Hub Blogs

Hub Blogs contains fresh contributions written by Financial Independence Hub staff or contributors that have not appeared elsewhere first, or have been modified or customized for the Hub by the original blogger. In contrast, Top Blogs shows links to the best external financial blogs around the world.

Why choose Joint Life Insurance?

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Dundas Life

By Greg Rozdeba

Special to the Financial Independence Hub

When considering life insurance, the first thing that comes to mind is coverage for a single person. While that is the most commonly used option, there are many variants of the policy that you can use.

One of these variants is the joint life insurance policy. It is an option that covers two people instead of the one offered by a standard policy. These policies are usually targeted towards couples.

While having two separate policies is better overall, joint life insurance can come in handy in certain circumstances.

There are some important reasons for choosing joint life insurance. One of these is if your spouse does not qualify for an individual policy. It can also come in handy if you have people who depend on you or if you want to leave an inheritance for your heirs.

Most joint insurance policies are permanent and last your entire life. They contain an investment component that earns interest.

There are also a few joint policies that can be set up to last a certain amount of time but are rare.

Differences between Single and Joint Insurance policies

A single-life insurance policy provides coverage for a single soul, which is usually you or your significant other. The policy pays out if that soul passes away.

Conversely, a joint insurance policy provides coverage for 2 souls. It pays out if one of the policyholders passes away.

Joint insurance policies pay out only once when one of the covered individuals passes. This leaves the other person without coverage. Joint insurance policies cost more but provide more protection.

How do Joint Life Insurance policies work?

Joint life Insurance policies provide coverage for 2 people within the same policy. This is a cheaper alternative to buying two different policies. It also has its own unique set of bonuses.

Since it is cheaper, a joint policy will pay out only once, usually when the first person dies. In some cases, the policy can also pay out if one person is diagnosed with a terminal illness. The doctor must specify that person has less than a year to live.

The policy ends instantly when it pays out once. This leaves the other partner uncovered. This can be a problem if the surviving person is old and cannot afford a new policy.

Both the partners in a joint insurance policy are usually insured for the same amount. This ensures the payout is also similar when either person passes. Continue Reading…

Fixed Income: Down but not Out

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Franklin Templeton Investments: Licensed from GettyImages

(Sponsor Content)

While many equity markets have performed well year to date, the last few months have not been as kind to fixed income investors. Last quarter, fixed income markets recorded some of the worst returns in 40 years as central banks and governments worldwide continued to rack up a mountain of debt in ongoing support of the global economy and consumers during the COVID-19 pandemic. But don’t despair; as Franklin Bissett fixed income portfolio manager Darcy Briggs points out in this Q&A, the market still offers value — if you know where to look.

 

Q: How would you describe the current environment for Canadian fixed income?

After seeing significant returns in Canadian fixed income last year, we expect more subdued performance in 2021. Given the year’s starting point of very low interest rates and tight credit spreads, we see corporate credit as offering the best risk-adjusted return opportunities in the current environment. As active, total return managers focused on generating income and capital gains, we know bond selection will remain important this year. Small interest rate moves can lead to significantly different outcomes for different fixed income sectors. Uncertainties remain high, and we are seeing a wide range of forecasts on how the balance of 2021 will unfold. Although interest rates have been up as much as 100 basis points so far this year, we think they may have overshot, as happens from time to time. We would not be surprised if they drifted lower later in the year. Realistically, we expect the path ahead to be a little messy.

Source: FactSet, Franklin Templeton

How so?

This recession/quasi-depression was prompted by a dramatic health crisis and the resulting government-mandated shutdown; it was not caused by normal business cycle dynamics. While fiscal and monetary policy have prevented a full-blown financial crisis, those tools have limited ability to solve the current recession. We believe it will end once the pandemic subsides and the economy fully opens, functioning in a more familiar pre-pandemic way. Vaccines are key to the pace of progress. Continue Reading…

Retired Money: How Bond ETF investors can minimize risk of rising rates

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My latest MoneySense Retired Money column has just been published: click on the highlighted text to retrieve the full column: Should investors even bother with Bonds any more?

In a nutshell, once again pundits are fretting that interest rates have been so low for so long, that they inevitably must soon begin to rise. And if and when they do, because of the inverse relationship between bond prices and interest rates, any rise in rates may result in  capital losses in the value of the underlying bonds.

In practice, this means choosing (or switching) to bond ETFs with shorter maturities: the risk rises with funds with a lot of bonds maturing five years or more into the future, although of course as long as rates stay as they are or fall, that can be a good thing.

As the column shows, typical aggregate bond ETFs (like ETF All-Star VAB) and equivalents from iShares have suffered losses in the first quarter of 2021. Shorter-term bond ETFs that hold mostly bonds maturing in under five years have been hit less hard. This is one reason why in the US Vanguard Group just unveiled a new Ultra Short Bond ETF that focuses on bonds maturing mostly in two years or less.

The short-term actively managed bond ETF is called the Vanguard Ultra Short Bond ETF. It sports the ticker symbol VUSB, and invests primarily in bonds maturing in zero to two years. It’s considered low-risk, with an MER of 0.10%.

Of course, if you do that (and bear the currency risk involved, at least until Vanguard Canada unveils a C$ version), you may find it less stressful to keep your short-term cash reserves in actual cash, or daily interest savings account, or 1-year or 2-year GICs. None of these pay much but at least they don’t generate red ink, at least in nominal terms. Continue Reading…

Book Review of Beyond Brochures: an insider’s guide to the Travel Business

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By Ruth Snowden

Special to the Financial Independence Hub

Hopefully by summer’s end, travel will start to return.

