Are you tired of market ups and downs and unpredictable returns?

Did you know you can invest your cash, RRSP, RRIF, or LIRA securely and safely with top profitable real estate developers, including Lamb Development Corp?

I invite you to contact me right away to obtain more information or to attend one of our upcoming seminars.

This is truly an exciting and incredible opportunity. Yet, it is not new.  Banks make billions of dollars in profit every year investing this way.

What’s their secret?  They invest in high quality, secured mortgages.  Mortgages are one of the most secure investments because:

1. Only those who qualify can obtain a mortgage
2. The property is registered as collateral, or security, to the bank
3. They receive steady cash flow from the interest payments
4. If the payer defaults, the bank simply takes back and sells the property.

Now RRSP and cash investors can pool their money together to do the exact same thing.   How would you like to give a mortgage to top condo developers in Toronto?

So why give a mortgage to Lamb Development Corp? It is headed by Brad J. Lamb, star of HGTV’s “Big City Broker” and regarded as “the condo King”.  His company has a stellar track record.  Consider this:

• Brad’s office has sold over 16,000 condos in the past 20 years for over $4.1 billion
• His recent Toronto project sold out in only 6 days!
• His recent Ottawa project sold out 45% in only 2 hours!

 Can your RRSP, mutual funds or segregated funds offer this?:

• Receive 8% interest per year, paid quarterly
• 3-year term
• Receive 12% profit sharing, paid tax-efficiently
• Total potential return over 3 years is 36%
• Your principal is 100% secured against the property
• The interest is guaranteed, as it is also secured and held in trust

Would you like to learn more?  Please call me at: 416-855-0245. 

We hold regular seminars to discuss various projects available for investments.  Please follow this link to register for an upcoming event.

There is a permanent insurance plan that allows you to pay the premiums over the course of a defined period of time (called “quick pay insurance”).  That is, once the premiums are paid for 10, 15 or 20 years, the policy becomes “paid up”.  There are no further premiums due and the coverage remains in place for life.

This can be a great plan if you need permanent coverage. It is perhaps the most cost effective way of purchasing permanent life insurance.

In a quick pay policy, cash values are accrued over time. This cash value is essential to keep the policy funded for life when you stop paying premiums.

I discovered that an inexperienced agent was telling a client that they could withdraw the cash values from a “10 year quick-pay” policy after 10 years, and that this would not have an impact on the policy.

The client was confused, as he believed this was both “too good to be true” and illogical.  He was right.

You can borrow from the cash values, but taking the money out would surrender the policy. In other words, the policy would terminate (or lapse).

I am glad the client called me, because not only did I clarify the “misunderstanding”, but I found the client a better plan at a reduced rate.  I suggested putting the money saved in a TFSA, which will further increase savings.

If something sounds too good to be true, or just plain unrealistic, it’s time to ask questions and perhaps get a second opinion.

Call or email me, and I’ll shop the market to help you save money and get the right plan.  

Call: 905-235-3931 or 416-855-0245

We established that the Infinite Banking Concept (IBC) or system is not a scam. However, it is definitely not for everyone.  If you have decided to proceed with this strategy you must ensure it is carefully planned and implemented using the right type of product.

Choosing the right product could be a daunting task, as there are many types of universal life and whole life policies in the Canadian market.  Perhaps a good approach would be to enumerate the ideal features we seek and go from there. 

The idea policy should contain:

• Funds with low volatility
• Funds with stable long-term performance
• Flexibility in overfunding policy
• Immediate vesting
• Low interest rate on loans
• Low or no fees on loans
• Preferred underwriting
• Low cost of insurance

Low volatility and stable long-term performance

The participating whole life (WL) investment funds (par account) have long stable historical performances, even as long as 130+ years.  They invest primarily in bonds and short-term securities, real estate and mortgages. A small percentage is allocated to equities.  Accounting practices also allow each company to use a “smoothing approach” which further ensures stability in returns over time.

With a universal life (UL) plan, you are behind the wheel when it comes to making investment choices (I have seen policies with over 300 funds to choose from!).  That defies the purpose of the IBC, unless you are willing to take on extra risk.  Also, to my knowledge, there are no funds for UL that have over 100 years of historical performance data.

