Insurance, explained without the fine print.

A healthy applicant can often get a substantial amount of coverage for less than the cost of a streaming subscription each month. The reason it's affordable: the insurer is betting you'll outlive the term, and statistically, most people do.

Term is pure protection with no investment component, which keeps costs low and coverage high exactly when you need it most.

The goal is to match your term to your biggest financial exposure. If your mortgage still has a couple of decades left, a 20-year term probably lines up nicely. If you have a young child, a longer term gets them through school and into their own life.

The mistake people make? Buying a shorter term to save money now, then needing to renew later at a much higher rate. Longer is usually smarter than shorter.

Convertibility is a feature you choose and pay a little more for, not something every term policy has. Where it exists, it lets you move to permanent coverage without proving your health again, which matters most if your health has changed since you applied.

Two limits to check before you buy. Conversion is normally only allowed up to a set age, not for the whole life of the policy. And the premium you convert at depends on the contract: an original-age conversion prices the permanent policy at the age you first applied, while an attained-age conversion prices it at your age when you convert. That difference can be substantial.

This is called joint coverage, and it comes in two forms:

• Joint first-to-die: the payout happens on the death of whichever person passes first. Often used by couples covering a shared debt or mortgage, since the surviving partner is the one who needs the payout to manage on their own.
• Joint last-to-die: the payout happens only after both people have passed. This is typically used for estate and legacy planning purposes, rather than day-to-day income protection.

Choosing between a joint policy and two separate single-life policies depends on what you're trying to protect, and it's worth talking through with an advisor.

When a life insurance claim is paid out in Canada, the amount goes directly to your named beneficiary free of income tax, and typically avoids probate fees if the beneficiary is named directly rather than your estate.

This is a meaningful advantage compared to other assets, which can be fully taxable on death.

A common starting point looks at your outstanding debts, your income over the years until retirement, and what you already have saved, to estimate your total financial exposure. Most people are more underinsured than they realize once they actually run the numbers. That's not a scare tactic, it's just math.

Part of every whole life premium goes into a cash value account that grows tax-sheltered. Over time, this becomes an asset you can borrow against, use to help pay premiums, or surrender if your needs change.

Think of it as a savings component bundled with life insurance. Not as liquid as everyday savings.

Borrowing is not free of consequence. A policy loan reduces the death benefit by the outstanding balance plus interest until repaid, and borrowing beyond a certain point can trigger a policy gain taxable as income. Ask for the available loan amount and any taxable disposition before you borrow.

Unlike term, which renews at higher rates as you age, whole life premiums are generally locked in at the rate you qualify for when you start the policy.

That predictability is valuable for long-term planning.

Structures vary. Limited-payment policies are designed to be fully paid after a set number of years. Be careful with premium offset illustrations, where projected dividends are shown covering future premiums: because dividends are not guaranteed, premiums may need to resume. Ask what is guaranteed and what is projected.

Death benefit paid to a named beneficiary generally avoids probate, passes tax-free, and doesn't go through the estate. That can mean fewer delays and less of what you leave behind being eaten up by fees.

For high-net-worth individuals, whole life is often used as a strategic "estate equalizer," a way to leave one child a business while another receives an equivalent insurance payout.

Unlike whole life's fixed premiums, universal life lets you pay more when times are good (growing the investment component) or dial back when cash is tight, as long as there's enough in the account to cover the ongoing cost of insurance.

The flexibility is real, but it requires more active management. It's not a set-it-and-forget-it product.

Depending on the carrier, you can direct the accumulation account to more conservative, guaranteed-style options or to market-linked funds with higher growth potential and more volatility. You are choosing from the investment accounts the insurer offers, which determine how the policy credits growth, rather than directly owning the underlying investments.

The catch: poor investment performance or underfunding the policy can put it at risk of lapsing. That's why a UL policy benefits from more active oversight, and ideally, a good advisor keeping an eye on it with you.

