March 2008 Vol-4

In This Issue

• Shari's Opener
• Protection when you need it the most
• Long Term Disability Insurance vs Long Term Care Insurance
• The 2008 federal budget - Changes you need to know!

Shari's Opener

March is here and that means SPRING! One of my favorite times of year. At last the temperatures are not sinking below freezing and we can watch our neighbours in the east shoveling snow and send the our condolences with our golf photos! It's good to live here!

In this issue I have included a couple of articles on living benefits. Most know the importance of life insurance , but when it comes to truly 'living your life' insurance many are not sure what they need. Hopefully this will help you learn a little more of what 'living benefits' are and how they can help you maintain your lifestyle, and give you peace of mind.

I have attached the new federal budget highlights that just came out. Exciting news is that the government announced a new savings account that can grow with tax deferral. Now you can put a maximum amount in this new tax sheltered savings account and not be penalized when you withdraw the funds. Great addition to your portfolio. They will be available in 2009.

Enjoy the longer days and don't forget to smell the flowers that are already blooming!

Protection when you need it the most

None of us likes to think about the likelihood of suffering a critical illness, but statistics show it is a possibility we have to come to terms with. With advances in medical science and improved lifestyles, we now have a far greater chance of surviving a critical illness than ever before.

What would happen if G-d forbid you woke up tomorrow in the hospital after experiencing even a mild heart attack? Your doctor might simply recommend a change of diet and more frequent exercise. But what if you had to modify your lifestyle even further-like being forced into early retirement or to trade in your old job for one less stressful and less productive? What if the diagnosis was cancer or one of 22 other critical illnesses?

Now picture the financial and emotional impact on your family. Not only do you and they have to cope with dramatic lifestyle changes, you will quickly realize that the mortgage and other monthly living expenses still need to be paid.

To compound the problems, the incredible strain on our medical system makes waiting for surgery, treatments and other procedures common place and projected to get worse as time goes by. Are you willing to bank on treatment you need being available when you need it? Would you rather be in a financial position where you have choices?

What is Critical Illness Insurance?

Critical illness insurance was designed to provide financial assistance in the form of a lump sum, tax free payout to help you cope with the stress and difficulties associated with such an event. The benefit is paid on first diagnosis of one of a list of critical illnesses. Coverage can be issued from $25,000 up to $2,000,000. There are no stipulations on how the money is used. You can use it to:

• Pay off debts or mortgages
• Supplement income
• Pay for experimental medical treatments not offered in Canada
• Get quicker treatment outside of Canada
• Take an extended vacation to improve recovery
• Make alterations to your home that may be necessary because of your new condition

Here is a handy table which illustrates some of the key differences between Long Term Disability Insurance and Critical Illness Insurance:

Long Term Disability	Critical Illness Insurance
Can replace a portion of your lost income	Can pay a lump sum to be used as you choose
Requires ongoing proof of loss of income to continue receiving payments	No ongoing proof is required
Benefit payments cease once an income is earned	Benefit is not affected by other income
Benefit is limited to a percentage of pre-disability income	Benefit is the full amount of the policy

For more information please go to my website http://www.molchanfinancial.com/critical_illness.htm

Long Term Disability Insurance vs Long Term Care Insurance

What is the difference?

Disability insurance is designed to replace income. The percentage is a maximum of 66% to 80% of yourproven income. Therein lies the problem if you are self employed. Many do not take an income or very little, and as such, have never purchased disability insurance.

Most plans have an end date of age 65/70. The plan may only pay up to 3 years in the disabled person's own occupation. Then the person has to retrain or find other means of income.. i.e.: CPP disability (which has a stringent definition of disability; 'severe & prolonged'), welfare, savings, RRSP's etc. Because the cost of disability insurance (which can be double the cost of long term care insurance) most people put a 90 day elimination(wait) period in place. Some new standard plans may also exclude claims for soft tissue injury and for stress, as these are impossible to prove.

Disability plans can also be considered the 2^nd payor, meaning that benefits are reduced by payments from provincial car insurance, WCB, CPP, court settlements, etc.

Long Term care Insurance benefits are paid based on ability to function with the activities of daily living, rather than the ability to work. If unable to perform 2 of the 6 activities of daily living that get you up and going in the morning, the full income is paid.