Flexibility in overfunding

Most UL policies are flexible in this regard.  WL policies tend to be less flexible, so you need to shop around to find one that will allow you increase and decrease premiums with relative flexibility.

However, one thing is for certain.  You must overfund your policy to the max during the first 5-10 years!  This is because both UL and WL are governed by strict tax-status rules (also known as “walking the MTAR line”).  Upon the 10^th and subsequent years, the maximum contribution allowable will be 250% of the cash value of the 3^rd preceding anniversary.  So if you haven’t been maxing out your contributions, you will be severely crippling the IBC in future years.

Immediate vesting

This, in my mind, is very important.  When dividends are paid out in a WL policy, they are immediately vested, meaning it cannot be taken away or reduced due to adverse market conditions.  This is why insurance companies will allow you to borrow 90-100% of the cash value.

UL fund returns are not vested.  The entire cash value is subject to market volatility.  For this reason most insurance companies may lend up to 50% of the cash value. This is counterproductive for an IBC.

Low interest rate and fees on loans

As mentioned in my previous blog entry, yes, there is interest to be paid on all policy loans to the insurance company.  Is an interest free loan ever possible from a financial company? I’m afraid not.  Hence, look for a policy that has low rates and, if possible, no admin fees.

Preferred underwriting and low cost of insurance

This is very important.  After all, you don’t want your cash value growth to be stunted by high premiums.  Ideally you should obtain the least amount of insurance that will provide you the maximum overfunding limit you can afford.

That being said, if you can pay less because you are healthy, then why not?  There are only a small handful of policies that offer preferred underwriting.  Less money for premiums, more money in your pocket.

Summary

Participating whole life insurance is the right choice for clients who are looking for guarantees, low volatility, stable growth, and hands-off management.

Is the Infinite Banking Concept right for you?  Would you like a more detailed analysis using real product examples?  Contact me for a no-nonsense, straight to the point discussion.

And as usual, I have encountered many individuals who have obtained a mortgage and accepted the mortgage insurance that was offered at their bank.  Many don’t know that you are not obligated to purchase coverage at the bank. In fact, you can save a lot of money if you simply shop around.

For example, a husband (age 37) and wife (age 36), both in excellent health and non-smokers, were offered mortgage life and critical illness insurance coverage at their bank.  Based on their $288,000 mortgage amortized over 20 years, the premiums were to be $226, including applicable taxes.

Instead, I was able to search the market and find a better solution.

For a joint-life insurance of $288,000 with $100,000 critical illness insurance each, the premium was $122 a month. This was provided through BMO financial.

That’s a savings of $104 a month, or $1,248 a year, or $24,960 over 20 years!

Now that’s something worthwhile to consider. Not only are they saving money, but they are receiving superior coverage.  The death benefit never decreases (like the bank’s), and they are covered for 25 illnesses (in contrast to the 3 illnesses covered at the bank) plus a 10% early detection benefit.

TIP:  Don’t be fooled!  Sometimes banks charge for their insurance on a “bi-weekly” basis to give a false sense of a lower price.  Multiply your bi-weekly amount by 2.17 to get the real monthly total!

It pays to shop around.

Call or email me, and I’ll shop the market for you to help you save money. If you already have insurance with the bank, I encourage you to make a comparison today!

Residents in Newmarket can call me locally at: 905-235-3931.

To learn more about the pitfalls of bank’s mortgage life insurance, click here.

This also means that relatively large mortgages are being taken to finance these homes.

Many people also sign up for mortgage life insurance with their banks in order to protect their family in the event of death or a critical illness.  But what most people don’t realise is that substantial savings can be obtained if they shop around for coverage.

For example, a husband (age 45) and wife (age 41) in Aurora, Ontario, took out a mortgage for $375,000 at a major bank, amortized over 20 years.  Their total cost for mortgage insurance, plus applicable taxes, was $208 a month.

