense. However, before selecting this type of rate, you will need to be sure that you will only be there for a short while. With this rate, one can take advantage of the ARM?s initial interest rates which are low. 

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New Mortgage Rules To Come Into Effect This Week

New mortgage rules coming into effect in October and November likely won?t have much of an impact on already-tight rental markets in Canadian cities, experts say.

As of Monday, Oct. 17, everyone hoping to qualify for an insured mortgage will be subjected to a ?stress test? ? checking whether they will qualify at the Bank of Canada?s conventional five-year fixed posted rate. Right now, that?s about 4.6 per cent, significantly higher than what most banks offer.

In an article by News, the Department of Finance estimated that this would affect about eight per cent of new home purchases.

But that doesn?t mean that there will be eight per cent more people suddenly looking to rent an apartment, said Craig Alexander, chief economist with the Conference Board of Canada.

Many people will simply buy a less-expensive home. ?The people who will get pushed out of the market, or are vulnerable to being pushed out of the market, are the first-time buyers who are buying the entry-level home. Because if you can?t qualify for the price of the entry-level home, then you?re not going to be able to move to a price point lower than that,? he said.

He isn?t sure what percentage of buyers this might be, but he doesn?t think it will be much.

?I don?t think we?re talking about a dramatic number of individuals. On the margin, it will impact demand, but it?s not a game-changer.?

David Hulchanski, professor of housing and community development at the University of Toronto, agrees that it?s hard to tell how many people will linger in the rental market as a result of the mortgage changes. And he doesn?t think it will be enough to really change things.

?Let?s take Toronto. So the City of Toronto has about 1 million housing units. Half are rental. And there?s another million in the 905 and one-third are rental. So these are a lot of rental units,? he said.

?Right now today, how many people in their rental units are dying and freeing up a unit? How many couples are breaking up and one is going to join the rental market? How many people are landing in Toronto right now as newcomers and looking for a place to rent? It goes on and on.?

So many things affect the number of rental units, he said, that any influx of people due to mortgage changes is ?just too tiny to impact the market.?

Not everyone agrees, though. A new report released Friday by the Toronto real estate research firm Urbanation suggests that ?there will no doubt be a sizeable chunk of demand taken out of the homeownership market that will be directed into the rental market.? However, the report doesn?t specify just how sizeable that demand might be and mostly examines the condo rental market rather than the entire Toronto rental market. There are about three times as many purpose-built rental apartments in Toronto as rented condos, according to CMHC.

Historically, said Hulchanski, the only thing that has caused the vacancy rate in a Canadian city to change radically is economic boom and bust: notably in Calgary and Edmonton. Other cities generally don?t see these kinds of dramatic changes, he said.

Vacancy rates in many Canadian cities are very low though, particularly in cities that also have a hot housing market. In Toronto, it was 1.6 per cent, in Vancouver, 0.8 per cent in October 2015, according to data from the Canadian Mortgage and Housing Corporation, and average rents rise year over year. Part of the reason for this, said Hulchanski, is that there has been relatively little purpose-built rental housing constructed since federal programs ended in the mid-1980s.

The federal government is currently holding public consultations and asking for public input on an upcoming National Housing Strategy, which could include programs or incentives to build new rental housing ? as promised during the 2015 election campaign. Canadians can submit comments online until Oct. 21, and a report summarizing the consultation?s findings is set to be released in November.

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Hiring the Right Leaders in the Mortgage Industry in Toronto


You might be looking for a job in the mortgage, oil industry, gas or any other industry for that matter and the best way for you to land that job is by using headhunter Toronto agents. These agencies have years and years of experience in placing candidates at the right jobs according to the skills and capabilities they poses. Below are the benefits of using a headhunter Toronto to get your dream job. In addition to this, they not only will be helping job seekers but the employers as well because they will get capable employees as well.