The six activities are; bathing, dressing, feeding, toileting, transferring and continence. You may be injured and require help with these activities and yet be able to go to work. The 2 major claims for long term care insurance benefits are cancer - 26% and injury - 37%.

You can design the future income as anything from $7800 to $104,000 tax-free annual income that is paid on a monthly basis. It is not based on a percentage of current or earned income.

The coverage can be designed as unlimited coverage ... till death, and does not end at age 65 or retirement. It truly is a living disability benefit.

It is not affected by WCB, Group Disability or any settlements. Nor does it impact any payments from these sources - so may be considered a top-up.

Long term care insurance is good protection for clients in high risk employment or activities that may not otherwise be eligible for any protection (such as Loggers).

The baby boom generation isnearing retirement age and by 2010 nearly 25 per cent of Canadians will be over age 65. The demand for care facilities and home care will be huge and the cost burden to support family members will continue to rise.

Life is what happens when you are busy making other plans..

Call for an appointment - (250) 755-4004

The 2008 Federal Budget Plan in Review

The 2008 Federal budget lays emphasis on preparing the Canadian economy for a potential slowdown in global economic growth. Canada's Department of Finance projects that the Canadian economy will expand by 1.7% in 2008, significantly below its earlier expectations of 2.4%.

Hence, the budget provided little cheer for investors looking for generous personal tax relief. There was also little to get excited over in terms of any lavish government spending. The government is instead focused on reducing overall government debt and on being prudent in the current environment of economic uncertainty.

Here are five highlights from the 2008 Federal budget

1. Tax Free Savings Account (TFSA): An incentive for Canadians to save. Expected to benefit mainly low and middle income earners as well as seniors.

· This tax sheltered savings account will allow individuals 18 years of age and older to contribute up to $5,000 annually to a TFSA account from 2009.

· Individuals will be allowed to carry-forward unused portions of this $5,000 allowance into future years with the annual contribution limit indexed to inflation in $500 increments.

· Contributions will not be tax deductible while capital gains or any other investment income earned within the TFSA will be tax exempt. Withdrawals from a TFSA will be tax free.

· Qualified investment for a TFSA will be similar to those allowed for under a qualified RRSP, including stocks, bonds and mutual funds.

· Spousal contributions are allowed, up to the contributor's maximum limit of $5,000.

Choosing between a TFSA and a qualified RRSP will depend on the specific needs on an investor.

RRSPs may make more sense if the tax rate at withdrawal is expected to be lower than the tax rate at the point of original contribution. Investors can use a TFSA to save for specific needs. Seniors over 71, who no longer qualify for contributions to RRSPs, can use a TFSA to supplement a retirement savings plan.

2. Increased flexibility to withdraw from Federal Life Income Funds: Improved access to funds in these accounts.

· Individuals 55 years of age and older with small balances (less than $22,450) in LIF holdings will be able to wind up their accounts with the option of converting it to a tax deferred savings vehicle

· One time conversion of  up to 50% of LIF holdings to a tax deferred savings vehicle with no minimum withdrawal limit

· Ability to unlock funds in times of financial difficulty (maximum of $22,450)

3. Registered Education Savings Plan (RESPs): Increased flexibility

· Maximum contribution period extended by 10 years, allowing individuals to contribute to an RESP for up to 31 years. There is no change in the education grant.

4. Guaranteed Income Supplement (GIS) - higher GIS exemption to benefit low income seniors.

· Full exemption of first $3,500 in earnings from $500 at present. It will allow GIS recipients to keep more of their income.

5. Dividend tax credits - reduced dividend gross-up and dividend tax credit rate for eligible dividends to reflect corporate tax reductions announced in 2007.

· Eligible dividend gross-up will be reduced to 44% effective January 1, 2010 from current level of 45%, 41% in January 1, 2011 and 38% in January 1, 2012. Meanwhile, the dividend tax credit will be reduced to 18% from 19% currently. It will fall to 16.5% in 2011 and 15% the following year. As a result, tax on dividends will go up marginally.

Any questions - I would be happy to help you. Call me at (250) 755-4004