August 11th, 2020

The whole world is searching for a cure

By Medicine Hat News Opinion on July 11, 2020.

The world is looking for a cure for COVID-19. I truly home that each of you remain safe and healthy until a vaccine is found. Have you ever gotten really sick? How did it affect you? When I was a teenager I got Scarlett fever. It’s not a common ailment but it can be very serious if left untreated. It has some common elements of COVID-19 in that it spreads via droplets when someone coughs and can lead to more serious complications like pneumonia and organ damage. My world changed very quickly from a healthy, active lifestyle to a fragile and sensitive point. I remember being quarantined in my room for a few days and finally recovering. I will never forget that time and how it helped me realize the vulnerability of my health. During the CO-VID 10 crisis, some people have been affected physically. However, almost all people have been affected economically. So is there a financial cure for CO-VID 19? Yes, there is and it lies in the proper application of wealth planning using life insurance

A financial cure to COVID-19 means that you are immune to the economic fluctuations of the financial markets. What financial stage of life are you in? Would you like to have a cure from the volatility? I think recent events have shown us all that even if you were financially healthy your world can change quickly and dramatically. However, there is a vaccine provided by the life insurance industry and with Canada, has been here over 150 years. It is cash value life insurance. Yes, cash is king and especially during volatile markets.

Cash value life insurance is also known as whole life insurance. In past articles I have spoken about how you can use life insurance as a tax shelter similar to a tax free savings account and build your retirement portfolio within a policy. It is a vaccine right now for many reasons. Firstly, it cannot have a negative return. Indeed, right now the cash values are still positive and doing well. Wow! That is amazing given that the markets swung approx. 35% last month. How can this be? Well, insurance companies are conservative in nature and operate very differently than a traditional investment. Insurance companies are regulated by government and have stringent capital requirements to ensure that they are positioned to pay when claims occur. They like to invest in boring, low risk investments and like to buy things for the long term as in 30, 40 or 50 years. They are allowed to smooth out their investment returns over a rolling 5 years, which provides stability and tax benefits. They pay dividends that are formed from more than just investment returns. The dividend is additionally generated by mortality gains, policy loan interest that the insurance company may receive from policy holders if they take out a loan and lapses if anyone cancels early. These are the main elements but there are many other factors involved. These policies may also have guaranteed cash values baked into the contract as well. Therefore, it may actually still increase in value during volatile markets. Remember, life insurance companies are the oldest companies in Canada and there is a reason for it. You can park your investments within an insurance policy to vaccinate them from the volatility of the financial markets. I am not sure if you already have a vaccine in place or not but I do know that you still have time to take a proactive approach to your financial health. There is peace of mind when you create immunity.

Steve Meldrum B.Mgt. CFP CLU is the founder of Swell Private Wealth Ltd. For over a decade he has specialized in helping individuals and businesses expand protect and perpetuate their wealth. For further information or tailored advice, contact him at 403-487-0490, or connect on social media.

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