I have held off writing this blog for quite some time because I simply did not want it to appear self-serving. The truth is there is a lot of fact and fiction out there regarding this simple but powerful product or as I call it contract for money. At the very basic level it can provide your family with money to carry on after you die. The simplest and least expensive form of Life Insurance is term insurance, but for a young couple with a few kids 10 year renewable and convertible term is the cheapest and best way to go. Once a couple has reached its 40’s the next best approach is to re-examine the need and then determine if it might be required for another 20 years. If that is the case I often recommend that 20 year term renewable and convertible might be the way to go. It is a little more expensive than a 10 year term, but over a period of 20 years will cost less than the renewal rate of your existing 10 term when it rolls over.
The next question I am asked often is how much do I need? The simple answer is as much as you can afford without compromising other daily expenses you have to put aside. The truth is that if you are earning anywhere between $50-100,000 one million dollars of insurance is not a lot insurance. How can I defend that position simply because if one were to invest the principle at today’s low-interest rates the annual income would probably not be more than $30,000 gross before taxes. If one were to spend the capital amount of $1,000,0000 it would be gone in 10 years to produce a $100,000 living allowance to a family or 20 years if $50,000 was taken out annually. Just to demonstrate that the cost of $1,000,000 is not as expensive as you think I did a survey on some software I use to illustrate to clients competitive premiums from competing Life Insurance companies. A healthy 35-year-old non-smoking male would pay about $45 a month for $1,000,000 and a health 45-year-old would pay about $92 a month for that same coverage. A more complex but scientific way of calculating insurance needs can be calculated by working out a monthly budget that the family needs to live on and then figuring out the capital that it would take to sustain that lifestyle over certain amount of time. Other things to be aware of that you might or not need but that a commissioned insurance agent will show you is a waiver of premium rider which simply means that if you become disabled the insurance company will pay the premium of that policy. My take on this benefit is if you already have disability insurance through work or on your own then this additional rider may not be as valuable to you. There are sometime accidental death and dismemberment riders which I don’t have a lot of use for because the majority of deaths are by natural causes, so you are probably throwing your money away on this one. The other favorite rider you will be a small amount of life insurance on your children. I am kind of neutral on this one as the probability of losing a child at a young age is quite low, but the cost of funerals has been quite inflationary, so you may want to give this one some consideration. That is all for today. In a future article I will talk about the upside and downside of permanent insurance and how to use life insurance for estate planning purposes.
What’s the future of health benefits in Canada? A hybrid model of core coverage and personalized benefits is a likely scenario, speakers at an event in Toronto said on Wednesday.
“Our vision is really a hybrid model, where you have this traditional benefit program there to support your employee should something happen, something unpredictable that could have a big financial impact on their life, but combined with this broader view and their well-being,” said Julie Duchesne, a partner and leader of Mercer’s health business.
Duchesne made the comment as she and colleague Brian Lindenberg presented their insights at the Toronto instalment of Mercer’s second-annual series of events on the future of health care at the Ritz-Carlton hotel.
Last year’s event featured seven predictions for the future of health care by 2025. They included an estimated 130 per cent increase in health-care costs and the rise of personalized medicine like pharmacogenetics.
“It was an eight-year prediction window, so we’re year one into our predictions. We actually feel pretty good, generally speaking, about our predictions. We feel we’re kind of on track and as the future unfolds, it will unfold in a way that’s consistent with what we’ve predicted,” said Lindenberg.
One prediction that missed the mark, he noted, was around public health-care reform and pharmacare, which Lindenberg said in 2017 would never happen in Canada.
“Clearly, we might have missed a sign. But in our defence, a lot of people missed that same sign. Clearly there’s an increased enthusiasm for implementing the national pharmacare program,” said Lindenberg.
Speaking to the need for personalized benefits, Lindenberg referenced the issues of rising costs and the war for talent, both in terms of attracting and retaining employees.
“The game is clearly changing. In order to win that war for talent, we strongly believe you need to engage your workforce in a different way. You need to acknowledge the individual preferences of each of your employees and future employees. You need to leverage technology and what’s happening in terms of the vendor landscape to deliver a more personalized approach to your employees within the context of the age of the individual,” he said.
According to Duchesne, gathering data is key to developing a personalized approach and implementing targeted benefit programs. Targeted programs are essential to meeting the needs of multiple generations of workers and setting organizations apart, she said.
According to a global survey by Mercer conducted in 2016, 96 per cent of employers collected data but only 45 per cent used it in support of decision-making processes. Duchesne noted there are many different forms of data in the benefits field, including information about disability, use of wellness and employee assistance programs and demographics.
“The first opportunity we see is making sense of all that data through what we call data analytics. This is really important in order to better understand your workforce, your demographic and where you should invest in order to best control your costs over time,” said Duchesne.
According to Lindenberg, an important data set for plan sponsors and employers is around what employees want, need and feel they’re receiving. He noted a recent survey that suggested employees value health more than wealth or career progression.
“Close to 50 per cent of your employees would like to see you invest more in workplace wellness. That’s what they need. However, your employees are also skeptical. Thirty-seven per cent of your employees don’t expect you to invest a whole lot more within the next two years and only 19 per cent think you’re investing enough,” he said.
Noting the disconnect between what workers need and what employers are offering or able to deliver, Lindenberg said knowing where to invest in wellness goes back to data, understanding cost drivers and risk factors and then putting the information into the context of employee needs and wants.
“Once you know what the strategy is . . . you can figure out how to leverage some of those new vendors and that new technology in terms of making your workplace wellness strategy really sing,” he said.
As I continue my work with the non-profit organization that works with our start-up community I was thinking about the impact a strong mentor can have on the development of a relatively inexperienced entrepreneur. I never really reached out for the help of a mentor to later on in my career, that is on me. The value of a great mentor is quite simple they have gained valuable business and life experience during their careers that they can pass on to their students or lesser experienced entrepreneurs. They usually ask great questions to uncover what is going with you and your business. They can help you avoid mistakes they have made along the way, that can save you and your business financial and emotional pain. Mentors generally have developed substantial networks they might be willing to share with you, once they are convinced you are on the right path. So why would a successful business person go out of their way to help some stranger just starting up a new business without financial reward? In one word, “paying it forward”. In addition these are people of high moral character who appreciate the success they have experienced and want to share their knowledge and success with others. To all those mentors out there lending a helping hand, you make this a planet just a little better place to endure.