Vancouver Group Benefits, Employee Benefits, Pension Plans, Life Insurance, Living Beneifits | Redcliffe Financial Group

Employee Group Benefits – Agents vs Brokers vs Fee-for-Service Consultants – What’s The Difference?

admin — Tue, 23 Nov 2010 09:00:12 +0000

This week we look at the major differences between employee group benefits agents, brokers and fee-for-service consultants.

While it may seem like a good idea to pick up the phone and dial the 1-800 number of a well known insurance company to go “direct” when shopping your employee group benefits plan, you should consider alternative channels such as brokers or fee-for-service consultants.

Below is a comparison table to clarify the differences:

Agents	Brokers	Fee-for-Service Consultants
Compensated on a decreasing, flat or increasing commission scale. The commission scale is a percentage of premiums on all insured benefits. Depending on the size of the group, commissions could range anywhere from 4-15% of premium.	Same as agents.	Fees are charged directly by the consultant to the client. Fees are calculated based on estimated number of hours and resources used to maintain full service of your account. Fees may also be calculated as a percentage of total premium
As the premium on the account rises, so does the agent’s commission.	Same as agents.	Fees are generally guaranteed for a negotiated term – further reducing the impact of rising insurance costs.
There is no incentive for an agent to negotiate a reduction in rates because the higher premiums are, the more commission is paid.	Same as agents.	Consultants have every incentive to reduce your insurance costs as the compensation is not premium based, but rather service oriented.
Most agents are not obligated to disclose how much commission they are taking. The commissions are a direct cost to the client and are generally not addressed in proposals.	Same as agents.	There is full disclosure and transparency. The client purchases the insurance at cost without the additional expense of an agent or broker’s built-in commission schedule.
Most agents have exclusive contracts with their employing insurance company and cannot offer the products of their competitors.	Most brokers have access to all insurers and alternative providers.	Most consultants work with all insurers and alternative providers. Also, as their block of business is usually substantial in volume, they are able to receive preferred “wholesale” pricing on certain benefits such as Accidental Death and Dismemberment.

It should be noted that the majority of benefits plans for groups with less than 500 employees are placed through agents or brokers.

Redcliffe Financial Group has offered fee-for-service consulting to the 50+ employee group benefits market with growing success since 2003 and traditional brokerage services since 1976. We believe the fully transparent consulting model will be adopted rapidly by traditional brokers – especially if Federal Regulators in Canada made commission disclosure mandatory for insurance representatives as it is in Australia and the UK.

To learn more about the employee group benefit consulting and brokerage services offered by Redcliffe Financial Group please contact us at 1-888-676-8111 or email info@redcliffefinancial.ca.

Life Insurance 101

admin — Thu, 18 Nov 2010 17:30:22 +0000

When considering the purchase of Life Insurance it is important to understand that there are a number of options available. Here we offer a very basic summary of common needs for insurance, how the insurance is priced and the policy options available. Please contact us if you wish to learn more about the Life Insurance options available for you.

Financial Needs

There are 6 major cash needs at death for individuals with dependents:

Mortgage Fund – a.k.a. Mortgage insurance, is usually an amount equal to the mortgage
Emergency Fund – Usually 3-6 months of household expenses & enough to pay off any uninsured debt (credit cards, line of credit)
Dependency Period Income – How much will be needed until the youngest child is out of the house?
Education Fund – On average a Canadian undergraduate degree costs between $40,000 and $60,000 (including entertainment) Check out the Federal stats HERE
Last Expenses - Funeral Costs ($15,000-60,000)
Spouse’s Income – What capital amount would generate enough investment income to replace the deceased’s income?

Click HERE to use the best online needs analysis calculator.

Individuals without dependents may need insurance for business use. These policies are known as “creditor insurance or key person insurance.”

Individuals without dependents who desire increased financial flexibility purchase whole life insurance policies at a young age to lock in cheap rates and build up a cash value. These policies are like a guaranteed savings plan which serve as your own personal bank, retirement income booster and long-term estate planning tool.

