Risk and Insurance

· Types of credit insurance

-life , critical, disability, involuntary loss of employment

Deductibles

Aggregate deductible - firm pays all the losses for the year until the deductible limit is reached Straight deductible or per occurrence deductible - firm pays the deductible for each separate loss Franchise deductible- is found only in ocean marine insurance Either a dollar or percentage amount of loss, and the entire loss is paid once a loss is greater than the deductible - a disappearing deductible Considerations High deductible Stop loss provision - caps the amount the insured pays in total throughout the policy period Self insuring, firm retains apart of the risk exposure

Determining risk exposures

Determining the objectives Identifying the risks Evaluating the potential losses Risk avoidance: avoid the risk Loss control: reduce the severity or frequency of a loss Retaining the risk: risk management that large corporations use to limit their expenditures Sharing the risk: hedging through futures contracts, or including hold harmless clauses in contracts Insuring the risk: use insurance for large exposures Considering the alternatives Implementing the risk management techniques Performing ongoing evaluation and review

Professional liability

Errors and omissions: covers professional activities whose primary risk exposure is property damage, not bodily injury Directors and officers (D&O) insurance Errors and omissions policy for management

Direct Loss

Losses due to perils Extended coverage Insurance against perils not covered by basic policy such as riots and civil commotion Specific perils Covers the lift of perils names Open peril Coverage for all except those included in the list of exclusions Marine insurance Ocean marine Covers goods being transported over water and can include legal liability Inland marine Covers goods that are movable or moving as well as bridges and tunnels Types of marine insurance Cargo - covers goods being shipped if they are damaged or lost Hull - covers the ship, collision liability, does not include injury to people Protection and indemnity - damage to piers, docks, ships cargo, illness or injury to passengers and crew, fines and penalties Freight - insurance covers loss of earnings to the ships owners if goods are lost and are not delivered Three implied warranties Vessel is seaworthy Vessel will not deviate from its course Voyage is for legal purposes aka not smuggling Losses due to dishonesty Theft by non-employees covered by crime insurance Theft, act of stealing Burglary, thest by using force to gain entry Robbery, threats and bodily harm , violence done to steal property from person Only direct losses are covered, not indirect losses Discovery period- has a certain time period to discover losses usually about 60 days after it occurs Theft by employees covered by fidelity bonds Can become bonded Two types of coverage Blanket coverage covers all employees Scheduled coverage covers named individuals or positions

Other general liability and policies and endorsements Cyber liability insurance

Political motivations Influencing others online Economic motivations Theft of intellectual property and other economically valuable assets Socio cultural motivations Attacks on philosophical , political humanitarian goals Environmental liability Becoming increasingly important Covers pollution and chemical waste etc

Types of commercial insurance

Property insurance Used by organizations to protect property such as buildings, equipment and machinery form loss or damage A direct loss resulting from a hazard or peril and An indirect loss, which is contingent on an event or a repeated occurrence and is usually the result of a direct loss Liability Insurance Protection against legal liability risks that might require them to financially compensate a third party as a result General liability Liabilities faced during day to day operations Professional liability Arises from negligent acts, errors, omissions and poor performance by employees when performing their professional duties Employer liability Covers various risk exposures that an organization faces when it employs people to complete various tasks

Commercial general liability (CGL)

Used to be called comprehensive general liability insurance Loss exposures covered Premises and operations Ownership and maintenance of the premises Wet floor, ice outside Conduct of business operations Liability due to business operations, women spilled hot coffee on herself from mcdonalds Product liability Negligence or breach of warrant Strict liability - injury or damage from manufacturing defect

Commercial liability insurance

Vicarious liability Is the obligation of principal to pay for losses of a third party caused by the acts of an agent Strict liability Those engaging in certain undertakings, such as hazardous practices are held responsible for injury without inquiry into fault

· Before purchasing life insurance

do you need it? how much coverage? what kind of insurance?

· What is a beneficiary?

o A beneficiary § Receives the proceeds of a life insurance contract (death benefit). § Named beneficiary · Person, corporation, trust, or charity or a religious organization o Beneficiary Designation § Designated in the insurance contract. § If this does not exist, proceeds are paid to the insured's estate. o Primary beneficiary § Entitled to receive proceeds first. o Contingent beneficiary § Receives the proceeds if the primary beneficiary dies.

· End of creditor insurance coverage

o All 4 types of Creditor Insurance will end due to the following: § Expiry of the term of insurance § When you reach age 72 for Life Insurance and Critical Illness § When you reach age 68 for disability and loss of employment § Date receive your cancellation request form § Date repay or discharge insured loan § Date your loan ends § The date you transfer your insured loan to a creditor § The date you missed more than 6 months of payments § Date of your death § If disability reaches max benefit payable of $100 000

· Health insurance

o Basic health insurance is provided to all Canadian residents and citizens. o Extra health Insurance covers partial or entire medical expenses that an individual incurs. o Coverage can include: § Medical § Surgical § Prescription drugs § Dental o Extra health insurance is sometimes provided by employers, or can be purchased for an additional monthly charge. o Health insurance companies can directly reimburse consumers or pay the health provider. o Major health insurance companies include: § Manulife § Ontario Blue Cross § SunLife Financial o Extended health insurance can vary in price depending on coverage. o Average Canadian pays approximately $5,000 yearly for extended health insurance.

