Dear Rachel: I run a successful business with twenty employees and would like to start offering benefits, but want to get an idea of the cost first. I've looked online but can't find anything. Could you please give me some insight on what I'm getting myself into?
The answer is: it depends... but that's not very helpful! So, I've compiled a list of benefits, design options, and ballpark costs to get you started.
Age - Is your average employee age 35? Great news! Your Life Insurance and Long Term Disability premiums will reflect this. Conversely, if your employees are all in their 60's it can really affect costs.
Gender - Did you know that statistically, women are more likely than men to make a Long Term Disability claim? This can be reflected in your disability premiums when your employee base trends towards one gender or the other.
Volume - Single or family? Depending on whether your employees have dependents, rates for Health, Dental and Vision can vary. Expect to pay approximately double the Single rate for Family coverage.
Life and Dependent Life Insurance, Accidental Death & Dismemberment (AD&D), Short and Long Term Disability and Critical Illness coverage amounts all vary depending on plan design. They can be indexed to earnings or offered as a flat amount; your premium cost is based on the total volume of coverage.
Sample monthly rates:
- Life Insurance can range from $0.10 to $1.00 per $1,000 of coverage; Dependent Life Insurance can range from $1.00 to $4.00 per employee with dependents.
- AD&D from $0.03 to $0.25 per $1,000.
- Short and Long Term Disability can range vastly depending on the plan design; expect to pay between $0.20 and $1.00 per $10 of weekly earnings for Short Term, and between $0.20 and $3.00 per $100 of monthly earnings for Long Term Disability.
- Critical Illness can range from $0.10 to $4.00 per $1,000 of coverage.
Industry - Are your employees working in a professional office at a desk? Or are they involved in manual tasks such as lifting inventory and using heavy machinery? Depending on what industry your business is in, your employees are more likely to make certain types of claims.
Turnover - If you've had a benefits plan for a while, have you marketed your plan more than every three years? Does your employee base have a lot of "churn"? This can add up to extra risk for the insurer that you may not be a loyal customer, or that there will be additional administration required. Insurance carriers love stable employee bases because it helps them to predict claiming patterns more accurately when setting rates.
Extended Health Coverage (EHC): What's driving the cost of EHC is prescription drug coverage; drugs tend to comprise the majority of claims your employees will make. Typical coverage is 80% coinsurance (or 20% out of pocket to the employee), and a marquee plan will offer 100%.
Other "rate affecters": Paramedical practitioner coverage for services such as physio, chiro, and massage. Typical coverage ranges from $200 to $500 per practitioner per year. Hospital room upgrades can include a semi-private or private room.
What You'll Pay: Rates for Health coverage generally range from $30 Single to $150 per employee with dependents per month.
Dental: Dental plans are usually divided into three increasing levels of coverage, Basic, Major and Orthodontic Services. Basic covers regular cleanings and check-ups. The best plans cover recall exams every six months, but this can range to 9 or 12 months. Major coverage is for more in depth work such as crowns and bridges. Orthodontics can be limited to dependent children only or be inclusive of adults.
Other "rate affecters": Each of these coverage levels comes with its own coinsurance level and possible deductibles. Cream of the crop plans offer 100% Basic, 80% Major and 50% Orthodontics, but for some small businesses offering only 80% Basic can be a welcome perk. Coverage maximums also affect the rate; offerings range from $500 to $3,000 for each of Basic and Major or a combination of the two. Ortho usually comes with a lifetime maximum of $1,000 but this can range from $500 to $5,000.
What You'll Pay: Rates for Dental coverage generally range from $30 Single to $150 per Employee with Dependents per month.
Health Spending Accounts / Cost Plus: There are ways to offer flexible personalized coverage without insurance. These arrangements allow small business owners to set annual limits, and employees to spend coverage credits at their own discretion.
Again, it needs to be said that these are ballpark figures and your rates will be specific to your plan and the employees it will cover. If you want to get started with a quote or for more information, please feel free to contact me at email@example.com or 604.872.2866. Or, you can request a quote here.
You may have noticed I'm not a big fan of bank mortgage insurance!