Both individuals enjoy excellent health and are non-smokers.  I was able to provide them with a 20-year term each with $375,000 coverage for only $77.99 at RBC insurance. 

That’s a savings of $130 a month, or $1,560 a year, or $31,200 for the full 20 years!

The money they save can be used to accelerate their payments and pay off their house much faster, saving them thousands of dollars.

In addition, their coverage stays level at $375,000 for the full 20 years, in comparison to the bank’s insurance, which decreases over time.

Without a doubt, it pays to shop around.

Call or email me to find ways to save you money on mortgage insurance. There is no risk, and you can cancel your bank’s insurance without penalty once you are approved and 100% satisfied.

Call 416-855-0245 or 905-235-3931

Learn more about the pitfalls of bank’s mortgage life insurance here.

Basically, the idea is that you can become your own banker.  Over time, you create a “bank account” by building cash reserves within a participating whole life insurance policy (i.e. one that pays dividends).  You can then borrow funds from this account and pay yourself the interest, rather than paying another lending institution.  By doing this, you not only save on interest, but your account continues to grow exponentially.

At least that is the theory.

First of all, let me point out that the concept is not a scam. It is based on the growth potential, built-in features, and operation of a participating whole life policy structure which has been around for more than a hundred years!

That being said, I must also point out that the concept is not for everyone. I will take it a step further and say that it is better suited to individuals that:

• Are high-income earners
• Have stable employment and cash flow
• Have no debt
• Are also contributing to other tax-saving vehicles (RRSP, TFSA, Leveraging)
• Who have some need for life insurance

I have heard and read many arguments to the contrary.  Ultimately, however, ambiguity can be removed through mathematical analysis. Let’s quickly (you can definitely write a book on it!) examine a few claims one by one. This is by no means an exhaustive list:

“This is not an investment.”

Of course it is! Only that you are not in control. You cannot chose funds or how monies are being invested.  A participating whole life policy contains a ‘par-fund’, which comprises of bonds, mortgages, interest on policy loans (more on that later), equities, etc.  Dividends declared are based on the performance of this fund and are never guaranteed.

“The more you borrow from your policy, the faster it grows.”

I’ve heard this from almost every broker I have spoken to regarding this system (also referred to as interest volume).

To understand this, it must be known that participating whole life insurance or universal life policies can be overfunded (pay more than the prescribed premium). This is where the “interest” is being “paid”.  So, obviously, the more “interest” or overfunding you pay, the faster the policy will grow.

However, you can grow your policy without ever borrowing. In fact, your policy will continue to grow completely independent of any borrowing taking place.

“Pay yourself the interest, not the bank”

This grabs a lot of attention. Who wouldn’t want to pay themselves the interest?

This isn’t entirely true.  When you borrow funds from your own policy, you must also pay interest to the insurance institution.  This is why the IBC tells you to pay yourself higher interest than what you would pay a bank.

To my knowledge, every participating policy charges interest (as of today, the lowest I’ve seen is 4.25%). In fact, this interest becomes an income component of the par-fund (the fund that drives the growth within a participating policy)!

“The tax-sheltered benefits accelerate cash value growth.”

For a policy to grow at maximum efficiency, the policy must be overfunded for several years by the maximum prescribed amount (called the MTAR line).  If you are arbitrarily funding your policy through “loan interests”, you are paying more for the insurance policy than you have to.

It is also not entirely possible to ‘arbitrarily’ overfund a whole life policy. There are restrictions based on underwriting which renders the method inflexible.  If you need the flexibility, then a universal life policy is required (but that’s an entirely different discussion).

“Better than a chequing account or mutual fund policy.”

This is an easy one.

Assume Jane, age 36, has $400 after-tax to contribute to any plan.  Her marginal tax rate is 32% (she earns $40,000 annually). Note that I said “after-tax”.   She must earn $588 before taxes to afford a $400 after tax purchase.  For example, Jane must earn $588 to afford a $400 LCD TV, after taxes.

I ran an illustration to show how an optimally configured participating whole life policy would work for her over the course of 15 years.  By optimally, I mean the death benefit is automatically reduced over time as the cash values increase and the policy is overfunded to the max.