Employers are able to use headhunting services in order to get to fill in the senior management as well as executive positions. They also get specialized individuals in the fields where there are only active professionals. For this reason, it actually makes sense to use headhunters to recruit prospects instead of advertising internationally.

Executive search consultants do not just attract prospective employees but they also go out of their way to actively seek them. They are able to achieve this through networking, developing relationships with different companies, making sure they have company directories, maintaining their database as well as cold calling the prospective candidates.

Headhunters in Toronto enable talented employees to be able to accelerate their careers even outside their company to other companies. Headhunters will always get employers quality candidates, the right people with the right tools in order to be able to perform the jobs, people who have great potential as well as enhanced value. Search Consultants also allow employees to explore any hidden or unutilized talent they might possess and that can be harnessed by other companies and for them to get better careers. So, if you are a candidate, you need to focus on creating a captivating resume, one that focuses on their capabilities as well as results

The next best thing about using headhunters Toronto is the fact that they will save you time and effort. If you decided that you would handle hiring all the employees all by yourself then you would need to go through a lot of resumes in order to get what you want. Of course, having a headhunter makes it easy because they can discard all chaff and get you the ones qualified. If you are a company with low hiring needs then you need not have a HR department, all you need to do is hire some Toronto headhunters and they will always bring you the kind of prospects you are looking for and the kind of skills you want to have in your company. It is very crucial to have the right talent at the right positions so that your company can grow in the right direction.

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Why Mortgage Insurance Is Critical To First Time Home Buyers

We are in a world where there are a lot of demands made of us either from our loved ones, from the society and the government. With proper planning and with the right information, you realize that you can easily meet all the goals of all people and still leave you a happy person who loves life. Owning a house is a dream that you might be having and which will most probably set you to the path of financial stability. There are some helpful tips that you must check out and which will likely help you in identifying a great house whose value is high and where you will enjoy a real life.

Don?t be persuaded by the agent or anyone to buy a house without visiting and checking it out and also before exploring the neighborhood. A good house is not only the interior design and décor but also the neighborhood, the roads to the house and the general serenity of the place. Check out the crime rate records of the neighborhood, the general aura of the place and the graffiti on the walls if there are any. For a better experience of the place in general, book yourself into a bed and breakfast place and learn all that you might need about the place.

Sometime back, if you wanted a property, you had to visit an agent and stand at the window where all the properties were advertised. This probably made it easier then but it also came with a lot of constraints such as exaggerated prices and denying you a chance to buy the best available property with your money. One of the things to consider when purchasing a house in Vancouver, BC is the internet. There is a plethora of websites that will give you all the information you need online and for a very good price.  Many of them allow you to preview that will work.


This is the type of information that a seller wouldn?t otherwise freely provide. Such questions would include, how long has the property been on the market, have there been disputes with the neighbors, how many offers has the property had, and what renovations have been done and so on. Such information will help you know what price that house is worth before you start on the negotiations.

Visit the property at different times of the day. This will help you have a general overview of the type of lighting it has and also help you knowing of the neighborhood better. Still, there might be times that the neighborhood is a palace of peace while in other times it?s a very noisy and uncomfortable place.

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Advice You Need To Know When Shopping For New Mortgage

Recently, there have been a lot of talks about reverse mortgage in the media and even in the social Medias.  The new survey conducted shows that almost 55% of the people in Canada who have attained the age of 55 and above are worried that they will run out of their saving before they finish their first ten years of retirement.

Due to this reasons most individual opt for this program so that they can supplement their savings and income. However this people they find if difficult to choose a reverse mortgage that will not stress them because they often see this program as a burden. Some alternatives need to be considered. This article will outline all the things you need to know about reverse mortgage in Canada.

What is the meaning of reverse mortgage?

It is a plan or program that allows all homeowners who have attained the minimum age of 55 years to borrow a loan up to 50% of the value of the home they own, unlike other loan plans. With this program, you don?t have to proof your income to anyone or anywhere.  If you go for this loan, you can use it doing anything, and you?re not required to pay this money or interest until the time you decide to sell it.

