1. Paul Sabat, CFP, CLU Financial Planner Allan Sabat, GBA Advisor – Executive & Employee Benefits

2. Who we are Insurance Brokers Represent almost any insurance company The Consulting House Inc. Established in 1985

3. Why talk about life insurance now? You are currently enrolled in the group plan Your coverage and options are about to change Group coverage/conversion options are not ideal Do you still need insurance? What type of policy is best?

4. Supplementary Life Insurance - Optional This is an optional benefit. You can choose coverage in amounts equal to one, two or three times your annual basic earnings. You pay 100% of the total monthly premium cost for supplementary life insurance. Your coverage will end the last day of the month in which you terminate employment, or the October 1st immediately following the date you reach age 65, if you continue employment past that birthday, except where coverage is provided under total disability provisions. However, coverage remains in force for a 31-day ‘period of grace’ to give you time to set up another life insurance policy. Your Conversion Options

5. Group insurance Doesn’t offer the same control, portability or flexibility as personal life insurance Only insured as long as you’re part of the group Conversion options are limited and not ideal

6. Common Questions Do you need life insurance? How much life insurance do you need? What are the different types of life insurance you can buy? What is the right type of life insurance for your needs?

7. Any Insurance Company President John Doe One Million Dollars 1,000,000 What is Life Insurance? Nothing more than a Cheque You decide the amount and the payee(s) The date is TBA… Any Beneficiary You Choose To be announced

8. What can life insurance do for you? When you die it can be used to Cover final expenses and pay off debt Ensure your family maintains their standard of living Leave a legacy to your favourite charity While you’re alive it can be used to Build a tax-advantaged cash value Supplement your retirement income Provide for long-term care or home care

9. Who needs life insurance? People with estates to protect Cover growing tax liabilities Reduce taxes owed on other investments Pass estate on to beneficiaries or a favourite charity

10. Who needs life insurance? People who want to leave a legacy Provide your favourite charity with stable, long-term funding Tax-effective, without jeopardizing your own financial independence or reducing your estate

11. When to purchase life insurance? When you least expect to need it Important events in your life A new child or grandchild Marriage or divorce Death of a parent or spouse Children leaving home for college or to start families of their own Purchase of a home or cottage New job or business Upon retirement?

12. Term versus Permanent

13. Life Insurance Products Term Insurance Ideal for temporary needs such as mortgage debt or Income Replacement Coverage expires at age 70 to 85 depending on policy Initially, very inexpensive but renewal rates are cost prohibitive by design No savings component Convertible to permanent insurance

14. Permanent Insurance Permanent protection for an ongoing need – i.e. estate taxes Level premium to age 100 Level benefit amount No savings component Most plans are designed that if you stop paying the benefit coverage and protection end Life Insurance Products

15. Participating Whole Life or Universal Life Insurance Permanent protection for an ongoing need – i.e. estate taxes Level premium – Duration varies Opportunity for tax-advantaged savings Significant cash values can be developed Life Insurance Products

16. You might be thinking... What options do I have? What if I don’t qualify? Too expensive at my age? At this stage, why insurance? I’m going to shop around I’ll save to pay the taxes Conversion vs. Individual Next Steps

17. Your Life Insurance Options GROUP CONVERSION: One year convertible term Term to 65 (non-convertible) Participating Whole Life (accumulation) INDIVIDUAL POLICY (medical evidence required): Term 10 or 20 Term to 100 Universal Life Participating Whole Life You do not lose the right to convert if you are declined

18. Application vs. Conversion 60 Female non-smoker. Estatemaster Paid-up AdditionsEstatemaster Accumulation Primary Notes:ApplicationConversion Total Death Benefit250,000 Total Annual Premium12,475 # of Premiums Illustrated15 Cumulative Premiums Paid187,125 IRR Year 10 Total Death Benefit319,55016.61%291,44115.01% Total Cash Value114,392-1.58%109,691-2.35% Year 15 Total Death Benefit359,6707.81%317,2036.35% Total Cash Value200,0680.83%174,453-0.88% Year 20 Total Death Benefit357,1844.93%310,7133.87% Total Cash Value239,9751.91%203,2130.63% Year 25 Total Death Benefit377,0733.89%319,8372.98% Total Cash Value288,3942.40%238,3371.34% Year 30 Total Death Benefit410,1593.42%337,4702.57% Total Cash Value343,2072.64%276,2201.70%