After 15 years, the cash value of this policy is about $88,000. Technically, she can borrow up to 90% of this amount.

Could she have done better?

1. Non-registered “mutual fund” or “segregated fund” solution:
   After 15 years, and at an average growth rate of 6%, her net after-tax growth is about $110,000 (remember she must pay taxes along the way). 
2. TFSA solution:
   After 15 years, the TFSA grows to $117,000, tax-free.
3. RRSP solution:
   We can contribute the entire $588 into the RRSP because of the tax deduction.  After 15 years it has grown to $171,000.
4. Non-registered Leveraging solution:
   This entails borrowing money to invest and paying only the interest on the loan.  Since the interest is immediately tax-deductible, the full $588 contribution is allowed.  At 6% loan interest, the leveraged amount is $118,000 (this is readily available through insurance leveraging programs to those with good credit). After 15 years, the net asset value is $134,000.

The cash value is inherently lower for the whole life IBC due to internal costs (cost of insurance, provincial tax on overfunding).

In each of the above instances (except the RRSP solution), the accrued amounts can be pledged as collateral for loans. Essentially, you are creating the IBC using other more efficient solutions. You are not bound to using a whole life policy. You can even combine solutions, such depositing RRSP refunds to a TFSA, further accelerating growth (and outperforming a whole life IBC).

In addition, although an RRSP policy cannot be pledged for collateral, it will have accrued substantial growth for retirement. She can use the tax deductions to pay down her debt.  She can even give herself loans, such as a self-directed mortgage!

I only summarized the results from each concept. If you wish to have a detailed analysis or inquire about more advanced strategies, please feel free to contact me.

It’s not over yet! We’ve only scratched the surface. In my next blog entry I will discuss specific pros and cons for using the IBC with whole life or universal life insurance.

In the meantime, I welcome comments and questions.

The home page quotation interface is quite simple.  Simply select your date of birth, gender, smoking status, the amount of insurance (from $10,000 to $10,000,000), and the length of term (10, 20, or 30 years). Click the “Show quotes” button and you will instantly be directed to another page listing the top 15 premiums from various life insurance companies.

Take note that these are all “best preferred” or “super preferred” ratings. You must submit to a medical for underwriting to ultimately determine the rate you will receive.  Hence, I stress that these quotes are only guidelines.

The more detailed quotation system provides several additional options.

One option is the “Payment”, which shows the premium based on monthly to annual payments. Generally speaking, you can save up to 10% by paying annually versus paying monthly.

Several additional types of insurance plans have been added under “Product Type”.  You can survey the market for whole life products, including plans with accelerated payment plans. An accelerated payment plan allows you to “pay off” the insurance in 10 or 20 years. After this time, you don’t owe another penny. It’s a great way to buy permanent coverage and save substantial money.

Finally, you may select your “Health Risk” category.  Options range from “super preferred” to “regular” (also known as “standard”).  As mentioned above, only underwriting can determine this status once all the medicals have been completed.  Take note that few people actually qualify for the best preferred rating.  It would be wise to run 2 quotes, a super preferred and a regular quote, to get an idea of the range of premiums available to you.

If you have a spouse, or are planning to have multiple lives insured, I highly recommend you call me directly. I can provide multi-coverage discounts in these cases, and they are not available online.

Call me directly to obtain a detailed quote or to obtain specific details on available policies.

They promise “guaranteed acceptance”, “no questions asked”, or “affordable premiums as low as $20 a month.”

While this all sounds good, there may be far better alternatives for most people who deem themselves uninsurable, hard to insure, or who simply don’t want a medical exam.

The general rule is that the fewer the questions asked, the higher the premiums.  The less an insurance company knows about your health, the higher the risk they are assuming.

If you can answer just a few questions in order to save money, then why not try?

There are several non-medical plans that ask a few questions, and therefore offers much lower premiums.

Do the premiums really make that much of a difference?

Let make a comparison using a non-smoker male who can only pay $75 a month.

At age 65, the “guaranteed acceptance” insurance offers him a $7,600 death benefit.