In this little gem of a Traveller’s guide readers will find dozens of precious nuggets, gleaned from the experience of a ‘well-seasoned’ Traveller, written with a light touch, a definite opinion and a good sprinkling of humour.

A bit skeptical at first, I wasn’t sure how anyone could write a book targeted to two different readers, the Traveller and the Travel Advisor, as announced in the introduction.  Within a few pages, though, it was evident that Picken honestly believes that although Travellers and Travel Advisors are on different sides of the same transaction, mutual understanding is a good thing and ‘the more people travel intelligently the better the world should be.’

He then proceeds to draw his readers into the joy of travelling, in 98 chapters: each a succinct one or two pages, divided into three distinct parts: Travellers, Travel Advisors, Travelling.  In every section are valuable hints and suggestions to help Travel Advisors make their customers’ experiences favourable and unforgettable, in a good way.

Building trust is not easy, especially in this world of virtual engagement and digital communication. In Beyond Brochures Picken provides readers with such solid insights that the Traveller reader naturally trusts him and Travel Advisors who follow his advice will be better able to create trust with their customers.

I am another seasoned traveller, having logged thousands of miles on business and leisure travel over many decades, much of which I’ve booked myself and some for which we needed a Travel Advisor.  For both the neophyte Traveller and for someone who has been there and done that, Section A is chock-a-block with important information: government websites; the regulatory environment and jurisdictions governing air travel; demystifying how airlines price seats; and agreeing that in many cases it is easy to book your own hotel room, without the assistance of a Travel Advisor.

Even when booking your own hotel rooms, the author shares great tips on how to use the ubiquitous on-line booking engines and suggests additional actions you can take to save money. Beyond Brochures will make me a better customer of a Travel Advisor and will make my self-directed and self-booked travel more enjoyable.

The philosophy behind why we travel

Early in this section he looks at what we look for in travel that is interesting and enjoyable to us: the philosophy behind why we travel. Continue Reading…

Setting them up for success: Financial Advice for new parents

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By Veronica Baxter

Special to the Financial Independence Hub

Are there some things that you wish you knew before you became a parent? Parenting comes with lots of financial responsibilities, and it’s a life-changing experience for many. Suddenly, life is about taking care of yourself, but another person solely depends on you for everything.

Preparation is critical to get ready for this exciting and, perhaps, scary new adventure. It is more helpful to be prepared for the many financial alterations to come. It is estimated that a middle-income American parent spends at least $284,570 (US$)  till the child turns 18 years old.

Most people tend to focus more on their finances after a significant life event. Making the necessary financial plans will save you the stress as you embark on this journey.

Here are vital planners to get you started:

1. )  Make a Household Budget

Having a baby can be expensive. A household budget prevents you from being a spendthrift and also saving for the future. Please write down your steady monthly sources of income and compare them to your monthly expenses.

Adjust your expenses to cover the baby’s needs like diapers, furniture, formula, and other unexpected costs that come up. Also, set some spending limits and do your best to stick to them.

2.)   Get a Life and Disability Insurance Policy

Many new parents question the worthiness of buying life insurance. After all, most don’t think of death. Life insurance comes in handy during such situations to protect you during such worst-case scenarios financially. Life insurance has three different choices:

1.   Whole Life Insurance

This one is lifetime guaranteed. It offers a specified benefit given to your spouse or other beneficiaries upon your death. It accumulates cash value over time and provides the opportunity to earn dividends.

2.   Term Life Insurance

This policy provides coverage for a certain number of years, mostly 15, 20, or 30. If you live longer than the plan, no benefits are paid out since the coverage automatically expires. However, most term policies allow for a continuation after the initial term though at higher charges.

3.   Universal Life Insurance

This policy is a hybrid of the two. It also allows you to set your premiums and death benefits.

Disability insurance becomes a significant refuge when one or both parents cannot work during a disabling injury or illness. No specified amount can never be enough for anyone. That’s why it’s essential to consult a financial expert to help you explore the best option that will fit your financial capability and excellent financial standing.

3.) Write A Will

Thinking about writing a will can be pretty uncomfortable. In a case of untimely death, the state decides how and with whom your assets are shared. The state’s decisions may probably go against your preferences. This is why a will comes in handy to name the guardian to your kids and who will manage your asset distribution when they become adults.

Have the hard conversations of when they are allowed to chip in, to make healthcare and financial decisions. An attorney will give a good outlook that will help you set up a financial trust that aligns with your situation and goals.

4.) Adjust your Emergency Fund

An emergency fund is essential to ensure your household runs smoothly in the event of unforeseen financial circumstances. The amount set aside varies from family to family but should start with three to six months of living expenses. Your emergency fund should now reflect the cost of having a child versus what you initially saved for.

5.)   Include your child in your Medical Insurance Cover

Having a baby is a qualifying life event that allows you to adjust your health plan to enroll your child.  Most of these plans require you to add your child within 30-60 days post-delivery. Try and add up your child as fast as possible to prevent those recurring cash expenses during pediatrician visits.

6.)   Don’t rush to make a Home Upgrade

Some couples equate good parenting to owning a home. However, financial planners advise couples to wait until 3-4 years to make a move. It would be best to have a better outlook of what you want the future to be like within that time.

7.)   Tax Breaks

Childcare can be expensive for many parents. The [US] government offers tax breaks to reduce the tax burden on individuals, allowing them to keep more of the money that they have worked for. Tax breaks are awarded either from claiming deductions or excluding income from your tax returns. Continue Reading…