I think that having insurance in place for your family is really important, and if you are going to to the trouble of putting insurance in place ideally you buy a plan that puts you in the driver's seat in terms of the premiums and coverage.
This is a very unselfish and potentially life changing purchase - you're buying it to make sure you and your loved ones are taken care of - so taking a little extra time to find out more is worth it.
#1: coverage should be guaranteed after your policy is approved and issued. This includes the amount you're covered for, the contract wording and premiums.
With a bank plan, you are part of a group contract and not an individual contract. Guess who is the owner and beneficiary of the group contract? The bank! Your bank coverage is not guaranteed, rates are not guaranteed, and yes, unfortunately, the contract wording can be changed by the lender without your approval. Please read the fine print because there may be exclusions such situations as for acts of war, terrorism or a pre-existing medical condition.
With an individual plan, for as long as you continue to pay the premiums, your contract is guaranteed and cannot be changed by the insurer once it is approved and issued.
#2: you should be able to choose your own beneficiaries. With a bank life insurance plan, the bank is always the beneficiary. One of the great benefits of having an individual policy is that you can select exaclty who you want the insurance proceeds to be paid to. These proceeds are paid directly and tax free to your beneficiary who can use the money as needed. That may not necessarily mean retiring the mortgage, as it could be more important to pay for time off work or to fly in family members.
#3: your coverage should be customized and portable. Bank insurance is akin to one-size-fits-all clothing. The plans are the same for every customer and don't take into account the specifics of your life and situation.
With an individual plan, you can tailor the coverage to take into account items other than a mortgage, such as a student loan, university fund for your kids, or the fact that you are a business owner.
If you change lenders, your insurance should move with you uninterrupted. Individual insurance is totally portable and not impacted if you change jobs, change cities, or pay off or move your mortgage. With a bank plan, your coverage ends if you change lenders.
#4: critical illness insurance should be comprehensive. Some bank plans cover only three illnesses under their plans, and there may be pre-existing conditions clauses that you aren't aware of in the fine print.
With an individual CI plan, you can design your plan to include more than 20 conditions and even opt to get a return of premiums if no claims are made. Plus, your coverage and costs are guaranteed.
We're often able to save our clients 30% compared to their current bank plan premiums. For a free rate comparison of your bank mortgage insurance and individual protection, please call us at 604.872.2866 or request a quote here.
Rachel von Sturmer
Depending on the type and amount of insurance you are applying for, as well as your age, you will be required to provide certain information and medical evidence in order to qualify. This is paid for by the insurer.
Commonly, a nurse will be sent to your home or office to take a blood and urine sample and do a health history questionnaire with you. They will also take blood pressure readings, and measure your height and weight.
For certain age groups and for higher insurance amounts, the nurse may do an electrocardiogram reading (EKG). An EKG records electric impulses of the heart through a band across your chest while you rest.
There are several things you can do to prepare for your insurance medical, and make sure you are going to get the best possible results:
True Benefits has a comprehensive tip sheet to help our clients get the best possible medical results.
For more information, please contact our office at 604.872.2866 or firstname.lastname@example.org.
Rachel von Sturmer, BA, GBA, CFP
When setting up your payroll system or doing T4s, you'll need to know which employee benefits are taxable.
The benefits for which an employer’s contributions are taxable are: Life & Dependent Life Insurance, AD&D Insurance, Critical Illness Insurance and Provincial Medical Services Plan premiums.
For other group benefits such as: Extended Health Care, Vision Care, Dental Care and Health Spending Accounts, employer contributions are tax-free.
In the case of Disability Insurance, employer contributions have potential taxation consequences for the employee if claims are paid.