• Instead, he could answer just a few medical questions and be approved for the same amount at only $44.46 a month.
• That’s a savings of 40%!
• Or, for $75 a month he could qualify for a $13,500 death benefit.
• That’s an increase in coverage by 78%!

But didn’t they say he could get coverage for only $20 a month?  Yes, but the total coverage would be a mere $1,950; hardly enough to cover final expenses and ensure the family is not burdened financially.

Unfortunately, not everyone will qualify.  But most people who are looking to get a guaranteed issue plan will qualify without a medical.  For the rest, the “guaranteed acceptance” plan is a final resort.

Call me direct to see if you qualify. You can obtain up to $75,000 life-time coverage without a medical, and your premiums will never go up.

You can also visit the non-medical life insurance quote page to get an instant online quote.

I’ve been asked many times if the ROP option is worth the extra money. I always say: “it depends on your particular circumstances and needs.”

Before we get into that, let’s examine the premise behind obtaining this feature.

Let’s say Mary, age 45, wishes to buy $100,000 of critical illness coverage. Ideally she would like to have coverage until she retires at age 65. Her premium is $100 per month. If she wishes to have the ROP option her premiums would be $160 per month.

Assuming her cash flow allows for $160 per month, she has 2 options:

1. Instead of paying for the ROP option, invest the extra $60 per month. However, all the premiums paid are gone forever.
2. Add the ROP option for $60 per month and get all her money back at age 65.

 If Mary chooses option #1:

We assume she will be investing in a non-registered balanced portfolio. We also assume she is paying tax at a rate of 30%.

In order for her to experience the same effect as option #2, her investments need to yield 12% compounded annually.

In other words, if she invests $60 per month in a balanced portfolio earning 12% per annum, at age 65 she would recover both her principal invested ($60 per month for 20 years) and interest equivalent to the total premium paid for the critical illness plan without the ROP option.

Although this is not entirely impossible, it is quite a stretch, especially for a balanced portfolio. She is also taking on unnecessary investment risks to achieve this high rate of return. The advantage, however, is that she does not have to wait for a prescribed period to end and is free to take her invested money out at any time.

(Incidentally, if you are interested in how this rate – known as the Internal Rate of Return – is calculated, contact me directly and I’ll be happy to go over the details.)

If Mary chooses option #2:

She needs not worry about market conditions, as the return of all premiums are guaranteed if she stays healthy.  And if she does not, she gets paid $100,000 in a cash lump sum.

Compared with option #1, the internal rate of return for this plan with the ROP option is 12%. It is as if she earned 12% compounded annually on the extra $60 per month invested personally, just to get all her money back.

This is the stress-free solution for all those needing critical illness coverage and can afford the ROP option.

What about using a Tax-Free Savings Account (TFSA)?

Starting in January, 2009, the government of Canada introduced a new personal savings vehicle, the Tax Free Savings Account (TFSA), to help Canadians save money tax-free.

If Mary uses this vehicle to invest the $60 monthly difference, the internal rate of return is reduced to approximately 8.6%.  This rate is certainly more plausible than 12%, and the market risks are indeed lower. This is a solution which should be considered.

What if your RRSP and TFSA are maxed out?

If you are already contributing to an RRSP and/or TFSA, and can afford the extra premium for the ROP option, then it would make absolute sense to add the ROP option.

What if you can’t afford the ROP option?

As a rule of thumb, I always recommend determining the amount of coverage needed before considering the ROP option.

In the case of Mary, she got the coverage she needed ($100,000) and could comfortably afford the ROP option. It was within her budget.

If she could only afford $100 a month, it would not make sense to reduce her coverage to $50,000, just so she could have the ROP option. After all, isn’t having the necessary money to recover from a critical illness more important than getting your money back?

If $100 is all she could afford, she should get the needed $100,000 coverage and consider at a later date setting money aside by either contributing into an RRSP or TFSA.

Final thoughts:

Consider the ROP option as a desired “beneficial luxury”, and not a “must have” feature.

Contact me to examine your options and determine if this feature is right for you.

Click here to learn more about critical illness insurance.