· Benefits and Limitations

o Benefits § Helps protect your ability to repay debt § Improved customer relationships § Provides protection and security · Helps ensure lifestyles are protected to help saving § Cost effective · Only pay for coverage they use, only purchasing to cover their needs § Convenient and easy · Available at time and place of loan · Simple to do § Gives you peace of mind o Exclusions and limitations § General Exclusions · Do not provide notice and proof of claim within time limits · Use or ingest any drug that has not be prescribed · Commit a criminal offense · You mistake your age on your agreement · You withhold important information including health · Commit suicide within 2 years of obtaining insurance · You operate any vehicle on land, water or vessel while under influence § General limitations · Make claim for insurance benefits within first 2 years of coverage · If misstate age but still are eligible for the coverage based on correct age o May be able to obtain insurance if still eligible after one of these two limitations

· Business life insurance

o Business may acquire life insurance for the following reasons: § Loss of skill, which is the result of death upon a key employee § To meet creditor demands § To deal with the family of the deceased owner, where there are multiple owners of the business § To pay the tax on capital gains

· Key person insurance

o Businesses may insure the life of a person who plays a big role in the success of the organization § For example, assume a sales rep who produces 45% of a company's annual revenue o The tax-free benefit for the death upon a key person can be used for the following § Finding and training a replacement § Making up for the revenue lost § Covering overhead costs

· Buy sell agreements

o Buy-Sell Agreements are essential for businesses in which there is more than one owner o Buy-Sell Agreements state the outcome for when one of the business owners dies § Who may or must buy the deceased owner's shares § The price that will be paid for those shares § How the purchase will be funded

· Who offers mortgage default insurance?

o Canada Mortgage and Housing Corporation (CMHC) o Genworth Financial Mortgage Insurance Company Canada o Canada Guaranty Mortgage Insurance Company

· EI - caregiver benefits & compassionate care

o Caregiver Benefits and leave is for an individual who is providing care or support to a critically ill or injured person, or someone needing end-of-life care. § Family Caregiver benefit for children allows up to 35 weeks of of benefits. § Family Caregiver benefit for adults allows up to 15 weeks of benefits. o Compassionate care benefits, which is available to those who are taking care of a person of any age who requires end of life care. § Compassionate care benefits allows up to a maximum of 26 weeks of benefits.

· Payment Options for Participating Policies

o Cash o Premium reduction o Paid-up additions (PUAs) o Term Insurance § To buy this within the base policy o Impact on death benefits and cash values

· Cash value and cash surrender value

o Cash value: § two parts: the guaranteed cash value and the dividend cash value § can be taken out as a policy surrender or as a policy loan § The dividend value can be taken out as a withdrawal policy surrender or policy loan § make sure you understand your policy o Cash surrender value: § "Surrender": terminate or return § an amount that an insurance company pays when you decide to "surrender" your insurance policy back to the insurance company § Buyer beware - certain policies have policy fees and surrender charges o All policies are usually cash value, for surrender they need to be processed

· Social insurance: characteristics

o Compulsory Program - everybody in the organization participate o Floor of Income - providing income for basic needs o Benefits loosely related to earning - Depending on the workers earning, determines the benefits the program will provide o Benefits prescribed by law - all benefits are prescribed by law and is managed by the government o No mean test - a formal mean test is not required; people will receive the benefits as long as they qualify for it Financially self-supporting - contribution are made by both employees and employers

· Segregated funds

o Contract: § Individual variable annuity insurance contract. o Structure: § Pool of money held in a trust by an insurance company. § Maturity date · A predetermined number of years o Guarantee of a certain value of the fund (ex. 75%). o Payable: § Only after the death of a policyholder or the maturity of the segregated fund policy. o Used to offer clients capital appreciation and death benefits

· Dangers of creditor insurance

o Cost o Beneficiary o Changing Lenders o Service and Support § Premiums will reduce if your benefits reduce § Creditors only pay lenders; traditional insurance can have a beneficiary that's a family member

· Cost of credit insurance

o Cost of insurance depends on coverage you choose o In most cases you automatically qualify for coverage o People can cancel anytime - free of charge o Can be very expensive o Can arrange same time when you sign loan paper or sign your mortgage o Premiums then added to loan or mortgage payments o Cost of credit or loan insurance o When you get credit or loan insurance, you either pay a recurring premium when your loan payment is due, or a one-time premium. If you're charged a single premium, you will usually be charged at the time your loan is approved. o Recurring premiums are usually calculated based on: o the initial amount of your loan o the amount of time you will take to pay off your loan o average daily balance of the previous month, if you have credit card balance insurance o your age, your sex, and your health o Credit and loan insurance can be expensive. It may not offer you the insurance coverage that best meets your needs. These products are not sold by a licensed insurance representative. This means that you won't receive a full review of your insurance needs and financial circumstances when you sign up for credit or loan insurance. o Credit insurance can be expensive upon cancelation you may not receive back all premiums

· Legal Aspects: who provides coverage

o Creditor insurance can be sold through banks, finance companies, credit unions, large retailers or even auto dealerships o Policies offered for following products: § Mortgages § Lines of credit § Credit cards issued by financial institutions or credit cards issued by large retailers § Personal loans § Vehicle loans § Financing and loans

