Nov 212014
 
When cutting expenses and finding ways to save money for retirement, a great vacation, college tuition or anything else, one of the first things to look at is insurance coverage. Below are some examples of common insurance types to consider.
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Life Insurance
Life insurance can come in different forms. The least expensive is term insurance. It provides coverage a specified amount of time. Cait, a fellow blogger also from Vancouver, recently wrote that she was able to buy a term life insurance policy for just $24/month. Usually the younger someone signs up for life insurance, the cheaper the premiums. However, there are other life insurance products such as permanent life insurance which will cover someone’s entire life and create a savings account that can be eventually used.
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Many insurance companies have an online presence these days. To research more about insurance in general, I think searching on Google for insurance agents is a good place to start for finding brokers near you. Then make an appointment with them to ask further questions. They can provide suggestions for how to reduce car insurance premiums or have a built-in savings account within a life insurance policy. Cait spoke with 3 different brokers before making her final decisions, so it’s okay to take your time. I’m really lucky to have group life insurance through my job. But if I wanted to have additional insurance I can buy private coverage as well.
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Car Insurance
For those who qualify, there are several ways car insurance can be inexpensive. There are discounts for people who have good driving records, and in some parts of the world, for students who have good grades in school. This is very useful for families with teenagers because their age group has the highest insurance rates. All policies have a deductible that you must pay before the insurance company starts to pay, but this deductible can be reduced every year if the driver maintains a good driving record.
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Home Insurance
A home is a large investment and proper home insurance coverage in important. However, there are ways to reduce the cost and still have excellent coverage. Bundling home and auto insurance with the same company can reduce the total premium by 10% or more. That’s why it’s a good idea to buy home and auto insurance from the same agency. 🙂  Installing fire and burglar alarms and other safety devices such as outdoor lighting could also help lower insurance costs. Personally I don’t have to worry about this one because my strata (HOA) corporation that runs the building takes care of it all. This is one benefit of living in a condo. 🙂 My neighbours and I simply pay a monthly maintenance fees, and a small part of that is allocated to earthquake and fire insurance for the entire building. But as Jim mentions in the comments below we still need personal contents and flooding insurance.
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Business Insurance
This can prevent a company from bankruptcy. For example, having liability insurance is critical if customers enter the business premises or if employees go into the customer’s homes. If there is an accident, and the business is not adequately covered, the owner could have to pay from his or her own personal finances. It’s best to speak with a financial advisor specializing in business development to help select the right kind of coverage for a business.
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Random Useless Fact:
In the country of Denmark, the population of pigs is bigger than the population of people.
May 182014
 

I recently read an article written by the affable David Carrigg, a prolific Canadian columnist 🙂 The article is about how a public insurance company (ICBC) made a botch of things and overcharged its customers by $39 million! Furthermore ICBC not only overcharged some of its clients, but it also undercharged other customers to the tune of $71 million total. Many B.C. residents became upset. When a Crown corporation mismanages money tax payers may be on the hook. And governments will often feel the pressure to raise taxes on the public to maintain fiscal order.

During this past year the Feds raised EI premiums. Quebec raised personal income taxes. B.C. increased its health care (MSP) premiums. Manitoba raised its provincial sales tax from 7% to 8%. And many Canadian cities like Toronto, Edmonton, and Vancouver (where I live) have raised local taxes 🙁 According to the Fraser Institute, a public policy think thank, the average family earned $97,254 in 2013 and paid $42,400 in total taxes. In other words, 44% of what the average Canadian family makes is spent on various taxes. 14-05-tax-dollar-goes-Summary

Many people go out of their way to find discounts on stuff they want to buy. They shop wholesale to save on bulk items. They feel disappointed when they miss a sale on their favourite toothpaste. Yet they don’t even think twice about paying the full retail price for their taxes 😐 They can try to outperform the stock markets. They can cut coupons everyday. They can even work extra long hours for overtime pay. But they could probably save more money than all those strategies combined by simply lowering their total tax rate by ten percentage points or so.

This is why I operate my rental farm as a business instead of a personal property, invest inside tax sheltered accounts, and have debts with deductible interest so the more taxes I pay, the more I get back. It’s all for the purpose of saving taxes. Each year I calculate how much tax I pay as a percentage of my total income. I track this ratio and try to reduce it every year 🙂 Like any other personal finance metric, once we start to track something regularly it will start to become something real to us that we can monitor, so that we can then set appropriate goals for it. But if we don’t track it, then we won’t know where to start or how low we should aim for. Last year my total taxes (income tax, sales tax, payroll tax, property tax, etc) represented about 30% of my total income. So I’m fourteen percentage points lower than average, but I think I can do better 😀 Who says doing taxes can’t be fun? 😉

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Random Useless Fact: 

14-05-interracial-photo-couple

 

Feb 222014
 

Last year I spoke with representatives from the insurance industry to learn about how life insurance works from a client’s point of view. There seems to be 2 difference kinds of insurance plans: term, and permanent.

