Becoming Your Own Banker | Preparing For The Unforeseen!

So if you as business owner get critically ill and are not able to guide and grow and run your business, these obligations are still due whether you're there or not. So the question is, where is the money going to come from? You know, everything begins with the way that we think. And some people may say it's half empty, some people may say it's half full. And then there's a third kind of person who says it doesn't matter whether it's half full or it's half empty. What matters is it's refillable. In my talk a I'm going to show some statistics, I'm going to show some data, but in addition to that, I'm purposely going to be asking a lot of questions and some questions are going to be rhetorical questions with obvious answers. The reason why is because I want you to start thinking about the things that you may not have considered as part of your financial foundation, some key elements that are required as part of creating a financial foundation so that you can start to build your financial goals with certainty, with security and with confidence. We're going to talk about disability insurance. We're going to get some education on disability insurance. And disability insurance called DI is best done when it's personally owned because the benefit is paid tax free. So we want to own disability insurance personally. The other kind of living benefit policy is called the critical illness life insurance. And critical illness life insurance, we're going to take a deep dive into understanding what critical illness is. And critical illness can be owned personally, but critical illness policy can also be owned corporately. Let's say that you own this car today and I found this picture on Google. So I just googled the most expensive car someone can buy and this is the first picture that showed up on Google. So I'm using the same picture. So if you own this car today, are you going to be excited about it? I hope you are because I'm going to be super excited if I get to drive this car. If you own this car today and me, I take a screwdriver and a jam the screwdriver in the gas tank of that car, you probably not going to like me and you're going to be pretty pissed at me and mad at me and ready to hit me with a four by four. But I'm making a teaching point here. If you have a car like that and I jam a screwdriver in the gas tank and you see the gas leaking, which is a problem, and if you see that as a problem, how quickly do you Want to fix that problem? That's the right answer. We're going to show you some action steps that you can implement right away so that you can proactively plan today for the problem that may come in future. And this problem will definitely hinder your ability to achieve or delay your financial success. So when you see a problem, you want to take action right away. Right now, let's start with this. What's your most valuable asset? Or someone who said health? We're going to, we are actually going to focus on that. Your health is your biggest asset because one of the things that comes as being healthy is to maintain your ability to earn an income. Because if you're healthy, you can do all that. So your biggest asset asset today is your ability to earn an income. And what factors can impact your ability to earn income, mental and physical health that will certainly impact your return income if you're not in the best of health health first world second. Right now, if your income stops today for health reasons, how will that impact your current lifestyle that you have to maintain your wants, your needs and future financial goals that you have today for yourself, your family, your business that you're working so hard to achieve? So if your ability to earn an income stops because of health, how does that impact your current and future financial goals? So when you think about that, one out of three Canadians before the age of 65 will get a health condition which will result in loss of income. I was shocked when I actually saw this as statistics, living benefits. So disability and critical illness is the solution to it. So we think about disability, think about replacing your current income cash flow. So when you earn an income today, that's your cash flow that you have to rely on to provide for your family, to provide for your business, right? So when you think about disability, think about that monthly monies coming in as a benefit, as a tax free benefit which is going to allow you to go on living to, to, to maintain the lifestyle that you want to maintain. When you think of critical illness, think about a benefit that is paid tax free as a lump sum which you can use to go get treated. So disability and crit, critical illness actually go hand in hand. So when you talk about living benefits, should I get disability, should I get critical illness? You should focus on getting both because they both focus on a very specific purpose. One focuses on cash flow, the other is an influx of capital that you can use to get treated. So let's talk about disability insurance first. Now here's a question for you. What do you think are the Most claims on disability insurance for if you guessed mental health, you're absolutely right. 