· What is creditor insurance?

o Creditor insurance is a group insurance that protects the creditor (lender) should the debtor (beneficiary) be unable to pay the required payments on the debt on credit products. o Creditor insurance is also referred to as credit protection. This type of insurance is an optional coverage you can buy to help cover your debt balances in case of death, disability, critical illness or job loss. o Protects creditor against defaults against loan o Usually offered at time of credit card or loan being approved o Known as balance insurance, creditor insurance, debt insurance o Not all products offered same coverage

· What does it cover?

o Death o Critical illness o Involuntary jobless o Disability o Creditors insurance may address individual or a range of 'risks" offering a variable assortment of coverages which may include hospitalization, loss of life, critical illness, terminal illness, disability, dismemberment, accidental death, loss of employment or strike insurance. The coverage particularly for critical and terminal illness is basic, especially when compared to what's available through an individual policy.

· The amount of coverage provided by group insurance

o Different group plans base the benefit amount in different ways § Earnings multiple - based on the members salary § Flat rate - every member is covered for the same amount regardless of fany factor § Length of service - based on the members length of service § Combination - based on a combination of factors such as the member's salary and position

· Ei - benefits for self employed

o EI Benefits for the self-employed allows you access to benefits 12 months after your confirmed registration date to the program. o In order to be eligible for self-employed benefits, you need to pay a premium after you register for the program. Premiums are based on total self-employed income for the entire calendar year, starting the year you register. § Estimating Premiums: · For 2021, you will pay $1.58 in EI premiums for every $100 you earn, with a maximum premium of $889.54 per year. This premium rate changes annually.

· EI Regular Benefits

o EI Regular benefits are for individuals who have lost their job through no fault of their own. o Examples of no fault: § Shortage of work § Seasonal or mass layoffs § Available for work, but cannot find a job o However, there are many reasons why you may not qualify for Regular EI Benefits: § Voluntarily left your job without cause § Dismissed for conduct § Unemployed due to participating in a labour dispute (ex. Strike, lockout etc)

· EI - Sickness, maternity & parental benefit

o EI Sickness benefits are there for those who are unable to work due to illness, injury, or as of 2020, due to quarantining for COVID-19. o Sickness benefits provides up to 15 weeks of financial assistance. You are required to get a medical certificate to prove you are unable to work due to medical reasons. o EI Maternity & Parental Benefit is provided if you are pregnant, have recently given birth, or are adopting a child or caring for a new born. o Maternity Benefits provides up to 15 weeks of income, and standard parental benefits allows up to 40 weeks, with one parent receiving no more than 35 of those weeks.

· Determining the premiums

o Either can pay: § recurring premium · initial amount of loan + time of loan + average daily balance of previous month + age/gender/health § one-time premium · usually charged when loan approved · o Recurring premiums calculated based on: § Initial amount of your loan § Amount of time you will take to pay off loan § Average daily balance of previous month § Your age, gender and health o Single Premium: § Charged when loan is approved § Questioned as many unaware if eligible to receive refund when coverage no longer needed

· Employment insurance

o Employment Insurance (EI) is a Federal program in Canada that provides temporary income support to unemployed workers while they look for employment or upgrade their skills. The purpose of EI is to help those who are without work, by supplying income to them. o There are various types of Employment Insurance, in addition to Regular benefits there is six types of special benefits such as: § Sickness § Maternity § Parental § Family Caregiver Benefit for Children § Family Caregiver Benefit for Adults § Compassionate Care o How Are EI Benefits Taxed? § All Employment Income Benefits you receive are considered taxable income. Federal and Provincial territorial taxes, where applicable, will be deducted from the payment. o Mandatory Reports § While receiving EI benefits, you are required to complete bi-weekly reports to prove that you are still eligible for the benefit. There are two ways to file a report, either through the internet reporting service, or by telephone.

· EI - fishing benefits

o Fishing benefits is provided to those who are qualifying, self-employed fishers that are actively seeking work. o Unlike regular EI benefits, the eligibility for fishing benefits is dictated by your earnings, not insurable hours of employment. o Fishers can qualify to receive fishing benefits, in addition to sickness, maternity, parental, compassionate and/ or family caregiver benefits.

· What is government insurance?

o Government insurance is various programs put in place by the government to help assist those in need at different points in time. § Examples of Government Insurance: · Social Insurance · Workers Compensation · Health Insurance · Employment Insurance

· OHS programs

o Hazard Identification & Risk Assessment - Every workplace has hazardous environment and may have hazardous materials. All hazards must be identified to know what actions may need to be taken o Accident Investigation - When investigating an incident the focus should be looking for the root causes of the incident to make sure it does not occur again o Emergency Response - These are plans for handling sudden events, (example: fire) o Ergonomics - This program is systematic approach to manage and reduce risk from ergonomic hazards in the workplace o Health & Safety Committees - Each organization is required to have this committee. This committee must have representatives from the labour and management. There primary goal maintain a safe workplace. o Health & Wellness - maintaining a healthy workplace environment. A healthy environment is people being respected, valued, satisfied at work. o Lockout/Tagout - it consists of comprehensive step-by-step processes that involve communication, coordination, and training. o Violence Prevention - is a program to take action against to prevent and eliminate potential violence o Workplace Inspections - help prevent incidents, injuries and illnesses. Through a critical examination of the workplace, inspections help to identify and record hazards for corrective action.