This surprises a lot of people. CI pays a lump sum upon diagnosis of a covered condition, not upon death. If you're diagnosed, survive, and recover fully, you can still receive the full benefit, depending on the condition and any survival period that applies.

The money is yours to use however you want: pay down debt, fund treatment not covered elsewhere, cover bills while you're off work, or simply breathe easier financially while you heal.

Beyond the "big three," comprehensive CI policies can also cover conditions like multiple sclerosis, Parkinson's disease, kidney failure, major organ transplant, and more.

The exact list and the definitions used for each condition vary by carrier and product tier, which is another reason shopping around matters. Not all CI policies are equal.

Return of Premium riders mean that if you reach the end of the policy period without making a claim, a portion of what you paid in comes back to you. It costs more upfront, but it softens the "what if I never need it?" feeling considerably.

The exact terms vary by carrier and policy, but many clients find it a meaningful comfort knowing the coverage wasn't entirely a sunk cost.

Most people have life insurance and nothing else. Life insurance covers death. Disability covers the arguably harder scenario: you're alive, bills are due, and you can't work.

The leading causes generally aren't dramatic accidents. They're things like cancer, mental health conditions, and musculoskeletal issues (back, joints).

Insurers intentionally don't replace 100% of income. There needs to remain an incentive to return to work when you're able. Personal disability benefits are generally tax-free if you pay the premiums yourself, which helps close the gap between the replacement percentage and your actual take-home pay.

Group disability through an employer is usually taxable instead (since the employer pays the premium), so the effective replacement can be lower than it looks on paper.

The strongest protection is built around your specific occupation: you're considered disabled if you can't do your specific job, even if you could theoretically do something else. (In a policy contract, this is often labelled your "regular occupation.")

Less robust policies use a broader standard, meaning you only qualify if you genuinely cannot do any job at all. That's a much higher bar to clear.

Segregated fund contracts guarantee at least 75% of the money you put in, paid at the contract's maturity date or on death, regardless of how markets performed. If markets did well, you keep the growth. If they didn't, the guarantee protects your downside.

Two things determine whether that guarantee helps you in practice. Withdrawals reduce the amount the guarantee is calculated on, so taking money out lowers the protected sum. And the maturity date can be anywhere from 10 years after your deposit to the annuitant's 100th birthday or beyond, so check when your guarantee actually becomes payable.

This kind of principal guarantee isn't something a regular mutual fund or ETF can offer. You pay for it through somewhat higher fees, but for the right investor it can be worth it.

Because seg funds are insurance contracts, the value held in them may be protected from creditors when a beneficiary in the protected family class is named: a spouse, child, grandchild, or parent. Naming an irrevocable beneficiary can have the same effect. Regular investment accounts don't offer this.

Two limits matter. The extent of protection is set by each province's insurance legislation and is not the same everywhere. And a designation made to defeat creditors who are already pursuing you can be challenged, so this has to be arranged well before any insolvency, not in response to a claim.

For entrepreneurs, professionals with personal liability exposure, or anyone in a higher-risk business, this can be a meaningful form of asset protection.

Like other insurance contracts, seg funds pass directly to a named beneficiary outside of your estate, which can mean fewer delays and fewer fees compared to assets that go through probate.

For families in provinces where probate costs can be significant, this is a meaningful estate planning advantage.

Pro tip: Keep the segregated fund's beneficiary designation separate from your will. Conflicting beneficiary names between a policy and a will can cause complications, so it's usually best to let the insurance carrier handle that payout directly.

You buy an annuity with a lump sum or several payments over time. The provider then pays you monthly, quarterly, twice a year, or annually. Payments can start right away, or later if you buy a deferred annuity.

Each payment combines three things: interest, a return of your own money, and a transfer from annuity holders who die earlier than expected to those who live longer. That last part is what lets a lifetime annuity keep paying however long you live.