31% of claims when it comes to disability insurance claim, 31% is on mental disorder, 8% is on injury, 16% is on cancer. And after Covid, do you think the mental claims actually increased? And if you say yes, you're absolutely right. Less than 10% of disabilities are caused by accident or workplace injury or vehicle accidents. Health condition or illness may not be terminal in nature, but it may impact your ability to work and earn an income. And who is the disability coverage for? That question comes up all the time. Hey, who is the coverage for? Who's the disability insurance coverage for? Well, if you have achieved financial independence, and I define financial independence where your passive income that you get Every month is 2 times your lifestyle expenses. So if you've achieved financial independence, congratulations, you don't need disability insurance. Or you may not need disability insurance. But if you are in the most productive phase of your life where you're in the growth phase and you're working towards your financial independence, then you certainly need and you should definitely consider disability insurance. Think about the next question. What financial plans do you have in place if you have a health episode which prevented you from earning an income today? Take some time and think about it. Nothing is a problem until it becomes a problem. Real problems that you have are the problems that you haven't experienced yet. If you're not able to earn an income today because of health reason, what financial problems still need to be addressed by you on a daily, monthly, quarterly or annual basis? Just close your eyes. In your mind's eye, think about what your financial obligation is on a monthly basis. Here's some of the things to help you understand what the obligations could be. It could be mortgage. If you don't have a mortgage, maybe you're renting. What about food and clothes that you need? Your cell phone bill, your Internet bill, your car payment, your credit card debt payment, your line of credit debt, your kids education, kids daycare, utility bills, savings. Because if you are sick and you're unable to earn income well then you're going to be compromising on your savings also because you won't be contributing enough to savings or investments, your investments accounts are going to suffer. Your insurance policies becoming your banker plan may get deviated property taxes. Now if you add up all these problems, all the problems, is it a little a lot of financial obligation that you're responsible for on a monthly basis? I know the answer. It's a lot of financial obligation. Where do you Think the money will come from to pay for all this? In case your ability to earn an income stops today because you have a health condition, where is the money going to come from? Disability insurance is an income protection insurance. It protects your income today from from today all the way to age 65. And some insurance companies may actually protect it until age 70. So it's during your income earning years. That's what the disability insurance pays the benefit. So if someone's earning 36,000 per year, someone may own 60k per year all the way to using an example where someone may earn 150,000 per year. And the first column is age. So age 30, age 40, age 50. So if you are age 30 and you're earning 36,000 per year, the potential of income that you have from age 30 all the way to age 60 is $3.4 million. That's how much you're going to earn. Provided I'm assuming that 36,000 is all that you make from now till 865, your income never increases, which is not accurate because your income will increase. But if 36,000 stays that status quo from now age 30 to age 65, that's the potential of income that you're going to earn. And that potential is what disability insurance would protect if someone was to get disabled. If you're age 40 and you're earning 36,000, here's the potential of income, here's what you are insuring using disability insurance. If you're age 50, your potential of income is 851,000 from age 50 to age 65. And on the other end of the spectrum, if you're age 30 and earning 150,000 per year as income, your income potential from age 30 to age 65 is 14 million. If you don't have 14 million coming in from age 30 to 65, think about where are you going to be in your life financially if that potential disappears. From age 40 to age 65, if you're earning 150k, this is the income potential. And then from age 50 to age 65, this is the income potential and everything in between. So the disability insurance protects your future income potential. Now, how much does disability insurance cost? So that's another frequently asked question. What's the premium for disability insurance? So if you think about it, if you have a house today, you own a house, and let's just say the fair market value of your house is a million, would someone pay 1,200 per year to protect the house, which is worth a million dollars? Now, if someone has a car worth $80,000, do you think the insurance premiums on an average for the car is about 2,400? And I may actually be using lower numbers, but it may be higher. So if you're comparing your house, your car, with the potential of your future income, which is $3 million. So if you look at the asset value that you're protecting, million dollars of a house, 80,000 of car, and $3 million in future potential income, or what do you think you should be paying for? This is the answer. 1 to 3%. 