19. Application vs. Conversion 60 Male non-smoker Estatemaster Paid-up AdditionsEstatemaster Accumulation Primary Notes:ApplicationConversion Total Death Benefit250,000 Total Annual Premium13,288 # of Premiums Illustrated15 Cumulative Premiums Paid199,320 IRR Year 10 Total Death Benefit319,55015.51%291,44113.91% Total Cash Value114,392-2.74%109,691-3.52% Year 15 Total Death Benefit358,5607.04%316,3905.58% Total Cash Value200,0680.05%173,640-1.74% Year 20 Total Death Benefit350,2334.30%305,4903.26% Total Cash Value235,2751.27%197,990-0.05% Year 25 Total Death Benefit363,5703.34%309,5642.45% Total Cash Value277,7921.84%228,0640.75% Year 30 Total Death Benefit389,0502.92%321,4122.08% Total Cash Value325,3072.13%260,1621.16%

20. Possible options to fund a benefit Save Borrow Sell

21. The life insurance solution A life insurance policy can be purchased to fund the taxes owing on death. With proper planning, you can ensure more of your estate is protected.

22. Compare funding options This example is based on the following: Male, 55, non-smoker, standard risk; female, 54, non-smoker, standard risk Joint last-to-die, 10-Pay Universal life Annual premium of $18,967.35 for 10 years Initial death benefit of $900,000 Death benefit at year 30 is $900,483 For assets to be sold: 5% selling costs and a discount rate for present value calculations of 3.5% cent before tax. Bank loan rate (annual): 7%, 10-year term loan

23. Life Insurance stages

24. Life insurance Myth As you get older or become more financially independent, your need for life insurance decreases Fact As your net-worth increases, the need to protect your estate also increases Your life insurance coverage may also need to increase

25. On death Generally, you are deemed to have disposed of all your assets and you will pay income tax on the disposition, including: Registered assets such as RRSPs and RRIFs Non-registered assets such as: Mutual funds Stocks Segregated funds Growth in real estate values, including vacation property

26. Estate and taxes We can defer some income tax on death by transferring assets to a spouse However, when the spouse dies, income tax on the deemed disposition of their assets must be paid Income tax can be as high as 50 percent,* depending on province *fifty percent is the highest marginal tax rate in Canada in 2012 (Nova Scotia)

27. Insurance Planning Continuum Investable Income or Assets Replaces Lost Earnings Capacity Asset Substitution / Estate Equalization Tax-Preferred Alternative to Fixed Income Strategic Investment Diversification

28. Life Insurance stages

29. Assets Accumulation rate of return Estimated valueCostCurrent capital gain = estimated value – cost Capital gain at life expectancy Cottage5.00% $ 500,000 $ 50,000 450,000 1,643,177 Non-Registered Account5.00% $ 500,000 $ 150,000 350,000 1,543,177 - - - Income tax on capital gains Total capital gains $ 800,000 $ 3,186,355 Unused amount available under capital gains exemption Tax payable on capital gains (Total capital gains – exemption) X inclusion rate X your marginal tax rate) $ 185,640 $ 739,394 RRSPs, RRIFs, pension plans Current value Value at life expectancy Current estimated value of RRSPs, RRIFs, pension plans $ 500,000 Total estimated annual contribution Accumulation rate of return 5.00% To age Age that RRSP assets are applied to a RRIF 71 Value at comparison year $ 495,849 Tax payable on RRSPs, RRIFs, pension plans (Total estimated value of RRSPs, RRIFs, pension plans X your assumed tax rate) 232,050 230,124 Total taxes payable on (second) death $ 417,690 $ 969,517 Your assets over time Based on a male age 60 with a marginal tax rate of 46.41%, and a life expectancy of age 85