Merits of program

If you look at it carefully, you will see that there are a lot of advantages than disadvantages

You are not forced to make any regular payments

It is easy to qualify since you don’t have to provide you income proof.

The loan is tax-free hence it doesn?t interfere with your pension or Guaranteed Income Supplement.

You?re the one to decide how to receive your cash

You remain the owner of the property.

Demerits of this plan

All of this merits above looks great but don?t forget: if something seems too good to be true, it should be, or it is. The following are disadvantages of taking this type of a loan:

In Canada, only one offers the service (Canadian Home Income Plan) by the HomeEquity bank.

If you borrow more with more equity the interest accumulates very quickly.

The interests are a very high if you compare it with other mortgage rates.

There are two main ways to get out of this program that is selling your property or death.

If you die amount of money, you borrowed plus the interest that has accumulated has to be paid for a limited period.

How does one qualify for this in Canada?

In Canada, it is very easy to be eligible for reverse loan since they look at five things only (age, current interest rates, and the value of your home and location of your property)




How To Really Understand What Term Life Insurance Means

When compared to term insurance policy, whole life is considered a new product. This is because it was created later in the years after term insurance policies had dominated the markets. Whole life insurance was to attract those clients who shied away from term insurance because they preferred investing their money in other fields that assured them off super profits over time. Whole life insurance is, therefore, more than a life insurance as it comes with more attractive advantages that are attractive to people from all walks of life.

This is a unique type of insurance cover. It assures you of a constant premium regardless of how long you stay alive. You are therefore able to set your financial targets and abide by them without any financial interference caused by increased premium. With a whole life insurance policy, you are always sure that your loved ones are covered in case of any untimely death.

You, however, need to understand that the value of benefit will be significantly reduced whenever there are withdrawals and issuance of policy loans. It is therefore very vital that you make such transactions with the knowledge that you need to have enough cover left at the time of your death. Though there is a definite percentage you are allowed to withdraw, you can opt to remove less over your lifetime.

Due to the unpredictable nature of life, it is always so hard to understand the times when you will need some financial boosting. However, when financial challenges come after a long duration of saving, whole life cover allows you to get policy loans that you can use to bail yourself out of all these financial challenges you are facing.

Therefore, whenever you are in tricky situations such as when you lack cash for your children?s college fee, you can be hopeful of finding help through your cover. Policy loans can also be issued to supplement your limited retirement savings whenever you want to do something costly.

Those who have whole life insurance covers stand a chance of enjoying dividends from the insurance company that covers them. With dividends, policy owners can increase their cash value as well as the protection received from the cover. Payment of dividends is however not guaranteed. There are however a good number of companies that are known to pay dividends. This brings aboard all the investors who desire a product that offers bonus over their savings.

Whole life insurance term is loved due to its fantastic features. Many companies have realized real growth since the introduction of this policy. More policy owners have also been able to enjoy the flexibility of converting their accounts to whole life due to its stable premiums.





Risk Analysis and Cost Effective Solutions

(Term Insurance, Permanent Insurance, Disability Insurance & Critical Illness Insurance)

The purpose of this article is to review important considerations when determining how much insurance you require as a business owner, the type of insurance, and some tax saving ideas.

How much insurance do you need?
There are two parts to consider. First is you family obligations. These tend to be temporary in nature and rather than repeat the considerations for term insurance, please refer to the article on this subject at Term Insurance Fundamentals. The amount for the family should be added to the amount determined for the business which is dependent of the following factors:

If family members are involved in the business? How easy will it be for them to find another similar paying job if the business fails?

If other family members can take over the business, coverage is required to bridge the time required to recover and get the business going again. In addition, the bank would like to see the loans paid off, as they will be very concerned with the risks.

