Mortgage Life Insurance - Better read the small print

I would like to share my thoughts on mortgage life insurances between different financial institutions and insurance companies.

I also recommend you to watch this video from CBC marketplace

I'm a shopper who likes to get deals on goods that I believe will bring value to me, my family or the people I care about. Can you imagine buying insurances and believe that you were covered but are not?

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I share a similar experience with my Future Shop warranty. I am not bashing Future Shop but I'm stating the flaws of their warranty which I was not informed of before purchasing it. I went into Future Shop around September 2010 to purchase a MacBook for my little brother who was entering graphic designs. I was excited and told the sales person to purchase the Apple warranty extension for another 2 years. At that time, he did all the transactions and I didn't read the warranty papers like most buyers. Approximately two later, I brought my laptop to the Apple store to fix keypad on my laptop. Guess what the Apple Genius said? "You don't have a warranty for this laptop!"

I was lucky that I kept all my original receipts of my purchases. After careful review of the paperwork, it turns out that I had a Future Shop warranty, not Apple Care (which I specifically asked for!) The reason why they wouldn't fix my problem is that "it is cosmetic and does not affect the functionality of the laptop". Even if they were to fix it, they would have to ship it to their central repair centre and it would take up to two weeks to get my laptop back. Can you believe it? However at Apple, if I had the warranty with them, they told me they would've fixed it on site.  I brought my frustration and disappointment to head office and management of Future Shop. No one responded to me for weeks. It wasn't until I reached them through Twitter that they then paid attention to me. Their solution was to pay me back what I paid for the warranty.

What good is having my warranty money when my laptop breaks down before 3 years? I paid for an insurance and perceived that I had coverage. It sucks and is downright horrifying when the rug gets pulled under you. 

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Life insurance should provide an accurate answer about covering you or not. Why should you pay for something if you are not covered? As a consumer, you should know exactly what you are paying for, exactly what you are covered so you can have true peace of mind.

What this event taught me is to always learn as much as you can about what you are purchasing and learn to ask the right questions. When in doubt, speak with a professional in the field. 

What does my clients ask me? Part 1

Today I would like to share common questions asked during my initial meetings with my clients, also known as frequently asked questions (FAQs).

WHAT IS AN INSURANCE BROKER?

An Insurance Broker is a person that has permission to seek insurance quotations for an insured (client) or prospective client. A broker is not an insurance company employee. As a representative for the insured, brokers will approach several insurance companies in an attempt to provide quotations and coverage to adequately insure the client's exposures.

An Insurance Agent is a person who has entered into an 'agency contract' with an insurance company for the purpose of selling insurance for that one company. An agent is not an employee of the insurance company, but rather an independent contractor. The agent, unlike a broker, has the authority to bind coverage (legally obligate the insurance company to provide coverage according to the terms and conditions as bound).

WHAT SORT OF EDUCATION DO YOU NEED TO BECOME ONE?

You will need to complete RIBO Level 1 (Acting under supervision of a Principal Broker like Brokerstrust) which I am allowed to promote Home, Auto & Commercial liabilities. For life, critical, disability, investments, group investments & travel insurances; I needed to complete my LLQP & Mutual Fund licenses. After 2 years as a sponsored agent, I became non-sponsored which allowed me to work with Managing General Agent (MGA) like Bridgeforce Financial to provide products and services from different insurers.

WHAT DO YOU SEE YOURSELF IN 5 YEARS?

Given the last 5 years of experience in this field, I see myself growing into an independent Registered Insurance Broker in Ontario (Level 2), which allows me to build my own brokerage. I want to have my own team of specialists to help provide to current, existing and new clients on many areas of speciality like wealth management & estate planning, tax planning, financing (mortgages) and Risk Management. There is a lot of room to grow but it takes a lot of planning and time to build a solid foundation which I see myself building in the next 5 years.

HOW DO YOU GET PAID?

First, I am self-employed which means my income is 100% Commission and trailers. I get paid when a client accepts my proposal on the products and services like Auto & Home insurances. I get trailers based on my current asset base which are based on the total value of all my current & existing clients. By getting this type of commission, I do my best to service and maintain my clientele.

BEING A BROKER, MAKES YOU A SALES PERSON?

Yes and No! A self-employed is like running their own business on a day-to-day business. Sales for any company, corporation or small businesses are crucial to bring in revenue. However Insurance broker does not only promote products, they are based on a servicing market which requires them to build relationship, research & analysing, and recommending solutions. We have a specific guidelines to follow as we are regulated. 

Being a broker, isn't about selling one particular product and let you leave at no given notice. That is not the way how I run my business. In our industry, maintaining clients allows you to have trailer fees which is residual income. I can confirm and will inform you that it's in my best interest to keep you as a client which means servicing you as you grow. I do not want to treat my business like a fast-food restaurant because I prefer quality over quantity. 

I have answered to all the questions with my honest opinions. If you have any questions or concerns, please kindly send me a quick message. 

 

Get the most out of your Savings!

We all save money for rainy days because we understand how it feels to have a bad day with unexpected costs like:

  • Car repairs
  • Pet eating the wrong stuff (Vet bills can mount up hundreds)
  • Injuries and Accidents i.e. Broken Leg
  • Natural Disasters hits i.e. Flood, Severe snow storms, black-outs
  • Losing your job

but we also save for the good days like:

  • Unplanned trips, vacations or day at the spa
  • Special family events
  • New gadgets (laptop or game console) and personal items like Michael Kors bag 
  • Weddings (Yes, the invites keeps coming)

Where can I put this money? Should I invest it? If so, how aggressive? Do I pay taxes?

Everyone has different goals in mind but let's assume that you are saving up as an emergency fund for the listed events because we all know how it feels to be stuck with debt if we didn't save. 

I am recommending individuals who plan to use their TFSA not to invest aggressively due to the short-term nature of the account. You can invest it in Guaranteed Income investments like GICs, Bonds and etc to ensure little risk to your principal of your account.

Life will be hard if you don't plan for these unexpected events. By saving, it helps eliminate unnecessary stress and you will feel confident to take on future problems.

Tax-free Savings Account (TFSA) is very ideal for current emergency funds. 

FACTS OF TFSA:

  • As of January 1, 2013, Canadian residents, age 18 and older, can contribute up to $5,500 annually to a TFSA. This is an increase from the annual contribution limit of $5,000 for 2009 through 2012 and reflects indexation to inflation. (Therefore, you may be eligible up to $31,000 limit for TFSA)
  • Investment income earned in a TFSA is tax-free.
  • Withdrawals from a TFSA are tax-free.
  • Unused TFSA contribution room is carried forward and accumulates in future years.
  • Full amount of withdrawals can be put back into the TFSA in future years. Re-contributing in the same year may result in an over-contribution amount which would be subject to a penalty tax.
  • Choose from a wide range of investment options such as mutual funds, Guaranteed Investment Certificates (GICs) and bonds.
  • Contributions are not tax-deductible.
  • Neither income earned within a TFSA nor withdrawals from it affect eligibility for federal income-tested benefits and credits, such as Old Age Security, the Guaranteed Income Supplement, and the Canada Child Tax Benefit.
  • Funds can be given to a spouse or common-law partner for them to invest in their TFSA.
  • TFSA assets can generally be transferred to a spouse or common-law partner upon death.

For more information on TFSA, feel free to contact Katherine Le.

To look into TFSA details, visit CRA Website.