QUOTE (DaveL @ Sep 26 2010, 09:22 PM) Michael he is referring to the guaranteed option for renewal in case a life event happened to you where the insurance company would not want to renew your policy going forward. Yes term insurance is a lump sum payout at death. The older you get the less insurance you should need as hopefully you are making wise investment choices. I do thinki it is important though to buy some term insurance to cover any capital gains (if any).
Universal insurance in theory has two components. True life insurance, i.e. when you and/or your spouse (depending on the insurance) croak there will be a payment similar to term insurance. The second component is a tax protected investment plan where you can build up an investment that upon your passing (to another dimension) will be paid out to your survivor or your company to offset a hefty tax bill associated with your estate where everything will be deemed sold (inheritance taxes, etc.).
The theory is great but... in practice the commissions are so high that one`s investments have to outperform the markets significantly. Mine I had for over ten years and... I lost 30% of my investment instead of having tripled my money by the time I would be 65 (still 7 years to go). I sold everything off and just transferred the remainder to my discount brokerage (that was 6 mos ago). Guess what, finally I am making money. Problem is that I cannot deduct my earlier losses from my taxes (it sat in a tax free account). So now even if I recover to the level I originally invested, I will still have to pay additional taxes on the recover `profits`.
My advice: Buy term insurance and invest tax free in your TFSA ($5000 per year max contribution) the rest put in your RRSP. Check with your accountant and if you have one with your financial planner.
A lot of people don`t understand the difference between a stock broker and a financial planner. So here a quick note: A stock broker sells you stocks, bonds and mutual funds. A financial planner advises you on how to set up your finances, including your your roadmap to Belize. But... how do they get paid? By selling you things such as universal insurance and mutual funds and whatever else they can sell you, e.g. off-the-shelf holding companies, even MICS and real estate.
Always look behind the curtain. Sometimes it is better to have a fee-based planner. But even with those it is sometimes rough sailing. Good financial planners just like good realtors and good brokers are hard to find. So, give them a little bit at a time so they can prove their worth. Overtime you will figure out who belongs on your team and who doesn`t. Any of these paid team members will have to prove how good they are and that they act first in your interest. If you do well, they will get more of your business and they will do well too.
