25 factors that impact Life Insurance premiums

By Chantal Marr, LSM Insurance

Special to the Financial Independence Hub

Life insurance protects your family financially, but it can also be huge strain on your budget. Over the years, even a small savings in your premium can really add up. The following factors are used to determine the rate you will pay. Not all of these factors are controllable; however, there are some lifestyle changes you can make to lower your premium.

1. Age at Time of Purchase

The younger you are at the time of purchase, the lower your rate will be. Insurance experts say the sooner you buy a policy, the better. Chris Huntley, life insurance agent at Huntley Wealth and Insurance explains, “Age is the most important contributor to both term and whole life insurance rates. If the insured outlives the initial term, the insurance carrier must adjust the premium to reflect their new age.”

2. Your Health History

Insurance providers need to know of any health problems you may have had in the past to determine your risk factor. Chronic illnesses could result in higher premiums. According to Canada Protection Plan, “Generally, insurance underwriters review an applicant’s medical history, and assign a rating based on the presence (or lack there of) of common medical conditions.”

3. Current Health

Most insurance providers require a medical exam to determine how healthy you are. The doctor will look for signs of high blood pressure and other conditions that may lead to future problems. If you are in good health, you will typically qualify for lower rates. “Your health is a key indicator of the risk you pose to an insurer and will directly impact not only your ability to get a policy but how much you’ll pay for the policy.” Richard Laycock, senior insurance writer.

4. Your Weight

Obesity can lead to all types of health problems. Being overweight or obese can put you in a higher risk category for insurance purposes. “Life insurance premiums are also based on your weight, or at least the proportion of your weight to your height. There are ranges and a theoretical norm at the center, that indicate a “normal” proportion. To the degree your own height-to-weight ratio varies from the ideal range, you will pay more in premiums,” says Neal Frankle, CFP.

5. Hazardous Occupations

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Large RRSPs nice problem to have, tax on them not so much

My latest Financial Post column can be found in Friday’s paper or online by clicking on this headline: Confronting the ‘wonderful’ problem of the too-large RRSP.

It describes what one source describes as a “nice problem to have.” That’s having accumulated so much money in a Registered Retirement Savings Plan (RRSP) that it presents a lucrative source of tax revenue for the federal Government once you reach age 71 and have to start making forced annual — and taxable — withdrawals from a Registered Retirement Income Fund or RRIF.

Doug Dahmer

This is a huge tipping point: moving from Wealth Accumulation to De-Accumulation, or what this site calls Decumulation.  Suddenly, you’re confronted with the flipside of what CIBC Wealth’s Jamie Golombek has famously dubbed “being blinded by the refund,” a reference to the juicy tax deductions we enjoy by making regular RRSP contributions during our high-earning high-taxed working years.

The article quotes regular Hub contributor Doug Dahmer – president of Burlington, Ont.-based Emeritus Retirement Income Specialists, and pictured here – who says baby boomers have a huge looming tax problem ahead with their 6-figure RRSPs once it comes time to start withdrawing money or securities from them. The FP piece references Dahmer’s Hub blog earlier this year: Better Retirement Choices: An elegantly simple solution.

The case for early RRSP withdrawals and delaying Government benefits

As Dahmer has related here and elsewhere, he does believe RRSPs can get too large (at least if you’re averse to generating large amounts of taxable income down the road), so he is an advocate of drawing down RRSPs during the low-taxed years that many semi-retirees may experience somewhere between corporate life (typically early 60s) until it’s RRIF time in your early 70s. Continue Reading…

Odds of outperformance in emerging markets stacked in favor of active managers

By Caroline Grimont

(Sponsored Content)

When investing in emerging markets, the odds of outperformance are stacked in favor of active managers. That’s because, unlike developed markets, emerging markets are a heterogeneous and inefficient asset class.  Each individual market and region possesses unique characteristics, risks and opportunities, which can be best leveraged through active, on-the-ground management.

The underlying truth is that indices such as the MSCI Emerging Markets Index that are used by passive managers to invest in emerging markets are a poor representation of opportunities in these markets. Indices typically include only the largest stocks by market capitalization and exclude potentially faster growing small and medium cap stocks which can be accessed by active managers.