1 to 3% of your annual income is what it takes to get a full fledged disability insurance. In most cases we can actually get it for about 2%. Majority of the cases are going to be about 2%. So 2% of your annual income is what it takes to ensure your future potential of income that you need to maintain your lifestyle. That's basically the premium for disability insurance. Let's say today you come for a job interview and there are two kinds of job, Job A and job B. Job A has an offer of 100,000 per year. That's the income potential per year for job A. And job B has a income potential of 98,000 per year. If someone accepts a job A, they can use that money, that income, that money to buy house, pay for mortgage payment, buy a nice car, pay for car payments, buy food, clothes, investments, all the things that you're going to need in life. So job A enables you to purchase all the above. Job B still enables you to purchase all the things above, but it also will pay for all the above in case you get disabled. So if you have these two job offers, job A, Job B, which offer will you select? 100,000 in income or 98,000 in income? That's basically the 2% that I'm using to show you to demonstrate to you what it takes to protect your future potential of income. Now, disability benefit payouts. It pays on a monthly basis from now till age 65. Some insurance companies go to age 70. The benefit is tax free, so it replaces your current after tax income. There is a 90 day waiting period, meaning you have to wait in this case 90 days for the benefit to kick in. But you can select a longer waiting period if you wanted to. And if you do that, your premium cost will go down. So if someone says, I got some savings in case I get disabled, I'm okay with 180 days in waiting period. Well, then you can select that and the overall premium will go down. So that's disability now we're going to pivot to critical illness. So remember, there's two living benefits. One is disability insurance, which protects your income potential, which is what you need regarding your financial to build your financial goals going forward. So disability insurance is that financial foundation. The other financial foundation is the critical illness, which is a benefit that is paid out lump sum, which you can use to get treated for the critical illness. Here's a question. Do you know someone who was diagnosed with a critical illness? Did that person plan to get sick? Nobody plans to get sick. When we get sick, it just happens that we get sick because of what happens inside the body. Nobody plans to get sick, nobody wants to get sick. So I'm sure that person never planned to get sick. But when that person got sick, did it cause financial stress in the family? I personally experienced this with my mother. That's a photograph of my mother at age 44. She was diagnosed with liver cancer. I was 13, 14 at that time. And cancer sucks. I've seen it not once but twice. Once my mother, second time for my father in law. Within six months of being diagnosed, she was gone. My father had to take a leave of absence from work for over a year a few months prior to when she got sick because she was sick and he had to take her to hospital during the time she was really sick and after, when she passed away. Treatment was very expensive. You know, we'd used up all our savings, we definitely got some help from family. But she had no critical illness on her life. So the treatment was expensive. The monthly bills just kept coming in like, no, that doesn't stop. With no income for a year, that put a big emotional and financial strain on a family. While we were still grieving the loss of our mother. I'm a firm believer that everybody should get critical illness coverage. Like I said, biggest problems that you have are the problems that you haven't experienced. And nothing is a problem until it becomes a problem. If you have to clear your schedule for one year to get treated for critical illness, where will the money come from for treatment and to maintain some of the lifestyle that you want to maintain? Where will the money come from to still pay your bills that are due every month? Because those bills don't stop well, you can use your savings, you can use policy loans. If you have become your banker system ready for yourself and your family, you can use a retirement account, you can get help from family. But if you do all that, then it's going to deviate you away from your financial goal. You can still get it all done. But you'll be backwards financially. So imagine the scale. Ten is where, in case something happens to you today, from health standpoint, you will have 100% of zero deviation in life financial goals or financial obligations, meaning you'll be fine no matter what financially. And then zero represents where, in case you get critically ill or you get disabled, 100% of that would bend and break your future family goals and lifestyle because the income will stop coming, the monies will stop coming based on what financial obligations and goals that you have for your family. Are you going to be between 5 and 10 or you're going to be somewhere in the middle or between zero and five? Or if this happens, you're going to be zero. So this will help you imagine what you need today to fix the problem that you are not experiencing today. And I don't wish anybody to experience that problem. We don't buy insurance policies like this to actually make a claim on these policies. We buy insurance policies in case something happens, there's benefit. Nobody wants to make a claim. We all want to live a long, healthy life, but we want to plan for that also in case something happens and things deviate. So if you are anything less than 10 on that scale, you should meet with one of the coaches on a team and have a consultation on your critical illness and disability insurance because you need it. Take action today and here's how you get a consultation. You can just text the word schedule to 780-809-4599 and you can book their call. Most claims on critical illness policies are on cancer. 