Payout annuities pay an income. A life annuity pays for as long as you live, a joint life annuity continues for a surviving spouse, and a term certain annuity pays for a fixed number of years. Payments can be level, indexed, or variable.

An accumulation annuity, sometimes called an insurance GIC, is different: it pays no income and returns your capital plus interest at maturity. Two newer types introduced in 2019, the advanced life deferred annuity (ALDA) and the variable payment life annuity (VPLA), are tied to registered plans such as an RRSP or RRIF.

• Once you buy, you generally cannot change your mind. Check your contract for a cooling-off period.
• With a life annuity, you might die before receiving back what you paid.
• Every extra feature, such as payments continuing to a spouse, lowers your payment.
• Payments vary between providers for the same product. Compare several and ask for all fees and commissions.
• Many providers set a minimum investment, often around $50,000.
• Your rate is locked at purchase. If interest rates rise afterwards your payment does not, which is why annuities carry interest rate risk.
• A level payment buys less each year as prices rise. An indexing feature protects purchasing power, at the cost of a lower starting payment.
• Tax treatment differs between registered and non-registered savings. Within non-registered, prescribed and accrual treatment change when you pay tax, though not the total over the life of the contract.
• Indexing and prescribed tax treatment pull against each other: an indexed annuity cannot qualify as prescribed. Which matters more depends on your situation.

The TFSA is overseen by the Government of Canada and offered through banks, credit unions, and other institutions. You must be at least 18 to open one.

You contribute money you have already paid tax on, so unlike an RRSP there is no deduction for putting money in. In exchange, interest, dividends, and capital gains earned inside the account are generally tax-free, and so are withdrawals.

A TFSA is a wrapper, not a product. Tax rules allow three forms of arrangement to hold one:

• A deposit with a bank or credit union, working like a savings account or GIC.
• An arrangement in trust, where an institution holds investments for you such as mutual funds, ETFs, bonds, or stocks. This is the common one for investing.
• An annuity contract with an insurance company. Permitted, but far less common than the other two.

A self-directed TFSA is not a fourth type. It is an arrangement in trust where you choose the investments yourself rather than leaving it to the institution.

• Growth and withdrawals are generally tax-free.
• You can withdraw any time, for any purpose, with no tax consequence.
• Withdrawn amounts return to your contribution room the following calendar year.
• TFSA income and withdrawals do not reduce Old Age Security, the Guaranteed Income Supplement, Employment Insurance, the Canada Child Benefit, the Canada Workers Benefit, or the GST credit.

• Contributions are not tax-deductible.
• Contributing beyond your room triggers a tax on the excess for every month it stays in the account. Check the current rate with the CRA.
• Room does not return immediately. Re-contributing in the same calendar year without room is a common and costly mistake.
• Trading with the frequency and sophistication of a professional can cause the CRA to treat the account as a business and tax the income.
• Rules change if you become a non-resident.

An RDSP is opened for a beneficiary who qualifies for the Disability Tax Credit (DTC). Contributions are not tax-deductible and can be made until the end of the year the beneficiary turns 59.

The Canada Disability Savings Grant matches contributions at 300%, 200%, or 100%, depending on adjusted family net income and the amount contributed, up to $3,500 a year and $70,000 over a lifetime. The Canada Disability Savings Bond pays up to $1,000 a year to lower-income beneficiaries, with a $20,000 lifetime limit and no contribution required. Both are available on contributions made until December 31 of the year the beneficiary turns 49.

On withdrawal, your contributions are not taxed, but grants, bonds, investment income, and rollovers are included in the beneficiary's income.

• Grants can match contributions at up to three to one.
• The bond provides money without any contribution.
• Investments grow tax-deferred inside the plan.
• Unused grant and bond entitlements carry forward up to 10 years.