· Taxation of disability income

o If your employer pays your disability premiums, your income will be taxed o Disability income usually does not exceed 85% of normal pay. o For taxable benefits: You can insure a maximum of 66% of your income before taxes o For non-taxable benefits: You can insure a maximum of 85% of your income before taxes

· Requirements for mortgage default insurance

o It's only available for residential homes priced under $1,000,000 o Properties with a price tag between $500,000 and $1,000,000, borrowers must provide a down payment of 5% on the first $500,000 and 10% on the remainder o For properties under $500,000, you must provide at least a 5% down payment. o Mortgage amortization period must also not exceed 25 years

· What is life insurance

o Life Insurance is a financial contract that pays out a sum of money either on the untimely death of the insured person or after a set period, depending on the life insurance policy purchased o Its fundamental objective is to provide enough funds to the beneficiary to help with expenses and children's education costs o Life insurance is not to a handout for the beneficiaries § Finance the risk of financial loss § Financial contract that pays out a sum of money at the time of death or after a set period § Fundamental objective is to provide enough funds to afford expenses

· Group life insurance

o Life insurance offered to a group through what is called a "plan sponsor" § Plan sponsor is usually employer, while members are employees o The insureds have a common association with that sponsor o For example, all the employees of an organization can be insured through the employer, assuming the employer has a policy in force o For an even better understanding of the idea, consider the insurance provided to Guelph-Humber students by Ignite and their contract with Claim Secure

Beneficiary Designations and Terms

o Life insurance policies can either have two types of beneficiary designations: § Revocable · Policyholder can change the beneficiary without the consent of the beneficiary. § Irrevocable · Policyholder cannot change the named beneficiary, except with their permission. o Terms § Specific Beneficiary · They are named (for example: Beneficiary - My son Agam Sharma) § Class of beneficiaries · They are not named (for example: Beneficiary - my son)

· Beneficiary - settlement options

o Lump-sum Payment § The entire death benefit is received · One-time payment is not taxable. · Income/interest generated on lump sum is taxable. o Interest only § Leaves the capital with the insurance company to manage. o Annuity § Registered accounts · RRSP, RRIF, LIRA § Prescribed annuity · Tax is the same every year, taxes are evenly taxed over the years § There are many variations of annuities.

· Converting group insurance to individual insurance

o Members can convert their group coverage to individual coverage under the following circumstances § The member leaves the plan because he/she retires or changes employers § He/she is no longer a member of the organization § The insurance plan is terminated o Note there is no need to provide proof of insurability § This benefits members who pose high risks for insurance companies § Members who pose low risks should first compare the premiums of a brand new individual policy

· How premiums are set for whole life policies

o Mortality costs o Expenses o Investment returns o Excess amount of premiums paid called policy reserve

· How premiums are set for term insurance

o Mortality costs § Policy's face amount x insured's probability of death during that year § Probability is based on factors such as age, gender, and health status o Expenses incurred by providing insurance § Selling expenses, underwriting expenses, administrative expenses

· How does it work?

o Mortgage default insurance is to protect lenders in case the borrower defaults on their mortgage. o Mortgage default happens when the borrower is unable to make payments. o Borrower has no protection when they default on a mortgage. o Required for high risk borrowers. o Mortgage default insurance can speed up how fast a borrower gets a house o A premium is to be paid that can be added to your mortgage. o If needed lenders will make an arrangement for the mortgage default insurance. o Costs of premium vary depending on size of down payment

· OAS old age security

o OAS is a universal pension plan targeted towards seniors whose income is insufficient. o Requirements: § 65 years and older § Canadian Citizen o You can receive OAS as an added monthly payment if you are still working or if you are not working. Canadians working out of the country (for Canadian employers) are also eligible for OAS. o You can receive a maximum of $615.37 a month. (2021)

· Private disability insurance plans

o Offer more coverage in the case of a mental or physical disability which keeps you from working as usual. o CPP disability plans provide less coverage and have stricter requirements. o DI Plans are more lenient and pricier, but provide better coverage for clients.

· Group disability insurance plans

o One contract, several beneficiaries. o A group of employees can purchase disability insurance which means the rate is divided amongst everyone, and all policyholders can benefit. This is only available through your workplace and cannot be moved or switched if occupation changes. o In order to be eligible, all members must : § Be Full-time § Wait until prohibition period is over § Sign up within 31 days after prohibition period (afterwards medical proof required) § Be actively involved at work after plan is functional § Actively participate o General Requirements: § Plan is subsidiary - was not planned § Risk is same for all ages § Automatic coverage § Specific percentage of members must participate § Costs are shared with insuring company § Premiums paid through payroll o Noncancellable = Policy cannot be terminated. During the period of time listed in the contract, the pricing cannot be raised either. o Guaranteed Renewable = The insurance company is responsible to renew the policy. They also have the authority to increase pricing for those who fall under certain groups or policies. However, they do not have the right to change individual consumers premiums. o Commercial = On the renewal of the policy, insuring companies have the right to refuse refusal, reduce coverage and/or increase premiums. o Conditionally Renewable = Refers to which policies will be renewed if/when the customer follows the conditions stated in the contract o Elimination Period = The amount of time a customer must wait before their benefit commences o Waiting Period = Can either mean the same as elimination period or it could also mean the time in which a new worker must wait in order to be a part of a group plan o Benefit Period = Maximum amount of time that the benefit will be paid for o Qualification Period = Amount of time the consumer must have been on total disability benefits before they even qualify for any other benefits