If the business has to be sold, the chances of getting anything near its value will be remote. It is also likely that there are personal guarantees on the business debts and other financial obligations like leases that will have to be met. Creditors can attack life insurance intended for the family if the wife has signed guarantees for the business, which is very common. For example, if you have a lease for space or a bank loan that is guaranteed by the surviving spouse, the landlord and bank can come after the life insurance proceeds to satisfy the amount owed. I have seen where these unexpected business obligations exceeded the insurance and the family home had to be sold to meet them.

If the business is a partnership or corporation, it is important that there is buy/sell agreement in place including the life insurance to enable the surviving partners or shareholders to buy out the surviving spouse’s interest in the company. Seek advice on who should own the insurance, as there are significant tax implications on where the ownership of this insurance lies – corporate owned or personally owned.

Again, the most affordable type of insurance is term insurance and it is used to meet the need for cash as you build the business and provide for your family’s needs generally comes in 5, 10, 15, and 20 year terms. This means that the premiums are guaranteed for that period of time and they will automatically renew at a higher rate for the next term period.

For example, a 10 year term policy has guaranteed rates for the first ten years and then you can renew it for another ten years without a medical at a set rate contained in the policy. Do not renew it if your health is good as the renewal rates can be 25% to 100% more than the premiums if you shop around for a new policy. The assumption is that you only renew if you are too sick to get a new policy. Almost half the people renew term insurance and pay these high premiums It is where the most competition is focused and consequently it has the lowest premiums.

There are also preferred rates and regular rates; about half the people will qualify for a preferred rate. At the time of this writing, a 35 year old should be able to purchase $500,000 for about $35 per month at regular rates but preferred rates would be in the $25 per month range. It is not expensive to move the risk to your family of your death to an insurance company and it is the responsible thing to do. For more information visit There are also a number of significant tax advantages to incororating some universal life in the insurance portfolio for small business owners. Please refer to Fundamentals of Permanent Insurance for a review of this and 4 money saving tips.


Disability Insurance

Whether you are a sole owner or have a partner, the financial risks to your business and family are very significant if you suffer a serious accident, injury or illness that prevents you from working for an extended period of time. Not only does your current income stop, future income also stops and, in most cases, many of the business and personal expenses continue. There are leases, loans, salaries and other commitments to be met and no income.

If you have Workers Compensation, it will pay a percent of your income but only 8% of disabilities are covered by workers compensation as the accident occurs off the job or it is an illness. Further, these payments will likely fall far short of what you will need. One of the leading causes of divorce is long-term illnesses and the associated financial stress.

One way to provide some protection is with a good disability insurance policy. However, as it is designed to protect your income and if you are starting out, there is no income to protect. Consequently, you will only qualify for a minimal amount – likely $1,000 per month or less. Be careful as there are policies available for whatever amount you want up to $3,000 or more per month but they do an income test at time of claim and look at what your actual income was and they only pay out about 66% of this income regardless of the amount you were paying.

One consideration is to purchase a personal disability policy at least one year before you are planning to go out on your own based on your income at that time. The need for a year is that there is a question in most applications concerning your intention to leave the current employment within a year – a yes answer and you do not get the insurance. Ensure it is the type of policy that will cover you if you change jobs in the future and the monthly benefit coverage is underwritten when you take out the policy. This means they will pay what you have purchased and they will not do an income check at time of claim.

Disability insurance is a specialty and you need to talk to someone who has expertise in this area and it may not be the same person who sells life insurance. Ask about how you will be paid if you can do part of your job or as you come back out of your disability. There are residual or partial disability payments when you start back and they are uniqueand different. Further, do you want to wait 30, 60, or 90 days before payments start? The premiums are about twice the cost for 30 days compared to 90 days. This is another excellent reason to have at least 90 days worth of expenses available for an emergency in cash or short term investments.

