Whole-Life Life Insurance


The Emergency Fund You Didn’t Even Know You Had

“COVID-19 has shut down my business, I need cash now!”

I have had clients start phone calls with that line, or something similar, at least twice a day for the past three weeks. Thankfully, most of them were smart enough to take my advice and set aside some emergency money, those that did not are wishing they had and are ready to push the panic button. But not all emergency funds are created equal and so yesterday I took to YouTube to discuss the most overlooked source of emergency cash that a lot of people have at their disposal; check it out here.

Once you get past my riff on breakfast nutrition I get into the meat and potatoes of the discussion around the 1:55 mark, hang in there, its worth it. Or you could just pause the playback while it downloads and skip ahead if you really want to.

For those of you who do not have a Whole-Life Life Insurance policy, I want to take a few minutes today to ask you one simple question. Why not?

I get that some people think Life Insurance is a waste of money. Why pay for something that you will not reap the benefit from directly? While I understand the sentiment, I have to say, dying without a plan in place to provide for your family and pay off your debts is just rude. If you are independently wealthy, that’s one thing, but my mother taught me never to expect anyone to clean up my messes for me. Even wealthy people have Life Insurance because Life Insurance, when built properly can be the final broom that comes along and sweeps your life into a tidy little pile and makes things easy to dispose of.

Not that I am saying you’re dirt that you family is just going to toss away. Let’s assume you love your family, and in turn they don’t think you’re dirt, let’s also assume you’re not independently wealthy and you’re not rude.

You probably have some Life Insurance already. Most employers provide at least a small amount of income replacement for your family to help them through a difficult time as part of your health plan. That’s nice but it’s not generally going to be enough to clear your debts and provide for your family long term. In addition to your employer sponsored plan most people will purchase some term Life Insurance to cover off major debts and provide income for their families for a few years. This is all good stuff but it’s not Whole-Life Life Insurance and it’s not going to provide you with any emergency money while you are living.

While term coverage resets at a higher premium at the end of a specific number of years, a Whole-Life Life Insurance policy is designed to give you coverage for one guaranteed premium amount throughout your entire life. It also provides you with the opportunity to participate in the financial returns of the insurance company and grow a cash surrender value which you can access while you are living. Term policies only payout once on death.

In the world of COVID-19 it’s the cash surrender value in Whole-Life policies that many of my clients are finding can form the basis of an emergency fund. You don’t need to die to gain access to this cash value, you can instead surrender some of the death benefit or take a loan from insurance company to bridge through a difficult time. The beauty of this plan is that you don’t have to submit to a credit check, it’s technically your own money, and you don’t have to commit to a specific time frame to pay any of it back. If you die while the loan is still outstanding the insurance company will just deduct whatever is left from the final death benefit and pay your heirs the rest.

This is not all sunshine and roses. The CRA may consider some of the advanced funds as income and expect you to pay tax on them and the insurance company may charge you interest if you take it as a loan. But if your other sources of income have taken a huge hit paying some tax is not a bad thing and the interest rate is about a third of that charged by most credit cards. Win-win.

Experts agree that everyone should have about 3 months of expenses in an emergency fund. Most people find this hard to do but by paying a premium of say $50 a month you can build up a cash value well in excess of that number over time. In the past week I have advanced an average of $6,500 from Whole-Life Life Insurance policies to everyone of my client’s who have qualified. Not bad for a commitment of $50 per month and a whole lot more than the government is offering through some of their emergency financing programs.

So, if you have a Whole-Life Life Insurance policy you might have a significant emergency fund at your disposal. If you don’t have a Whole-Life Life Insurance policy now might be the perfect time to check with your financial advisor and put something in place for the next “once in a life-time” financial emergency like we are living through right now.

Stay healthy and safe, and stay home if you can.

Lauren

So… That Just Happened!


Resetting the World Post-COVID-19

Every few generations we have an epoch defining event.  Life was going along one way and then, seemingly overnight, suddenly we live in a very different world.

The assassination of Archduke Franz Ferdinand, Pearl Harbour and 9/11.  These incidents have all split history and profoundly changed daily life from that point forward.

The current COVID-19 crisis will be remembered as another such event.

Here in Ontario last Thursday morning most of us got up and went about our business in the usual way.  Sure, we had heard about COVID-19 and how it was disrupting life in other parts of the world.  What had started in China and shut down production there had rattled financial markets around the world.  Italy had shut down everything, but the most essential services and we were starting to see similar action in New York City but very little had touched us here.

That changed on Wednesday, March 11 when the first couple of cases were reported here.  Within 24 hours, the provincial government had closed the elementary schools, secondary schools, and day care centers and ordered all nonessential employees to work from home.

Panic buying set in as people scrambled to purchase cleaning supplies and non-perishables.

“Social Distancing” and “Flattening the Curve” became the new buzz words as everyone was ordered to stay at least 6 feet apart.  Churches cancelled Sunday services, Restaurants, Fitness Clubs, Dentists and most non-essential businesses began to implement first, extreme cleaning protocols, then reduced hours but by early the next week only grocery stores, pharmacies, fast food takeout (no dining rooms) and big box household retailers remained open at all.

What started with a handful of reported case, in just ten days, has grown to over 200 cases and resulted in a near total lock down of all non-essential human activity.  Officials are telling us to get used to it, this could go on for several weeks or even months.

I’m not qualified to go into a discussion of why this is happening except to say that I understand that COVID-19 is a highly contagious illness, one that if left unchecked has the capacity to overwhelm the medical system.  I’ve seen the computer simulations; I know what an unchecked spread could look like and how the various social distancing and lock down protocols should prevent the worst-case scenarios.  I get it, so I am doing my part by working from home and going out as little as possible.