· What is mortgage default insurance?

o Only allowed to provide financing to home owners who provide 20% down payment unless insured against default o Legally, Canadian banks can only provide mortgage financing to homeowners with a 20% down payment o ....Unless the mortgage can be insured against default o Mortgage default insurance helps buyers who cannot afford a 20% down payment o Default insurance can also provide protection for properties which are in remote locations or if the buyer is high risk o This type of insurance is meant to protect the lender o It does not protect the borrower or guarantor o In the case of a default, the insurer may oversee payment enforcement o This can come in the form of a power of sale § Occurs on defaults of payments and lender decides you won't be able to pay and will sell your home to pay off your debts to them o The insurer must also compensate the lender for any shortfall after the sale of the property o It is the borrower's responsibility to pay off any shortfall on the mortgage after the sale

· Joint First-To-Die Life Insurance

o Pays out on the first death between 2 people o Most practical use § Debt repayment: pay off the mortgage in the event of either of their deaths. § Income replacement: When both spouses have similar income levels, the survivor can use the insurance payout to replace the lost income § Business partners: If either of them should pass away, the business will be in rough shape financially, can inject emergency capital into the business, can fund a buy/sell agreement, o Pays out on the first debt between to people

· Joint last to die life insurance

o Pays out on the last death of 2 or more people. § Pay final tax: pay out a tax-free death benefit upon the death of the surviving spouse § Property tax deferral: your estate can use the insurance proceeds to pay off the tax § Taking care of a permanently disabled sibling § Charitable donation § Insured annuity o Capital sold for fair market value § Capital gains get triggered for investments that gained o Have to include RRSP and RRIF

· Pros and cons of default insurance

o Pros § Mortgage Default Insurance has a higher acceptance rate. § Can be far more helpful to family members upon your death, where life insurance may be harder to obtain. § Provides peace of mind. § Will allow many financial benefits in regards to purchasing a first home. - Smaller down payment. 4.99% - 19.99% vs. 20%. o Cons § Max payment limits. · If you lose your job your policy does not pay out an equal sum of money, it pays out a pre-calculated amount. § If your mortgage payment is low, there is little need for insurance, as the risk you fail to pay premiums in the future is low. § As your mortgage amount falls with your monthly payments, the amount of coverage you receive declines as well. However, your premium will remain the same. § If you chose to switch insurance providers, you have to take out a whole new policy.

· Works compensation program has several objectives:

o Provide broad coverage to employees for occupational injuries, accidents and diseases o Provide substantial protection for loss of income due to injury at the workplace, this benefit would restore a portion of injured worker's income o Provide sufficient medical care and rehabilitation services for workers injured at workplaces, employers must pay for any medical cost that occur o Work compensation objective is to encourage firms to increase safety guidelines to reduce accidents, this would encourage companies to create and develop effective safety guidelines o Reduce litigation, the objective of worker's compensation is to reduce payment and legal fees that may occur during a settlement

· The importance of buy sell agreements

o Provides a guaranteed buyer § Peace of mind for the deceased's family o Provides a guaranteed value § Provides a fair buying and selling price o Provides a mandatory sale § Peace of mind for the other business owners

· Individual disability insurance plans

o Provides protection for you and your income when on leave for disability. o There is a higher premium because the coverage is more and you are the only one insured. Due to the risk being higher, much underwriting is required to ensure correct qualifications. o Insuring Company will inspect a clients: Income, age, health history, assets, employment, lifestyle, etc. o Individual Disability insurance plans can be switched and moved if occupation changes. o Individual Disability Insurance Policies can be: § Noncancellable § Guaranteed Renewable § Commercial § Conditionally Renewable o All Policies include different periods such as: § Elimination Period § Waiting Period § Benefit Period § Qualification Period

· Types of term insurance

o Renewable or Nonrenewable § Under a renewable term policy, the policyholder can renew the policy without providing proof of insurability; however premiums may be readjusted · Can expect a difference in premium o Convertible or Nonconvertible § A convertible term insurance policy allows the policyholder to convert to a form of permanent insurance at a future date without proof insurability nor a reset on the incontestability and suicide period § Premiums may be adjusted § Attained-age conversion or original-age conversion

· Selecting a policy, company, and agent

o Review the type of creditor insurance you are purchasing o It can be expensive § Understand terms and conditions of contract o Get to know your agent § Want to make sure the company covers the four areas that creditors insurance covers · Critical illness, · Involuntary job loss · Disability · Death