67% of critical illness claims are paid for cancer. So cancer Sucks. An estimated 3,075 Canadians will be diagnosed with cancer every week. That is 159,900 Canadians in a year. Our health care covers a lot of expenses associated with the treatment. We are privileged to be in a country where we have this option. Some countries, like me growing up in India, we had none of these options. So it costed us everything to get our mother treated. So we are privileged to be here. Major expenses like, and I'm using cancer in this as an example because the majority claims are for cancer. So oncologist, nursing, medical testing, drugs, medication, treatment, whatever you need, most of these expenses are covered. But there may be drugs that are not covered by the government, which an oncologist recommends. And those drugs are very expensive and you know that. So let's look at a best case scenario. Let's say the treatment is all covered. Everything is covered from top to bottom in Case someone gets sick, which it may not be, but how do you, and I'm just speaking generally, how do you plan to cover the time away from work, which you have to take no matter what to get treated so that you can get better? How do you plan to cover all that in terms of time away from work, which is going to result in loss of income? This is where critical illness coverage can be beneficial. Critical illness benefit pays a lump sum payout. It's not a monthly benefit that you get. It's a lump sum payout that you can take. And you can take that money to cover your treatment or to cover the expense of you being away from your work. The benefit is paid tax free. There is a 30 day survival period, meaning if someone gets diagnosed with critical illness, they have to live past 30 days and then they make a claim. If Death occurs in 30 days, then critical illness benefit, we can't make a claim on that. That's when your life insurance policy is going to kick in. Now, how much critical illness coverage do I need? So the minimum that I would recommend anybody is one year of your net income is what you should get as minimum critical illness coverage. In addition to that, I would factor in three to six months of your spouse's income. Now you must be wondering, when it comes to calculating how much critical illness one needs, why do we need to factor in three to six months of spouse's income? How does anybody plan to get to the hospital for treatment? If you're sick and you're mentally not there thinking about just how to drive, you need help. Your spouse is going to be there every step of the way. But if your spouse is there, which means spouse is not at work, and if spouse is not at work, where's the money going to come from? Now the most important rider that we suggest on critical illness coverage is return of rider on surrender. So the way this writer works is in case, you know, we are 15, 20 years into owning a criticalness policy. In case we get sick, yes, there's benefit that we can use to get treated. But in case we don't get sick and we've still had the policy 15, 20 years in, well, if you have achieved financial freedom at that time and you say, hey, you know what, I may not need the critical illness anymore. And if you chose to close that policy, quote, unquote, surrender the policy, then you will get all your premiums back so you don't lose anything on it, you get all your capital back. So that's why it's an amazing coverage Think of this coverage as a long term savings in case something happens is going to give out more than what you put in to cover your health treatment. But in case you don't use it, you actually get all the capital back. So what's the loss of having a critical illness to you today? Now can we get critical illness coverage on children? That's one of the most important questions that come up. And the answer is yes. Get them insured for critical illness when they're young and the premium is inexpensive. I have Q policies on my daughter, 100k each with different carriers. And the premium I believe is like 600 bucks a year. And I only have to put premium in for a certain period of time and then the policy is paid up and she has those benefits for rest of her life. And when she reaches age 60, 70 in future and she's like, I don't need the policy anymore because I built a really strong foundation for myself for financially she can choose to close those policies at that time and get all the money back that we put into the policies. But from now until then, God forbid something happens, we have the benefit of 100k that's going to kick in tax free so we can get treated. Now I'm going to pivot to corporate owned critical illness. So what I covered so far is just critical illness foundation. And that foundation also applies to corporate owned policies. But I'm going to talk about trade ownership. Critical illness coverage for business owners. Basic foundation is the same critical in this policies can be owned personally. So if you are a T4 team member, you're earning a T4 income, you