For me at least all of this is starting to beg the question, “what’s next?”.

The only thing I know for certain is that COVID-19 has split history, nothing will be quite the same again.  I have no idea what some of the broader implications of this may be, but I have a few suspicions and a few ideas about how to go about life once things return to “normal”.

In no particular order, here are my thoughts on the state of the world post-COVID-19.

1 – Small Businesses will be hurt the most

My friend owns a coffee shop up the street.  He’s closed.

Rents are still due on April 1 and with no revenue coming in I have no idea how businesses will be able to pay.  To date, the government has offered to help employees that are laid off and offered some tax relief, but I have seen nothing concrete that provides income assistance for the owners of these business.  I hope the government will step in with something that will prevent landlords from evicting businesses and extend the income programs to people who are self-employed.  But at the end of the day, most businesses will never get back the revenue that has been lost.  The big chain stores have deeper pockets and stand a better chance of coming back from this, many of the smaller shops may never reopen.

It’s not just retail business and restaurants that are suffering.  Personal service providers, dentists, physio therapists, contractors of all types, (plumbers, roofers etc.), anyone who works in person with customers is effectively closed.  Even my business, which relies primarily on face to face meetings with clients, many of whom are small business owners, has been significantly curtailed.

The world post-COVID-19 will see fewer small businesses and less service delivered in person.

2 – The Rise of Teleconferencing

Teleconferencing is not new.  The ability to put more than two people on the same telephone call has been around for at least 40 years.  In the past decade the technology has exploded on-line with video conferencing over the internet growing exponentially.  Last week as governments and businesses large and small began ordering people to work from home the stock price for video conferencing start-up Zoom Technologies shot up nearly 75% as tens of thousands, myself included, opened new accounts to stay connected with colleagues.  Google and Microsoft have their own versions which have also seen significant growth in just the last couple of weeks.

As people become more comfortable with this technology post-COVID-19 I suspect we may begin to see more and more companies offering permanent work from home solutions to their staff.  We are all taking a crash course in remote work and some companies may realize that this is a cost-effective alternative to the traditional office environment.  We may also start to see less long-distance corporate travel, why fly halfway around the world for a meeting when you can accomplish just as much from the comfort of your own home via video conference?

3 – Emergency Preparedness

I tend to do my weekly grocery shopping on Fridays.  Last week, when the first school closures where announced my wife tried to get me to go early but I refused, saying that there was no reason to panic.

Boy was I wrong?!

Within hours the grocery stores had been overrun, toilet paper, disinfectant wipes, canned goods, pasta and countless other food staples where suddenly the hottest commodities on the market.  By the time I went out on my regular schedule many of those items were simply sold out.

Experts have been telling us for years to always keep a supply of certain things on hand.  Non-perishable foods, batteries, bottled water and a bit of cash, to start.  Financial advisors like me also encourage people to maintain an emergency fund, anywhere from $1000 for essentials up to a savings account containing enough money to cover 6 months of expenses.

Nobody does it.

What this crisis has taught us is that you never know when, or how an emergency might unfold.  Post-COVID-19, financial advisors like me and other experts should redouble our efforts to get the word out and help people prepare for the next disaster, however and whenever it may come.  Will anybody listen?  I hope so, but I’m not holding my breath.

4 – Your Health Matters

When COVID-19 first started its rapid spread around the world health officials were saying that most people wouldn’t get it, and for those that did it would just be a bad flu.  The only people who needed to worry were the elderly and the immunocompromised.  What we know now is that age has less to do with it, the real determining factor is your underlying health.

I’m not qualified to go into a detailed discussion of health, fitness and immunity.  What I do know is that the three are both interrelated and mutually exclusive, it is possible to be both fit and unhealthy for instance.  Nutrition science is the new cutting edge of medical research.  I know you can’t kill a virus by changing your diet, but you can fortify yourself against attack and make your body stronger and better at fighting off all kinds of infections and other illnesses.   Cutting out processed foods, balancing your microbiome (the millions of micro-organisms that live in your gut) and eating the right balance of macro nutrients, (fats, carbs and protein) for your particular lifestyle can go a long way to boosting your immune system and making you better at fighting off illness.

Post-COVID-19 the medical profession needs to do a better job of educating people about healthy foods and supplements and the food production industry needs to stop feeding us poison that damages our overall health and compromises our immune system.  Again, will anybody listen?  Some how I doubt it.

 

 

We are standing an apex of history, how we pivot from here will determine the course of the rest of our lives.  The world has changed, adaptation is going to be hard, but we don’t have a choice anymore.  As Mohammed Ali once said:

Don’t quit.  Suffer now and live the rest of your life as a champion.

See you on the other side.

Could it Happen Here?


This is kind of scary!

Check out this story from Truth-Out.org – It Could Happen Here: The Confiscation Scheme Planned for US and UK Depositors

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Although I’m not sure what the Canadian Bank Act would have to say about this it is clear that in other developed countries it is possible that a bank failure, or even a liquidity crisis, could result in loses for depositors. 

In Canada we have the CDIC (Canadian Deposit Insurance Corporation), which was set up by the Federal Government to underwrite depositors funds up to $100,000 in the event of a banking failure.  But they make it very clear on their website that not all deposits are protected, especially in the event of fraud or theft.  A case could be made that most, if not all of these large-scale bank failures we’ve seen in the past few years are as a result of some form of fraud by bank managers so strictly speaking, maybe it could happen here. 

In my opinion the best thing to do would be to have an emergency fund and investment portfolio diversified over more than one bank and investment firm to ensure that no matter what happens, you don’t end up completely wiped out.

For more information click on The Meekonomist Manifesto above or write to themeekonomicsproject@gmail.com