· Riders

o Riders are "extras" or "add ons" attached to the policy to create a greater death benefit o Riders are optional and of course add to the cost of premiums o Riders that provide additional benefits at death include § Paid-up additions (PUAs) rider · Allows the policyholder to purchase additional amounts of coverage during the lifetime of the base policy · The policyholder acquires these amounts of additional coverage by paying additional premiums · Similar to dividend option with participating policies, the PUA's add to the death benefit and cash surrender value · It is important to note that insurance companies usually put a limit on this rider § Term insurance riders · Provides additional coverage for death o The amount of the benefit can in fact be greater than that of the base policy · Helps satisfying short-term and long-term needs · The term rider can be used to provide additional coverage to life insured or can be used to provide coverage for another life o Family coverage rider o Child coverage rider · Someone with a whole life policy acquires this to cover a term insurance § Accidental death rider · Provides an extra death benefit if the life insured dies due to the result of an accident · Death is considered accidental if it was the result of an unexpected violent or traumatic event o However, death must occur within a limited time after the event § Guaranteed insurability rider · This rider allows the policyholder to purchase additional coverage in the future without having to provide insurability · The premiums for the additional insurance will be based solely on the attained age o The health of the life insured will be assumed the same as it was when the original policy was put into place · Rider is valuable for those who don't need or can't afford much insurance now, but may need it in the future o Purchased with the base policy as a add on

Types of government insurance

o Social Insurance § Program created to help people with benefits, during certain events and situations o Workers Compensation § Is a program that provides benefits for workers have been injured at workplace o Occupational Health & Safety § is a government operated program that maintains the safety guidelines in the workplace o Employment Insurance § is a Federal program that provides temporary income support to worker that lost their job o Canada Pension Plan § is a government run this program which provide retired workers with pension o Disability Insurance Plans § provides coverage in the case of a mental or physical disability which keeps you from working o Critical Illness Insurance § is an insurance policy that protect the policy holder from payment, if they have a critical illness o Creditor Insurance § covers the insurance company if the customer is unable to pay

· Social Insurance

o Social Insurance Programs were created to solve complex social problem. This program is controlled by some form of government. o This program was created because private insurance companies are not able to take on certain risks or the risk are too difficult to insure o Social Insurance provides protection for the following: § Illness § Injury § Unemployment § Premature death § Old age § Occupational & Non occupational disability o Social insurance helps to solve problems that may result from economic changes beyond the control of all parties, such as the government, employers and employees. o An example of this type of event would be the Great Depression, many people had lost their jobs during this time period and nothing could have been in that time period o Another event could even be the COVID-19 pandemic, as many people had lost their jobs due to the lockdown. The social Insurance program would provide financial aid for people affected by this issue. o The main goal for social insurance is to provide economic security for citizens

· Non participating and participating whole life policies

o Sometimes insurance companies produce an unexpected surplus of profit o May be due to the following reasons § Fewer people died than expected § Returns on investments were higher than expected § Expenses for administration were lower than expected o Non-participating policies will keep that surplus as profit while participating policies will pay out that surplus in the form of dividends to their policyholders o Causes of surplus profit § Returns on investments were higher than expected, admin expenses were lower, less people passed away

· Temporary Term

o Term-10 could be right for you if: § You have a student or car loan. § Your mortgage is in its final 10 years. § Your kids are moving out soon. § Retirement is on the horizon. o Term-20 could be right for you if: § You just got married and are planning your future. § Buying a new house in the next couple years is a definite possibility. § You recently bought a house. § You have younger children or you're growing your family.

Life insurance policies

o The Application of the Life Insurance Contract § Life insurance begins with an application § Will include the policy you choose § Life insurance contract cannot be made without the insurable interest · Must apply and fill information with accuracy · Insurable interest must be present (person must be there) · Life insurance for others allowed for spouses and children o Age of the Insured § Based on the nearest or last birthday o Dependant of the Principal Life Insured § Child or spouse of insured o Joint Life Insurance Policy § Pays out on the death of the first person to die then the policy is ended o Last-To-Die Policy § Covers 2 or more lives but pays out when last person passes away § Can have more than 2 people o Second-To-Die Policy § Covers the lives of two people but pays out on the death of the second person o Life insurance policies are creditor approved § Creditors do not have access to anything when person passes away

· Occupational health & safety

o The CCOHS (Canadian Centre for Occupational Health & Safety) manage this program in Canada. o There main purpose is to make the workplace safer to reduce any injuries and illnesses o Under the Canadian law every company has to follow this program and has to make a health and safety program o This program helps prepare plans of actions to prevents accidents and illness. o They must also conduct investigations of event to stay compliant to the program

· CPP

o The Canada Pension Plan (CPP) is a contributory, earnings-related social insurance program put in place by the Government of Canada. o The CPP is a monthly, taxable benefit that provides part of your income for you when you retire. If you qualify for the CPP, you will receive the retirement pension until death. o To qualify you must: § Be at least 60 years old. § Have made at least one valid contribution to the CPP.