got to own it personally. But if you're business owner, you can have critical in this coverage personally and corporately. The strategy that, that we, that we use for business owner to own the policy corporately is called shared ownership. CI to shared ownership means the policy premium shared between the corporation and the business owner personally. Who is the most important person in your business today? The business owner is the most important person in the business because the business owner is the visionary. It's because of the vision and because of the relationships that you build. Your business is successful today or will be even successful more going forward. You as a business owner is the most important person in the business within consulting business. Whether you're in manufacturing business, whether you are realtor, as you incorporated, whether you're doctoring, a professional corporation, you're a dentist, you have a corporation. Your chiropractor, you have a corporation. You as business owner is the most important person in that business, if you get critically ill, a lot of things are still required for the business to perform its operations financially going forward. We talk about that. So the business can take a critical illness policy on you as the business owner. So the business owner gets critically ill. What financial obligations can a business face? So what are your financial obligations in the business per month? Think about those obligations. So here's some examples. Team members, payroll. You may have T4 team members. That payroll is an obligation to the business whether you're there in the business or not. That has to be paid. So if you get critically ill, what's the plan to pay the team members? Your own income, your income as the business owner, your personal income. Whether you take dividend income or T for income from a business or a combination of both, your business is the one that's creating your income. So T4 team member incomes plus your income is dependent on the business. That's a financial obligation for the business. If you have any mortgages in your business, if you own a property in your business, you own your operation where you get things done. If you're a dentist, you may be on a building where you get your operations, then maybe you have a debt on that building. Maybe you're renting your utilities that you have to pay for your business. Maybe there's other loan payments for fax machines, for furniture, for equipment, things like that. Maybe you have a credit card debt and you have to pay your vendors for the things that you buy from them. Maybe you have high life insurance premiums for your business or insurance premiums in general. Maybe you have tax installments that you have to pay every month. And if that tax installment stops, well, guess what? CRA is not going to treat you any different. They may still ding you with fees and penalties. You may have legal bills that you have to pay your contractor fees. So if you add up all that money for your business, I bet it's a lot of financial obligation. So if you as business owner get critically ill and are not able to guide and grow and run your business, these obligations are still due whether you're there or not. So the question is, where is the money going to come from? So let's talk about the shared ownership CI. So meet Robin. So Robin, he's a business owner, he's a consultant. He's got a Corporation. He's 38 now. His annual business revenue is just over $1 million per year. That's how much he produces as an income. Now, his operating expense, opex, is about $350,000 now. Operating expense doesn't include taxes. His taxes are probably a lot higher, is probably $200,000 personal and corporate combined. But his operating expenses are about 350k. Now his personal salary that he takes out of the business is about $280,000. So these are his facts, just very high level facts on Robin as a business owner. If he gets sick, the ability to earn $1 million is going to be challenged, right? Like where is the money going to come from to keep his operating expenses, his taxes, his growth, his capital X, that's the capital that he needs for expansion. Where is all that money going to come from? So here's what we did. So we did a shared ownership critical illness coverage. The coverage that we apply for is 500,000 DOL dollars. So the business owns the policy on Robin and the coverage is $500,000. So in case Robin gets critically ill, $500,000 is come in as tax free money into the business. So the business can take that money and still run the business operation, still pay Robin his salary, his chief or team members, his operating expenses, his taxes, his legal fee, whatever it is that money is going to cover at least good chunk of his years of expenses. Now his annual premium for this policy is 89, 85 per year. Now this is a shared ownership CI. So that policy is actually shared between Robin, his business, his corporation paying a portion of the premium and the second portion of the premium is actually paid by him personally. So the portion of premium paid by his corporation is 5935 which is 66% of the total premium. So this is what is paid by the corporation. The other portion of premium which is 3050, it's called the health benefit portion, the premium. Basically that benefit is also known as return of premium rider. Keep that in mind, it's called return of premium rider. We'll talk more