• Under the proportional repayment rule, $3 of grant or bond from the previous 10 years must be repaid for every $1 withdrawn, up to the plan's assistance holdback amount.
• Closing the plan, or the beneficiary's death, triggers repayment of the full holdback.
• Grants and bonds require tax returns filed for the past two years and every year after.
• From the year the beneficiary turns 19, amounts are based on their own income plus a spouse's, not their parents'.
• Losing DTC approval affects the plan.

When you leave an employer where you had a registered pension plan, you may be able to transfer the pension's value into a LIRA. The money keeps growing tax-deferred and is not taxed until you withdraw it as retirement income.

You cannot contribute new money to a LIRA, though you may be able to transfer in other locked-in money. You also cannot withdraw it for a house, a course, or an emergency, which is the main difference from an RRSP.

By December 31 of the year you turn 71, a LIRA must be converted into retirement income, usually a Life Income Fund or a life annuity.

• The rules depend on which pension law governed the original plan. Most private-sector employees fall under provincial rules; some sectors are federal.
• You take on the investment risk the pension plan used to carry.
• In Alberta, if you are 50 or older you may unlock up to 50% when you start a LIF. This is one-time only, and a pension partner's written waiver is required.
• Other exceptions may apply, such as small balances, financial hardship, shortened life expectancy, or non-residency. These vary by jurisdiction.

Once you reach the age set by the pension rules governing your money, you can convert a LIRA, or money coming directly from a pension plan, into a LIF. The money stays invested and you draw income from it.

Each year you must take out at least a minimum, which stops the money sitting untouched indefinitely. You also cannot exceed a maximum, set by pension legislation, designed to stop you spending the fund too quickly. That maximum is the key difference from a RRIF, which has a minimum only.

Withdrawals are taxable in the year received. Like a LIRA, a LIF must be set up by December 31 of the year you turn 71.

• The maximum withdrawal is frustrating if you need a larger sum in one year.
• You carry the investment risk. Poor returns plus steady withdrawals shorten how long the money lasts.
• Unlike a life annuity, a LIF offers no guarantee the money outlives you.
• Minimum and maximum calculations depend on your age, the balance, and the jurisdiction's rules.
• Some jurisdictions allow a portion to be unlocked at conversion, often a one-time opportunity.

An employer, union, or association arranges one contract covering everyone in the group. Plans commonly include prescription drugs, dental, vision, paramedical services, life insurance, disability coverage, and employee assistance programs.

Group life is usually term insurance, covering you while you are employed. Most group plans involve little or no individual medical underwriting, so people who would struggle to get individual coverage because of health history are often covered automatically.

Employer contributions to a private health services plan covering medical and dental are not a taxable benefit.

Employer-paid group term life premiums are a taxable benefit and appear on your T4.

Contributions to group sickness or accident plans are taxable unless the plan is a wage loss replacement plan paying benefits periodically rather than as a lump sum.

Instead of an insurance plan with fixed categories, the employer credits each employee with an amount for the year. The employee decides what to spend it on, within the expenses the Canada Revenue Agency allows.

For reimbursements to be tax-free, the arrangement must qualify as a private health services plan (PHSP). A plan qualifies when everything covered is a medical or hospital expense or an expense connected to one; all or substantially all, generally 90% or more, relates to expenses eligible for the Medical Expense Tax Credit; the plan is in the nature of insurance; and coverage extends only to the employee, their spouse or common-law partner, and household members related by blood, marriage, or adoption.

Where those conditions are met, employer contributions are not a taxable benefit.

• When the credit runs out, there is no more coverage, so a large unexpected expense is not protected against.
• The 90% test is a real constraint. Reimbursing too many non-eligible expenses can make the plan fail to qualify, changing the tax treatment for everyone in it.
• Quebec treats employer HSA contributions as a taxable benefit provincially, unlike the rest of Canada, which meaningfully reduces the value there.
• Whether unused amounts carry forward depends on how the plan is written.
• Sole proprietors without employees face different rules than incorporated businesses.