· EI - How benefits are calculated

o The basic rate for determining the EI benefits you could receive is 55% of an individual's average insurable weekly earnings up to a maximum amount. o As of January 1, 2021, the maximum weekly benefit you can receive is $595 a week. o EI benefits are available from 14 weeks up to a maximum of 45 weeks, depending on how many insurable hours you may qualify for based on the last 52 weeks of work prior to filing your claim and the type of EI you are applying for. o Steps in calculating potential weekly benefits: § Calculate your total insurable earnings for the required number of best weeks. § Determine the divisor (number of best weeks) that corresponds to your regional rate of unemployment. § Divide total insurable earnings in your best weeks by number of best weeks, multiply result by 55%

· Beneficiaries

o The beneficiary is the creditor and the borrower pays the premiums. There are various types of policies and each pays out if the borrower experiences one of the following circumstances. § Loss of Life § Critical Illness § Disability § Unemployment o Creditor insurance protects your lender not your family

· Purpose of creditor insurance

o The essence of creditor insurance are for individuals who believe they need it for a short period of time or cannot get a regular policy due to unemployment or would not pass medical. § Who need it for a short period of time, or cannot get regular policy due to unemployment it o Credit card creditors insurance is frequently sold after the sale of the credit to which it applies and sometimes at the end of application but primarily through telemarketing. § Generally offered at time of application, or granted through credits o Creditors insurance appears to appeal to young and financially challenged individuals. § Most likely to purchase ^

· CPP disability benefit

o The government provides a monthly income to those who are unable to work due to a severe mental or physical illness. o Requirements: § Under 65 years old § Have a long term illness that prevents you from working § Have a serious illness/condition § Must have paid enough into their CPP o This benefit can be applied to both the ill contributor & their dependent children. It can also be applied to spouse and children if the main contributor passes away.

· Term life insurance

o The insurer only pays a claim on the death of the life insured if the insured dies within the agreed time period; hence "term" life insurance o It's temporary coverage that lasts for a set period and, in most cases, automatically renews. o Canada Life offers a choice of 10-, 20-, 30-year terms or age to 65 term products. o With term life insurance, the payments you make, called premiums, are set at an initial low cost that won't change during the length of your initial period. § You pay premium yearly or monthly, protects your family for the period § Insurance cost will remain the same for the specific period of time § tax free payment will go to beneficiaries

· Premiums for group insurance

o The premiums for group insurance are based on the entire group as a whole § Regardless of the different risk each member poses, the premium is the same for everyone insured o The insurance company will usually adjust the premiums over time due to changes in a groups demographics § Average age changes § Gender ratio § etc

value of coverage

o The value of your insurance coverage is relative to the amount remaining on the loan or mortgage. As you pay down your debt, the amount of your coverage reduces with it. o The value of your life insurance remains the same throughout the term of your policy. o Creditor insurance is inflexible. Benefits from the claim are used to pay off your debt with the bank. o With life insurance, your beneficiaries decide how to use the pay-out. For example, if your loans are significantly reduced over the years, perhaps the benefits are used to pay for an education or other high-interest loans. o If you change lenders your policy is terminated, cannot be transferred o Life insurance is attached to you not your debt so it stays with you

· Workers compensation benefits

o There are four principle benefits: o Unlimited Medical Care o Disability Income o Death Benefits o Rehabilitation Services

· Ei - exclusions

o There are various reasons why an individual may not qualify for a full benefit or a benefit payout at all. Such exclusions are: § You do not have enough EI insurable hours to qualify. § You were fired for just cause. § You quit without just cause. § You are not available for work. (if you are not actively searching or able to work) § You made false statements to EI.

· Critical illness insurance

o This insurance will pay you an upfront payment if you are pronounced with a specific critic illness. This benefit is completely tax free. o Payments can vary depending on illness and situation anywhere between $20,000 and $2,500,000 and can be used on whatever you please. o Can be bought through: Insurance companies directly or employer (group plans available) o Plans can be purchased either long or short term. Medical exams required for individual plans. o Premiums are based on age, gender, personal and family health history, coverage, etc. o Qualities of Critical Illness Insurance: o Return of Premium Provision o Disability waiver of premium o Conversion option o Automatic increase benefit rider o Portability rider o Partial payment

· Universal life insurance

o Universal life insurance covers you for life, and incorporates a potentially high earning investment account. § Flexible investment account § Tax advantages · Shelters investment from tax abilities § Premium flexibility o Cons: more expensive ( higher administration fees) o More flexible than whole and term life insurance

· Whole life and T-100 Insurance

o Whole life policies provide coverage for the entire life of the insured o T-100 or Term-to-100 policies also provide coverage for the entire life of the insured however it matures when the insured turns 100 § Depending on the insurance company, it may or may not pay out the death benefit when the insured reaches age 100; however, the premiums stop o Term-100 could be right for you if: § You want lifetime coverage to help protect your family's financial future. § You want to lock in your cost. § You want to make sure your final expenses are taken care of. o Lifelong insurance plan and more affordable doesn't include investment aspect § Assists with funeral, debt and other issues or even charity

· EI - work sharing program benefits

o Work-Sharing is a program put in place to help both employees and employers avoid layoffs during times of lower work demand. The program provides income support for those who work a temporarily reduced work week while their employer recovers. o The work-sharing program involves employers, employees and Service Canada. o In order to apply for the work-sharing program, both the employer and the employees need to agree to participate and apply together. o There is requirements for both employees and employers, such as: § The employer must of been operating in Canada year round for at least 2 years. § Employees need to be core, full-time employees and qualify for EI.