Term life insurance will insure someone for a specified length of time like 5, 10, or 20 years. A premium is paid every year and if the person dies within the time period then the policy pays out the death benefit to the beneficiary. This is the most straightforward life insurance plan and works very much like auto insurance. A fee (premium) is paid to insure something for a limited period of time.

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Permanent life insurance is a little more complicated because it branches out into sub-categories like participating, non-participating, universal, etc. But all of them are basically policies that insure you for as long as you live 🙂 For example, when I had a quote done for myself I could pay $3000 a year in premiums for the next 20 years, and then stop paying forever. My hypothetical death benefit is $250,000, but everyone’s insurance amount will likely be different.

Fellow blogger Brian wrote a comprehensive article about term/permanent life insurance comparison, and which type individual should choose. He works in the industry. 🙂

The cost of the premium will depend on age and if you are a smoker or non-smoker. $2000 a year is pretty cheap for $250,000 coverage. But if I was 50 years old today and began smoking tobacco, then my premium would be many times higher. The cost of life insurance may also differ from country to country. I’ve heard some insurance costs are cheaper in Australia.

The most prominent reason to have life insurance is to financially protect one’s dependents. But another reason may be for one’s own retirement savings. With a participating life insurance for example, policy holders will share in the profits if the insurance company makes money. With universal life insurance a part of the premium will go into an investment fund that can grow over time. In either case it’s a bit like forcing oneself to save, similar to paying a mortgage. When a person retires one day he or she could cash out the investment part of the insurance policy 🙂 People should consider getting life insurance if they have children, or plan to have dependents in the future, or if they want another way to save for their future outside of an RRSP.

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Random Useless Fact: It’s called “slang” because it’s short for shortened language.

Jan 092013
 

Whenever someone is to receive a large sum of money they can sometimes choose to either take the entire amount right away, or have it pay out slowly over a long period of time. If someone is injured in a vehicle accident or if they’re injured at work and they are entitled to a $50,000 settlement from their insurance company, then they can choose to receive either the entire amount or spread out the payment during a longer period of time called a structured settlement. Payments for structured settlements can range from years to an entire lifetime, kind of like an annuity.

The nature of structured settlements requires people to wait to slowly obtain the full amount of funding. However, there are options to cash out on one’s structured settlement. Various legal financing companies can offer to buy part or all of one’s structured settlement  in return for a lump sum cash upfront. This allows people to switch from their structured settlement plans to one large payment now. Such financing can be used for many things such as pay for medical bills, debt, or it can be used to invest. In some jurisdictions a court hearing is required before they can buy a structure. Whether people should go with the lump sum cash or the spread out payments the decision should be discussed with a financial advisor. In most cases I would probably take the lump sum and invest it in the stock market to make some juicy dividends with. Any amount of money would help with my 2013 goals.

$1,000 Giveaway

Today I am happy to part of a $1,000 cash giveaway with some other blogger friends. This giveaway is brought to you by StructuredSettlement-Quotes.com, America’s #1 structured settlement and annuity marketplace.  Please use the Rafflecopter widget below to enter. Good luck.

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Oct 252012
 

Read in the local news today that police in metro Vancouver pulled over a car for not having a front license plate. The vehicle turned out to be a 2012 Lamborghini Aventador, which starts at $430,000 Canadian dollars, before taxes. The police soon found out that the 22 year old driver did not have insurance on the car. He was handed a $568 ticket and the Aventador was towed away. (In BC it’s illegal to drive without auto insurance.)

The young driver said he didn’t have enough money to pay for insurance, and complained that the fine was too expensive. I guess the moral of this story is don’t drive without insuring your vehicle. It’s a very irresponsible thing to do and there shouldn’t be any excuse for it. Furthermore, I think driving without a front license place is just asking for attention, I mean cheese and rice, what was he thinking?

 

But his biggest mistake was not planning ahead financially. He failed to budget by purchasing too much car and not having any money left over to insure it. What he should have done is buy a vehicle under $400,000, and used the extra savings to buy his insurance. Or just forgo luxury cars altogether and buy something more practical. Vancouver is the second most traffic congested city in all of North America. The Aventador’s ability to go from 0 to 60 mph in under 3 seconds might not be very useful around here.

Something tells me that he didn’t earn that car through hard work and sticktoitiveness because if he was bright enough to make that kind of money at his young age then he probably wouldn’t have made those mistakes and gotten his car taken away. Learning about how to legitimately earn, spend, and save money is the only way to properly appreciate the value of it, and respect what you have worked so hard to gain.

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Random Useless Fact:  Carolyn Davidson, the creator of the Nike swoosh symbol was initially paid only $35 for her design.