Some disability policies will also cover your “out of pocket” business expenses such as leases and loan payments. You can add this rider regardless of how much income you have. Some also allow you to add a rider that will continue to make contributions to your RRSP if you are disabled which can be critical to your retirement as a small business owner.

Money Saving Tip 1: If there are two or more employees that you want to cover with disability insurance, it can be very tax advantageous to have a Corporate Income Loss Program where the corporation pays the premiums and it is tax deductible.

Money Saving Tip 2: Some policies will return all the premiums less any claims. The cost of adding this option can be considered an excellent investment.


Critical Illness Insurance

A new and very interesting policy called Critical Illness Insurance is also available. It will pay a lump sum of $50,000 or more 30 days after you are diagnosed with a life threatening illness, such as heart attack, stroke, or cancer. Many people recover from these critical illnesses but not until they have gone through considerable emotional and health problems that causes significant financial stress. The premiums are lower than for disability insurance and the amount you purchase is not as limited by your income as disability insurance – $200,000 or more is generally not a problem.

Many business owners will return to work within three months from most injuries or simple illnesses and would not collect much on a disability insurance policy. It is the critical illnesses that keep them off the job for more than three months and all the money is paid out after 30 days. For more information on this type of insurance you might want to visit or the article mentioned on my home page Get Up To $200,000 Tax Free Now If You Get A Critical Illness! This is a must read.

Finally, as the business grows and increases in value, you may want to consider either disability buyout insurance or critical illness insurance on each partner/shareholder so that if one becomes disabled and can not contribute to the company for a year or more there will be funds available to buy out their interest in the company.

Few companies can carry an ill partner for an extended period of time – you need an exit strategy. Ensure that the conditions are set out in a shareholder or partnership agreement and that the funds to make it happen are will be there through insurance. It is an excellent way to get the company to pay for some critical illness insurance.

Finally, ensure that if you have insurance owned and paid for by your company, you have checked the tax implications with your accountant. When seeking advice on insurance, consult a well recognized insurance professional who has at least five years of experience.

Whole Life and Universal Life Insurance

Why You Need To Know the Difference

I once wrote an article about the use of Universal Life Insurance Policies for those who had used up their RRSP limits or whose taxable income was so low that they did not get a meaningful tax credit for RRSP contributions. The article elicited a number of questions about the difference between traditional “Whole Life” Policies and the new “Universal Life” Policies. I felt that the discussions I have had with several clients might be of interest.

First, there are essentially four parts to both whole life and universal life insurance policies.

Mortality Cost – the part of the deposit that covers the pure cost of the life insurance death benefit. We recommend that this cost of insurance be level or the same over the insured’s lifetime.

Administration charge – this is the charge for administering the policy and premium tax.

Savings or Investment. This is what is left from your deposit after the above two charges – the cost of insurance and the administration charge are deducted. You will have been provided with an illustration of how your savings will grow – it is frequently referred to as the “Cash Value”, “Fund Value” or “Cash Surrender Value” of your policy.

Return on the savings – this is the interest rate that is credited to the cash value in your account each year.

In addition, some policies guaranty that the above costs will not change and a minimum return on investments.

Whole Life Policies were designed to provide permanent insurance (the kind that you plan to have when you die) plus have a savings component at a single monthly premium. There has been a lot of this product sold over the years.

Whole Life Insurance has a level cost of insurance where the costs do not increase each year – what you pay in the first year is the same as in the last year but they do not disclose the cost of insurance. They also do not disclose the administration costs. After the “cost of insurance” and “administration costs” are covered, the balance of the premium is the savings or investment portion. The returns on the savings or investment part is dependent upon excess interest and investment earnings, savings in mortality costs, the operating expenses and the will of “the insurance company board of directors” – they choose what they will pay.

To summarize, apart from a minimum guaranteed return, the policies do not disclose the cost of insurance, the administration costs, or how they calculate the returns on your savings portion. You can not choose where the money is invested and they do not disclose the return you are receiving. You will have an illustration showing a guaranteed “cash value” and another cash value which reflects non guaranteed projected returns.