High Net Worth Individuals or families may use a combination of permanent life insurance and an annuity to create a very tax efficient financial solution known as an “insured annuity.”

Insurance Costs

What determines the cost of my life insurance?

For the most part, the cost of life insurance is determined by:

Age – The younger you are, the better your rates
Gender – Females generally outlive males
Smoker vs. Non-smoker – Smokers are heavily rated due to a higher risk of death

Higher amounts of insurance require in-depth financial and medical investigation.

The costs may differ greatly between companies and that is why using an independent broker is the best route for anyone purchasing life insurance. It may also be wise to work with someone who has been in the business for more than two years as unfortunately the attrition rate of insurance salespersons is in the 90th percentile within the first two years of entering the industry.

Types of Life Insurance

Term Insurance

Term Insurance Provides for a death benefit to be paid upon death during a certain period of time or term. It is the lowest cost form of life insurance and is ideally suited for young families with tight cash flow or short to medium term risks such as a mortgage.

Features:

Terms are generally 10, 20, 30 years in length (or to Age 100) and their costs increase respectively.
Coverage ceases at the end of the term, unless renewed
The policy can usually be renewed without a medical examination, but at a higher premium.
The policy may also have a conversion clause which allows the term insurance to be converted to some form of permanent insurance without a medical examination
Policies usually terminate at age 65-75

Permanent Insurance

Permanent life insurance provides coverage for the life of the insured. It exists in three forms:

Whole Life - offers level premiums and a “cash value” which accumulates over time. The “cash value” is subject to how the insurance company invests the funds (generally very conservatively). Some companies report an annualized rate of return between 9 and 10 percent over the past 15 years. This is an excellent long-term planning solution.
Universal Life – allows for an optional tax-sheltered investment account which can be used to enhance the death benefit. This is a popular tool for estate preservation and maximization – especially for business owners!
Term-to-100 - this is a 100 year term policy. There is no cash value, however, the death benefit is guaranteed as long as premiums are paid. A common tool for “insured annuities” and estate planning

Tips

Suze Orman and Dave Ramsay have videos on YouTube which cast permanent life insurance as the the most evil financial tool created and preach that term is the only insurance product to buy.The truth is that each insurable situation is different. Some require only term insurance and others permanent or a hybrid of both. Don’t buy into extreme opinions…do your research and find a trustworthy advisor. Be careful about buying from someone who just got recruited into an agency -their job is to sell as much insurance and for the highest premium…not necessarily a recipe for unbiased and ethical advice!

We have recommended polices to be canceled or replaced when they are unsuitable for the client in design or outrageously overpriced. The key to making sure you are getting a quality product at a reasonable price is an experienced broker. There is no single solution for life insurance, so we advise the following process be followed:

1) Calculate your needs (preferably with an advisor)

2) Get a market survey through your broker (online quotes can be misleading as they may be quoting prices for people in exceptionally good health to “bait the trap”)

3) Explore term and permanent solutions (hybrid products offer short and long-term planning needs)

Selecting a life insurance company

-Have you ever heard of the company?

-How long has it been around?

-What is the financial strength of the insurance company?

-If purchasing term, what are the conversion options? Some companies offer more than others

Learn More

We hope this has been a sufficient introduction to some of the basic Life Insurance options that are available. If you have any questions or comments please feel free to leave them below. We welcome the conversation.

Do not hesitate to contact us if you wish to learn more or are interested in a Life Insurance quote.

Welcome to Redcliffe Financial Group

admin — Thu, 18 Nov 2010 17:28:54 +0000

Welcome to the newly re-designed RedclifeFinancial.ca.

Our aim was to create an informative and simple to navigate website where the public, our clients and our partners can learn more about the services we offer. If you have not already done so, please have a look around our website.

This blog will be updated weekly and will feature a myriad of topics related to insurance and financial planning. We invite you to join the conversation.

If you have any comments or suggestions, please feel free to contact us.

Sincerely,

Redcliffe Financial Group

Christopher Redcliffe, CFP,
Norman Redcliffe, CLU and
Christopher Jones