Golden Girl Finance
 
Mike Cautillo, Desjardins Financial Security Independent Network
Posts (6)
 
 

Insurance

The value of 'just getting started'

June 12th, 2015 by

And you can get started, right now, with this quick read

 
 

It's not that we don't want to plan things, but at times, just getting started is far more important. 

Starting a life insurance plan is one of those things. Much too often, prospective clients are overly concerned with the anticipated sunk costs of investing in a term policy at the detriment of not getting started at all.

If you're having to abide by a budget, the search for the perfect plan is an endless pursuit. It doesn't exist! But it often derails our motivation to even continue on with the intended purpose, "What kind of plan can I get started now so that I'm able to protect my family and I?"

I want to protect my family. I know you want to protect yours, too. But we’ll never get there if we can't recognize the end goal matters so much more than whether the journey is perfect.

Getting started... that's where the real value hides!

Business

How small business owners can afford to offer group health insurance

May 12th, 2015 by

It's not just for the big players anymore

 
 

It wasn't that long ago that having health insurance benefits was a luxury only the largest of corporations could afford to provide for their employees. Boy, have things changed - it seems that what used to be a scarcity has now become a bare necessity, especially when trying to retain or attract employees.

The good news is, for employers big and small, there have never been so many flexible options to choose from. The not-so-good news? Popular misconceptions often stand in the way of many small business owners looking into these options. Perspectives such as "my business is too small" or "it must be very expensive" can damage your employee prospects and get in the way of making your company an attractive place to work. 

Small business, big coverage

Most small business owners are not aware of the fact that you can implement a conventional group benefit plan with as little as two people (that can even be part of the same family) - and it is often better than self-insuring. Additionally, as with all group benefit plans, pre-existing conditions are covered, unlike with personal/private health and dental plans.

Healthcare Spending Accounts (commonly referred to as HCSA or HSA) are an increasingly popular alternative to conventional group health and dental plans. They are practical, affordable, flexible, and a cost-effective way to meet the changing needs of many employers, as well as the diverse needs of many employees. I've recently teamed up with one of Toronto's most experienced group insurance brokers, and this is his outlook: "When the fit is right, these plans provide a tremendous amount of value and risk protection for employers, I've implemented well over three hundred group plans in the last two years, the results and satisfaction are amazing" (V.V).

Custom is key

Regardless of what plan you choose, customization (even a mix of the two options mentioned here) is possible and can be quite effective - if you speak to the right person. Having a broker who is capable of designing the plan and implementing the strategy is key. Experience is a must when working this side of the business. What's most exciting to remember is that now, more than ever, the small business owner can thrive in the competitive hiring landscape and maximize their company's potential!

Insurance

Thinking about life insurance? Go against the grain

April 27th, 2015 by

Why you should take the most common misconceptions about life insurance with a grain of salt

 
 

All too often, the perception of having life insurance is that it's a necessary evil. Not many enjoy buying it - the fact is, some even despise it.

Thinking of life insurance as a "just in case" proposition doesn't help our mindset either. All too often, looking at it that way can feel like we are wasting money on scenarios that might never happen, especially when we could be using that money for real things, right now! However, if we begin to look at insurance through our investment lens, and try to understand it as one of the best investments money can buy, then the purchase might just start to make sense - and maybe even feel good!

Looking at the bottom line

Life insurance should always be considered first and foremost as financial security protection for your family, whatever the need may be. But, if I can encourage you to also embrace the monetary value of the investment, it may help give you that "against the grain" viewpoint you've been missing in order to make the commitment - in case the first reason wasn't enough justification, of course!

If we do the math, in comparison to the face value of your insurance amount, premiums paid are heavily skewed in your favour. Depending on your age and health, the return on your monthly investment could be - and usually is - pretty astronomical. Where else can I give someone $1,000 a year, and be promised that a return of 500 times that amount can be returned to my family at any given time? The list of other investments that yield this type of return is very short.

Why perception matters

It's possible that, for most of you, this is not how you've been perceiving life insurance thus far. One of the main reasons it is hard to comprehend the value of life insurance is because you will never realize the actual benefit yourself - your family will. And that, in my opinion, is what makes this investment so valuable.

Insurance

Time and money: Where do you fit into the equation?

March 21st, 2015 by

Why you should evaluate life insurance terms on your (time & money) terms

 
 

I recently read a good article regarding an old proverb, "time equals money," discussing how we often make exchanges between time and money, especially in the form of work. The more we value our time, the more money we're willing to spend on saving it. The more we value our money, the more time we're willing to spend on preserving it. If we elect to take a direct flight over a one-stopper, we've decided our time is worth more than our money, therefore justifying the extra cost. In other situations, our money will be worth more than our time. You may drive across town to save a few bucks on groceries but you've decided that the money saved is worth the time driving. All throughout life, we will contemplate the two in an effort to help us make the correct decision... we hope!

After reading this article, it got me thinking on how I see this proverb contemplated everyday. The careful consideration of "time = money" holds strong to many of the decisions we make, especially when evaluating the different life insurance products available. One of the more popular choices is a product referred to as term insurance, which does come up in conversations between advisor and client most of the time - but how much do we really understand about the distinct differences between the terms available, and especially the effect this proverb has on our choice?

Evaluate life insurance on your terms

Term Life Insurance means just that - coverage for a set period of time selected by you, in which the insurance will eventually expire. You do have some options with term insurance, such as having the option in the first five years to exchange your existing term to a longer term. You can also convert to permanent insurance at anytime during the term without any evidence of insureability (meaning, regardless of a change in health during the term, the insurer cannot deny you the current insurance amount when applying for a conversion or exchange).