30. Complete market access U/L T100 - Minimum Premium Company NameAnnualMonthly Industrial - Alliance Life Insurance$5,929.29$494.12 Transamerica Life Canada$5,982.50$498.54 Sun Life Assurance Company of Canada$6,043.37$503.61 The Canada Life Assurance Company$6,109.69$509.14 Desjardins Financial Security$6,161.02$513.42 Industrial - Alliance Life Insurance$6,276.43$523.05 BMO Life Assurance Company$6,339.29$528.28 The Manufacturers Life Insurance Company$6,377.52$531.47 The Manufacturers Life Insurance Company$6,402.00$533.51 BMO Life Assurance Company$6,436.22$536.36 Transamerica Life Canada$6,570.00$547.50 The Empire Life Insurance Company$7,339.29$611.61 The Empire Life Insurance Company$7,733.87$644.49 The Manufacturers Life Insurance Company$8,212.31$684.37 The Manufacturers Life Insurance Company$8,236.80$686.41 Insured: Male, Regular, Non-Smoker Birthdate: January 1st, 1953 (Age 60 Nearest 60) Province: Ontario Face Amount:$250,000

31. Term to 100 - 55 MNSTerm to 100 - 60 MNSTerm to 100 - 65 MNS Total Death Benefit250,000 Total Annual Premium4,3225,9297,592 Sample Insurance Costs Term to 100 - 55 FNSTerm to 100 - 60 FNSTerm to 100 - 65 FNS Total Death Benefit250,000 Total Annual Premium3,6404,7856,753

32. Tax grind on non-registered Assets Personal marginalCumulative Deposits/tax ratepotential growth lost YearAgePremiums0.00% 46.41%to tax 160 7,502 7,802 7,663 139 261 7,502 15,916 15,490 426 362 7,502 24,355 23,485 870 463 7,502 33,131 31,651 1,480 564 7,502 42,259 39,992 2,266 665 7,502 51,751 48,512 3,239 766 7,502 61,623 57,215 4,408 867 7,502 71,890 66,104 5,786 968 7,502 82,568 75,184 7,384 1069 7,502 93,673 84,459 9,214 1170 7,502 105,222 93,932 11,290 1271 7,502 117,233 103,608 13,624 1372 7,502 129,724 113,492 16,232 1473 7,502 142,715 123,588 19,127 1574 7,502 156,226 133,900 22,326 1675 7,502 170,277 144,433 25,844 1776 7,502 184,890 155,192 29,698 1877 7,502 200,088 166,181 33,906 1978 7,502 215,893 177,406 38,487 2079 7,502 232,331 188,872 43,459 2180 7,502 249,426 200,583 48,843 2281 7,502 267,205 212,546 54,660 2382 7,502 285,696 224,765 60,931 2483 7,502 304,926 237,246 67,680 2584 7,502 324,925 249,994 74,931 Earning 4% interest income

33. Tax Advantage of Life Insurance Minimum funding means the minimum premium which must be paid to maintain the death benefit. Maximum funding means the largest premium permitted for the policy to remain exempt from annual taxation under the Canadian tax law.

34. Repositioning of assets

35. Fact: Roughly 4% of life insurance applications in Canada are declined each year. This represents an estimated 35,000 policies and $7 billion coverage. 80% of these declines are due to medical reasons. SecureLife has been designed specifically to enable many of your clients that have been declined elsewhere for medical reasons to obtain valuable life insurance coverage. Through a combination of special plan design features and unique special risk underwriting expertise and experience, we can offer coverage to many otherwise uninsurable individuals. Among the more common medical conditions we have been able to insure are: Diabetes Heart disease Cancer survivors Obesity Alcohol, drug abuse Mental disorders Kidney transplants Multiple conditions Below are the 2012 stats, all of Canada: AGE BAND 56 – 65: RATED: 17% DECLINED: 14% AGE BAND 66 – 69: RATED: 16% DECLINED: 20%

36. Selecting the right life insurance for your needs Professional advice Value for your money Features that meet your needs and budget today, flexibility for tomorrow Variables affecting the cost of life insurance The company standing behind your life insurance

37. Paul Sabat, CFP, CLU Financial Planner paul@consultinghouse.com Allan Sabat, GBA Advisor – Executive & Employee Benefits allan@consultinghouse.com (416) 362-5500 (877) 362-5500 Questions

38. This material is for information purposes only and shouldn’t be construed as legal or tax advice. Every effort has been made to ensure its accuracy, but errors and omissions are possible. This material is not intended to be a recommendation or opinion as to the approach you should take, but rather to form a basis for further discussion between you and your financial security advisor. You should obtain independent legal, tax and accounting advice to take into account your particular circumstances. Disclosure