And the fact that roughly two thirds of emerging market stocks are excluded from the respective indices means that investors in passive index-based investments lose the opportunity to participate in the growth of the majority of emerging market equities.

On the other hand, active on-the-ground managers have the advantage of being “free to roam” in making their investment decisions, compared to passive managers who are restricted to investing in stocks in an index over which they have no control.

As well, “in certain niche markets, like emerging market and small company stocks … it is possible for an active manager to spot diamonds in the rough,” states a Wharton, University of Pennsylvania article.[i] Conversely, the performance of passive managers is dictated by the index.

To put this reality in perspective, one of the world’s largest index providers, S&P Dow Jones Indices, highlights the shortcomings of using a broad-based passive strategy to invest in emerging markets in its research paper, Emerging Markets: What’s in your Benchmark?  It surmises: “Numerous factors, including country and regional combinations, can create vast differences in performance and return patterns. If you’re looking to boost returns through exposure to international markets, you may want to dig deeper and consider looking beyond traditional broad-based benchmarks to truly assess the value of an allocation to any of the world’s emerging economies.”[ii]

Unconstrained by sector bias

Another benefit of using active managers in emerging markets results from the fact that they are not constrained by the dominant sector bias in EM indices.

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How to find the best high-dividend-yield ETFs

High-dividend-yield ETFs can be great additions to a portfolio: here are tips that will help you find the best ones

Here’s a look at high dividend yield ETFs and our advice on finding the best ones for your diversified portfolio.

4 ways to invest in profitable high-dividend-yield ETFs

  • Look for ETFs that hold companies with long-term success and a long history of paying dividends. These companies are the most likely to keep paying and increasing their dividends.
  • The current financial health of each company in the ETF. If a company is doing well, has done so consistently, and shows signs of growth, these factors are indicative of stocks that will keep paying a dividend.
  • How does the company manage its relationships with investors? If there is a favourable relationship, and the company fits the other qualifications listed above, it may be a good dividend-paying stock to invest in.
  • Note the competition. Look for ETFs with companies with a strong hold on a growing market and a unique product or service that cuts its competition.

High-dividend-yield stocks are a key part of a successful portfolio but at the same time they can give investors a false sense of security. That’s because some investors tend to think that all high-dividend-yield stocks are safe.

When a high dividend yield means danger

A high dividend yield may be a danger sign. It may mean investors are selling and pushing the price down. A falling share price makes a stock’s yield goes up (because you still use the latest dividend payment as the numerator to calculate yield — but the denominator, the price, has dropped). But when a stock does cut or halt its dividend, its yield collapses.

The best ETF investments practice “passive” fund management

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Looking under the hood of a Guaranteed Universal Life Policy

By Jessica Walter

Special to the Financial Independence Hub

Though it can be morbid and upsetting to think about, it’s important that seniors have life insurance in place so that their families don’t have to worry.

Despite this, 54% of Americans say they are unlikely to purchase life insurance. As well as this, according to research organization LIMRA, 51% of all households say they would rely on life insurance payouts to pay bills and maintain their lifestyle, in the event of the main breadwinner passing away. That’s why it’s so important to choose a life insurance policy that works for you, and brings you the best benefits and flexibility.

Understanding the different types of available insurance policies is vital, as it could make a big difference to the amount you pay in premiums, as well as how much the family will receive in the event of a death.

What Is a Guaranteed Universal Life Policy?

A guaranteed universal life policy is one of the best ways for seniors to get coverage for life, for the lowest possible cost. Whether you qualify will depend on your health, and your age. The main positive of a GUL plan is its ability to meet a wide range of budgets.

This type of plan is similar to a whole life insurance policy, but is made more affordable by gaining cash value in the initial years. This value is then used to offset an increase in premiums in the future. This is in contrast to a whole life insurance policy, which would continue to gain cash value, but requires higher premiums to be paid. A guaranteed life insurance policy is one of the most popular around, and will meet the needs of the majority of healthy people, but it isn’t the only insurance policy available.

The Benefits of a Guaranteed Universal Life Insurance Policy

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