about it. So the portion, the premium that he pays personally after tax person dollars is 3050. The portion, the premium that he pays for the policy corporately after tax corporate dollars is 5,935. And the critical illness benefit is till age 75. So it's going to cover him all the way till age 75. He's 38 years young today in case he gets ill, all that $500,000 is paid tax free into his business. That a business can take that money, fulfill the businesses financial obligations, the obligations that we just covered and what you see also on your screen. Now let us fast forward 15 years in. So Robin, he was 38 when he got this policy years, he is going to be now 53. The total premium that has gone into policy is 8,985 for the next 15 years. So total premium is 134,775 out of which the corporation paid 89,025 and he paid personally 45,007 50. So if you add these numbers together, that's the total premium that's gone in. So this is after tax corporate dollars 89,000. This is after tax person dollars, 45,000. So that's 15 years in. Now let's assume 15 years in that Robin has achieved financial freedom, independence and let's say he's got lot of cash flowing assets that is going to make sure that whether he gets disabled or critically ill, he is going to be fined financially. And now he decides to surrender the policy. Or maybe he hasn't achieved financial freedom, but he is in a financial crux and he needs access to money. So he has a choice. He has a choice to continue paying the premium. But he doesn't have the money to pay the premium because he's in a bad financial situation. But he has been putting money into the policy for the last 15 years. And one of the portion the premium that he has paid in is called return of premium. So in case he gets into financial troubles and he needs access to money, in this particular case it could be both. Right? He's achieved freedom. Maybe he doesn't need the policy or he's in a bad financial situation and he needs access to capital. So let's say Robin chooses to surrender the policy 15 years in. If that happens, all the premium that has gone into policy 134,775. All that money out of which 66% was paid by the corporation and about 34% was paid by him personally, all that money will be received by him personally, tax free, including the monies that the corporation paid into the policy. So this is pretty awesome. And this can only happen in this particular shade ownership structure. So if he gets critically ill, there's benefit that's going to be paid out and that benefit is going to be more than the premium that he can put into policy. But in case after a long time like 15 years in, he doesn't need the policy or he gets into financial hot waters and he needs access to capital. Well, this capital can be recovered all back to Robin tax free. Now when I showed this to business owners, this is exactly what they do. They get super excited about, hey, I'm able to extract Capital out of business, tax free, 15 years in. That's great. That's exactly the reason why I want to do this policy. Well, here's the fact guys, that's not the reason why we want to do this. Shared ownership policy. That's not the desired outcome that we're looking to get accomplished here. That's not the reason why the policy should be purchased. In this case, the shared ownership critical illness policy, that option of return a premium to Robin after 15 so years personally, all that money back to him tax free, that's just one of the benefits, one of the features on the policy. But that's not the reason why anybody should buy a policy like this. The only reason anybody should buy a policy like this is for one thing and one thing alone is to buy critical illness insurance because your business has a need for it. Because the business will suffer in case something happens to you and you're not able to work on the business. So that's the underlying reason why we get a policy like this. We structured a policy like this for business owner there. That's a side incentive benefit from tax standpoint in future. Now, what I've shared today with you may bring up feelings of anxiety. And for some of you it may be just uncomfortable to to see the statistics and just take all this in. You may be uncomfortable watching all this. It's okay to have these feelings, but it is important to confront these feelings so that you can get the right coverage that you need today while you're still healthy, so that you can build your financial foundation. And from that foundation you can secure with certainty and confidence your financial outcomes going forward with confidence that in case something happens, you're protected. Take action. Without action, nothing happens. So text the word schedule to 780-809-4599. That meeting is no obligation meeting to you. There's no decision on what critical illness disability you need. There is discussion on how we can help you get set up with critical illness and disability so that you're protected going forward when it comes to your financial obligations and financial goals. We just want to understand how we can add value from that perspective. And we'll share with you what's required in terms of setting up critical illness and disability. And then from there onwards you can make a decision. Yes, this is something I want to do. But again, nothing is a problem until it becomes a problem. And the biggest problem that you have is a problem that you haven't experienced yet.