· Workers Compensation

o Workers Compensation is a social insurance program. This was Canada first social insurance program. This program favoured workers in unions and employees o Workers Compensation program provides medical care, cash benefits, and rehabilitation services for workers injured from job related matters. o Four Underlying Principles to workers Compensation: o Employers bear the main cost of the compensation, o Workers would need to give up the right to sues the employers and would receive compensation in return o Injury caused by negligence are not exempted from a premium to increase from the experience o This program is looked after a neutral agency, which holds full jurisdiction over all matters arising out of the enabling legislation

· Works Compensation: Guidelines

o Workers' compensation policies can be purchased in 3 different ways. o A company must purchase workers compensation from a private insurers. The policy pays the benefits that the employer must legally provide payment to workers who have been in an accident or have fallen ill o Self-insurance may be allowed in some states. Companies may choose the option to self-insure to save money Does not apply to Canada o Workers compensation insurance may be purchased from certain states funds. In some states the policy purchased from monopoly state fund. Does not apply to Canada o Employers Cost: § The employer would need to pay $1.94 for every 100% gross insurable earning before deductions § Rates are re-calculated for individual rate groups. There rates are based on injury frequency and from claims costs for individual rate groups § Rate Groups - 18 o Injured Workers § The workers would not need to make any payments § Maximum Earning Covered - is the maximum amount an employee can get from worker Compensation

· Cancellation of creditor insurance

o You have right to cancel within the first 40 days and obtain a full refund of paid premium o You can cancel after 40 but not receive full premium refund § Need to send a signed and dated request for cancellation form § Can cancel any type of protection

o Critical Illness Insurance

§ This type of insurance can help to pay off or pay down the remaining balance on your credit or loan if you're diagnosed with one of the critical illnesses specified in your certificate of insurance. A standard critical illness policy covers 25 illnesses. · Pretax maximum that could less than the amount of the loan coverage · May exclude some health coverages

o Involuntary Loss of Employment Insurance

§ This type of insurance covers the same as disability, including the 2-3% minimum balance per month, the other 97% having a higher interest rate, paying for only 24 months, and covering only the primary credit card holder. Typically, there are no exclusions for pre-existing conditions, and exclusions vary. · Covers same as disability · Typically, no exclusion on pre-existing health conditions however some may vary

o Disability Insurance on credit or loans

§ This type of insurance helps to ensure that the regular payments on your loan or credit card will be made for a certain period of time if you become ill or have an accident that leaves you unable to work. It includes sicknesses, disease, accidental injury nervous disorders, and mental illness. It may also include total disability. It generally doesn't pay off the full outstanding balance of your loan. · Helps ensure that the regular payment will be made for a certain period of time in case of ill ness etc · Usually pays minimum payments required · Usually only pays for 24 months and only for the coverage of the primary card holder

o Life Insurance (to pay off credit or loans)

§ This type of life insurance covers the outstanding balance of your loan with a maximum predefined limit in the event of your death. Your insurance company will use the death benefit to pay down or pay off the remaining balance on the loan, up to a maximum amount outlined in the certificate of insurance. · Insurance company will use death benefit to pau off loan maximum that is outlined · Money will go to creditor not beneficiary or family

How much life insurance do you need?

· Income or Human Life Value Approach o This calculates the present value of the insured's after-tax earnings and gives an idea of how much insurance should be purchased to cover future needs. § Taking after tax income and discounting by inflation rate · Expense or Needs Approach o This contrasts the former approach and focuses on the insurer and beneficiaries expenses and needs such as debt and education costs as opposed to just income. § Burial, mortgage, education and other forms of debt cost, focuses on more than just what the income like the previous approach § Expenses and family needs considered first · Capital Retention Approach o This approach is similar to the expense approach except the proceeds are invested and only the insurers income are used to meet the needs of the beneficiaries. The proceeds are preserved and are much later distributed to the heirs. § Calculate annual short fall and then invested to get passive income to fulfill short fall § What kind of Insurance should the insured buy?

Do you need it?

· Loss of income for financially dependent family members o If someone is dependent on you to provide income for daily expenses and education costs · Debt repayment and Income Taxes o Beneficiary can use insurance funds to pay debts · Estate Taxes o Use funds to pay taxes · Use as collateral on loans o Leverage for other leverages · Positive impacts on businesses o Can place insurance on key people, to keep the business funded during transition periods

· Critical illness insurance

· Return of premium provision = Provides a refund to the deceased consumers estate. This is sometimes given with interest if the consumer passed away with 0 claims and if they passed without collecting their benefit. · Disability waiver of premium = Freezes or puts a hold on premiums while consumer is completely disabled. · Conversion option = Allows for a short term policy to be changed to long term without any given underwriting or examination · Automatic increase benefit rider = Gives the consumer the right to increase their benefit at scheduled periods which will also increase their premiums by the same amount · Portability Rider = Allows a consumer to change from a group to an individual policy without any underwriting and examination · Partial Payment = Usually paid for non-life threatening conditions if they are treated right away · Creditor insurance o Creditor Insurance = Any type of insurance that covers the insurance company if the customer is unable to make payments. o It is a protection plan for the creditor which keeps them safe if the customer loses their income, passes away, cannot make payments for valid reasons, etc.