There are 10, 20, 30 year and to age 100 terms along with some others such as YRT (a Yearly Renewable Term), but generally, the former terms listed are the most popular. Terms are the most economical forms of life insurance and cost is one of the main reasons why they're such a popular choice, although one should be cautious with some of the "buy term, invest the difference strategies" available, as they're not always the most appropriate or wisest choice. When you buy a term, you're essentially protecting your beneficiary from a risk that, in that period of time, you generally anticipate will require capital should you no longer be around to mitigate it - such as a mortgage or the dependency period for a child. In some cases, you can purchase term to suffice temporarily for one reason or another.

But what happens if you still need the insurance nearing, or at expiry of the term? The price drastically increases, and with regards to the term length selected when first purchased, it could be many times the original premium depending on how much time has passed since inception. This scenario is surely a case where the insurance company now puts a higher value on their time - so how do you evaluate your value? 

Consider the road ahead

I usually try to advise my clients to at least see the price for the longer term, even if they feel it's unnecessary at the present time. You may find it to be worth your while to buy the extra time now, because it can potentially cost you down the road. Also consider that, if your health were to change during that period for one reason or another, having a little extra time to decide or afford an option can help you. In such difficult circumstances, time is worth more than the money spent. Don't get me wrong, there are times when the shortest term makes the most sense, especially when you are confident that your financial needs and/or situation will improve in the near future but you still need coverage that will suffice for today. Another such time might be if and when you are almost absolutely certain an obligation will be gone before the end of the term. These are situations where your money is more valuable than time, especially if changing the length of the term, product type or canceling are inevitable actions in the near future.

Time = money?

It's a slippery slope when contemplating what is needed now, and also trying to anticipate future obligations. Evaluating where you place your value in the equation of time and money is something to be considered when buying term insurance. Properly assessing your needs can help in calculating what you pay now, in relation to what you (might) pay later. It's an equation that doesn't have a one-size-fits-all answer. 

Carl Richards said "When and how we exchange time for money, or money for time, is incredibly personal. The decision doesn't fit neatly into some formula. Instead of assuming there's a right or wrong answer, we need to put the exchange in the context of what's right for us now. Some days money will matter more. But other days, we'll consider the money well spent for the time it buys us. That's the way it should be."

 

The opinions expressed in this article are those of Mike Cautillo, and not necessarily those of Desjardins Financial Security Independent Network.

Insurance

Why planning for the unexpected isn't just a cautionary tale

February 19th, 2015 by

Don't be caught as the turkey at Thanksgiving (metaphorically speaking, of course)

 
 

In his book The Black Swan, Nassim Taleb shares a lesson: "Don’t be a turkey!"

Taleb tells the story of a turkey that is fed by a butcher for 1,000 days. Every day, the butcher feeds it, pampers it and ensures its good health. For the turkey, everything is getting better by the day. Every day, the turkey's confidence grows; it believes the butcher genuinely cares about its well-being. The turkey's warm feelings are based on its great experience so far, so why would it think otherwise? "Tomorrow will be better than today," thinks the turkey. It becomes fatter and fatter until one day in October, the situation changes radically, as Thanksgiving has arrived. This is a surprise for the turkey - its fate has been in the butcher's hand, all along... 

This example may seem comical (except for the turkey), until we realize - we too think like turkeys. "Real estate has always increased in value, so it will do forever." "A paycheck arrives every two weeks, what’s to worry?" "I don't need life insurance now, I will buy it when I need it." Just like the turkey, we all-too-often fail to realize that stuff still happens, regardless of how promising tomorrow looked yesterday!

When events run a-fowl

To better understand this "turkey" phenomenon, I need to briefly explain what Taleb describes as a "Black Swan," and the Extremistan theory. The "Black Swan" is a metaphor that describes an unexpected event, a surprise that has a significant impact. In Extremistan (an idea, Taleb's philosophy), nothing can be predicted accurately and events (such as black swans) that seem unlikely or impossible, happen more often than we expect or realize. If you think about it, many things fit this idea, such as 9-11, the Titanic, the 1987 stock market crash - and certainly - an unexpected death or sudden critical illness in the family. 

For each and any of us, what could be more unexpected than the untimely death or illness of a loved one? Add in the fact that they're the breadwinner or caretaker of the family, and/or you have no insurance coverage - talk about a significant impact! There are many families with inadequate or no insurance coverage, and the reasons are endless. Middle-aged indivduals are often faced with unaffordable or unattainable insurance due to their health issues because they passed up the opportunity to qualify when they were younger and healthier. Investing in the belief that life follows a normal distribution can be dangerous. The reality is, things are much more random and unexpected than we are led to believe (such as our health). When we view the world as more explainable than it really is, we accumulate silent risk. We all run the risk of becoming uninsurable sooner or later, whether it's due to health, age or affordability. Don't leave your fate in someone else's hand, and end up as the turkey at Thanksgiving.

Protect against the unknown

Uncertainty can prove to be abrupt, powerful and, most of all, inevitable - but we do not need to be oblivious to what leads up to these consequences. Evidently, the real problem exists not in the actual outcome or consequence, but in the neglected risks leading up to the consequence. When we insure ourselves and our families, we can accept that these risks exist and protect ourselves. In some circumstances (e.g. various options strategies in investing), some can even benefit from such risks. The more quickly you understand the significance and value in the lesson of the Thanksgiving turkey, the sooner you start to realize that:

"The idea that the future is unpredictable is undermined every day by the ease of which the past is explained." - Daniel Kahneman

 

The opinions expressed in this article are those of Mike Cautillo, and not necessarily those of Desjardins Financial Independent Security Network.