Universal life insurance policies were designed to provide an answer to the advice that you should “buy term insurance and invest the difference”. In addition it provides an answer to some of the complaints about Whole Life Insurance’s failure to disclose how the premium is allocated between the cost of insurance, administration costs, and investment portion and to provide investment options that you can choose.

In a Universal Life Insurance Policy, the mortality charges are disclosed and, as mentioned before, I recommend that they should be level (they do not increase as you get older). The administration charges are also identified and frequently guaranteed not to change for the life of the policy. They are generally in the $100 to $125 per annum range. Consequently, the cost of insurance and administrative costs can be shown on the illustration.

It is the investment options inside a Universal Life Policy that have grown dramatically over the past four years. While some of the older policies did not disclose how the returns were calculated, the newer ones are offering a list of investment options that have similarities to mutual funds. In fact, some are designed to provide returns that mirror well known mutual funds and they are managed by mutual funds managers. Examples include, Standard and Poor Index Accounts, Canadian Index Accounts, Canadian and American Equity Index Accounts, Bond Index Accounts, and 1, 5,and 10 Year GIC Type Accounts.

The returns inside an insurance policy are generally slightly lower than mutual funds will generate but they have four significant advantages compared to mutual funds.

The funds grow tax-free – you do not pay any income tax on the growth. This is similar to an RRSP, however unlike RRSP’s there are ways to have the use of the money on a very tax favoured basis. This was the subject of my previous article on Leveraged Deferred Compensation Plans. I would be pleased to forward a copy of this article to those who feel that it might be of interest.

You can invest 100% of the savings/investment component in an index where the returns are based on the performance of an index outside Canada. Options include S&P Indexes, American and Global Equity Indexes, and Bond Indexes. Some indexes are tied directly to the performance of well known mutual funds with one policy offering access to indices that emulate over 400

The funds are “creditor proofed” if the policy is set up properly. Creditors can not get at the funds inside this policy, which is important for many business owners and others who are concerned about lawsuits.

If the policy is set up properly, the entire investment account plus the face value of the insurance policy goes to the beneficiary tax-free on death of the insured. There are not even any Probate Fees. The same applies to a whole life policy but the cash value may or may not be in addition to the face value depending on the type of Whole Life Policy

Let me provide an example of the different tax treatment on money in an RRSP and a Universal Life Insurance Policy on death. Let us assume that Peter had $100,000 in the investment part of a Universal Life Insurance Policy and $100,000 in a standard mutual fund and died. The entire investment account of $100,000 would pass to Peter’s beneficiaries (provided they were identified in the policy) together with the face value of the policy with no taxes or probate fees. Further, the cheque could be issued within a few days of proof of death. The same applies to the Whole Life Policy with the caution of point 4 above.

The mutual fund $100,000 would be subject to both income taxes (likely at a tax rate of about 43%) and probate fees and the funds may not be released until after the estate has gone through probate and has been settled.

It is my experience that Universal Life Insurance Policies are being used for estate planning as much as they are for meeting traditional insurance needs. There are numerous tax saving and estate planning strategies that utilize this type of insurance.

It may be advantageous to stop contributing to an RRSP when you believe that you already have sufficient RRSP funds for retirement and set up a Universal Life Policy. It should be noted that consideration of whether this strategy would be of benefit and then when to start it, should be part of your retirement and estate planning process.

The face value of the policy can cover anticipated estate taxes and a savings component grows tax-free and will pass on to your beneficiaries without the probate fees and a potential 50% tax hit that the RRSP funds experience. You can still get at the money in the savings portion if it becomes necessary but in a significantly tax favoured basis compared to withdrawing money from an RRSP. The downside is that you do not have the tax credit on your RRSP contribution but it still may make sense from an estate planning perspective.

This is a complex subject and I could have written a small book on it but I hope that you will find this overview of benefit.


Life Insurance Fundamentals

Term Insurance Explained

Life insurance comes in two types – temporary and permanent. Most people have some type of temporary insurance either as a term insurance policy, mortgage insurance, or group insurance policy (likely through work or an association plan like an automobile club). Some also have permanent insurance either in the form of whole life, insurance, universal life insurance, or Term to 100 Insurance. ce.

The purpose of this insurance is usually for a short term or temporary need (to age 55 or 65 while the family is growing up and you are saving for retirement. It is to provide cash in the event of your death so those who depend on you will have the money to:

Settle your debts – mortgages, loans (business & personal), remove guarantees, make up for the income you provided to the family – Remember the impact of inflation when doing this calculation. At 3% inflation, a need to supplement income by $25,000 will grow to $50,000 in 24 years.

Provide for children’s education, marriage etc.

Complete the funding for your spouses retirement plan – very important and why many need some term insurance to age 65 – this can also be a consideration for those looking for permanent insurance as well.

For businesses, it can be to fund a buy/sell agreement or to provide insurance on a key employee to provide cash to find a new person, absorb the financial shock of the loss and have additional funds to pass on to the family.

You can see the temporary nature of this insurance. It has a specific relatively short term purpose which will no longer apply by at least age 65. This insurance can be very inexpensive for the amount you are purchasing ($1 million can cost between $60 and $100 per month depending on age, sex and smoking habits) because most people will never collect it. It is purchased to cover you life when you are relatively young and the need is frequently gone by age 55 or age 65 for some of those concerned about saving for retirement.

It generally comes in 5, 10, 15, and 20 year terms. This means that the premiums are guaranteed for that period of time and they will automatically renew at a higher rate for the next term period. For example, a 10 year term policy has guaranteed rates for the first ten years and then you can renew it for another ten years without a medical at a set rate contained in the policy. Do not renew it if your health is good as the renewal rates can be 25% to 100% more than the premiums if you shop around for a new policy. The assumption is that you only renew if you are too sick to get a new policy.

Money Saving Tip 1: Over half the people renew term insurance and pay these high premiums – get a new policy – with preferred term rates it might be less than you were paying.

At one time, insurance premiums were divided into smokers and non smokers. However, the companies now have statistics that enable them to determine those who are least likely to die based on lifestyle, family history and blood pressure and some measurements they get from blood samples, such as cholersterol levels. About half the people will qualify for a preferred rate. At the time of this writing, a 35 year old should be able to purchase $500,000 for about $35 per month at regular rates but preferred rates would be in the $25 per month range. Some companies also offer a preferred smoker rate for those who would qualify for a preferred rate but they smoke.

Finally, there is the issue of convertible. You will see most policies are renewable which means you can renew them for another term of say 10 years and convertible. Convertible means you have the right to convert all or part of the policy to a Permanent Policy at any time during the term without a medical. You just pay whatever the rates are at the time of conversion. If you policy was issued on a preferred basis some allow you to convert on a preferred basis if they have preferred universal life insurance rates. This is an inexpensive option that is usually built into the policy cost and worth the extra price. A few companies will offer policies without this conversion option for a small savings.

Money Saving Tip 2: Ask for preferred rates. Refer to the sample questionnaire to see if you would qualify at Preferred Insurance Levels.

Money Saving Tip 3: There are significant differences between some companies in the percentage of people who will qualify for preferred rates ranging from under 50% to over 75%. Ask me about this.

Money Saving Tip 4: If you are a smoker of cigars or enjoy a pipe, some companies will consider you to be a non smoker. Make sure you get this rate.

It is not expensive to move the financial risks to your family of your death to an insurance company and it is the responsible thing to do.

Remember, the impact of inflation when doing this calculation. At 3% inflation, a need to supplement income by $25,000 will grow to $50,000 in 24 years.