Group Life & Dependent Life Insurance
· Employer paid life insurance premiums are a taxable benefit to the employee, and added to the employee’s T4
· Death Benefits are not taxable to the recipient
Accidental Death & Dismemberment & Critical Illness (Non-ROP) Insurance
· Employer paid life insurance premiums are a taxable benefit to the employee, and added to the employee’s T4 (new for 2013)
· Benefits are not taxable to the recipient
Extended Health Care, Vision Care, Dental Care and Health Spending Accounts (HSA)
· Employer paid premiums are not a taxable benefit to the employee
Disability Insurance (Weekly Indemnity and Long Term Disability)
· Employer paid premiums are not a taxable benefit to the employee
· Any employer contributions to the premium will result in disability benefits paid to employees to become subject to income tax
· Employers may choose to do payroll deductions from employees to ensure disability claim payments are tax free, OR, employers may pay the premiums and employees will pay income tax on the disability benefits received
· Some companies choose to add the disability premiums to each employee’s T4 as is done with Life Insurance; however, the CRA may not find this an acceptable method of making the benefits tax free
Provincial Medical Services Plans such as BC MSP
· Employer paid premiums are a taxable benefit to the employee
This information is provided for the purposes of designing benefits cost sharing arrangements; for detailed tax information please consult with your business accountant.
Many clients come to me looking for insurance after an exciting event in their life, like getting married, buying a new home, but most especially when they are starting a family. It is natural to start thinking about the future of your family when you are expecting a new member to arrive soon!
These days, insurers see quite a few applications from expecting parents. The good news is that most insurance companies will welcome your life insurance or critical illness application during pregnancy or just after delivery. If your pregnancy has been normal and healthy, the underwriting will be very similar to that for non-pregnant applications. Underwriting is when the insurer reviews the medical history and potentially also medical evidence that you have provided in your application.
In most cases, insurers can issue a standard life insurance or critical illness insurance policy, with little or no change in the terms. Disability insurance applications may have to be put on hold until after your baby's delivery.
For extended health benefits, such as individual health and dental plans, in many cases a standard policy can be issued.
With life and critical illness insurance applications, insurers will adjust their underwriting standards to take into account changes that are normally seen in pregnancy but don't affect your ability to get coverage, such as weight gain (approximately 15 to 40 pounds), blood profile (such as increased cholesterol, or lower iron), and innocent heart murmurs (due to increased blood volume).
Unfortunately, there are some situations where the insurer may ask you to postpone your application until after the baby is born: if you have been diagnosed with gestational diabetes or have a history of gestational diabetes, toxemia / pre-eclampsia, full eclampsia, and HELLP syndrome. High risk pregnancies due to an existing medical condition also fall into this category.
If you are pregnant and looking into insurance, please feel free to call me at 604.872.2866 to talk about the specifics of your situation. I've helped many preganant clients get coverage and I'd be happy to answer any questions you may have!
Rachel von Sturmer
After starting a successful business, every entrepreneur begins to wonder about whether they can now afford health and dental coverage. They may have given up employer benefits in order to pursue their dreams, but now they have a big dental appointment looming and they want them back.
There are several solutions designed specifically for the self-employed that are cost effective, tax deductible and straightforward to set up, including: individual health and dental plans, private health services plans (PHSP), and small business group insurance plans.
Individual Health Plans are purchased from an insurer to cover supplementary health and dental expenses such as prescriptions, cleanings, and specialists such as chiropractors and registered massage therapists.
The health and dental coverages are bundled into modular basic, mid-range or enhanced plan designs. Additional coverages can be purchased for items such vision care or travel insurance. Basic plans can usually be obtained without medical evidence, but be forewarned, the top tier coverage bundles generally require a medical questionnaire, and approval is not guaranteed.
These plans are great for sole-proprietors or businesses with one or two employees. There are also products specifically designed for people who have just left an employer plan, so make sure this option is explored within 60 days of leaving an employer group plan if applicable.
Premium costs are based on several factors such as the plan design, applicant’s age, and how many people will be covered under the policy. For those under age 45, expect to spend between $50 and $100 per month per person. The premiums may be eligible for deduction as a business expense.
A Private Health Services Plan (PHSP) is a plan set up between an employer and a trust company for the tax-free reimbursement of medical and dental expenses. It is not an insured plan, but allows an employer to provide benefits in a tax-effective manner under Section 248(1) of the Income Tax Act.
This is fast becoming one of the most popular methods for entrepreneurs to manage health costs. Any expenses that qualify for the Medical Tax Credit will qualify under a PHSP. This includes a wide variety of items that range from laser eye surgery, to medical equipment and orthodontics (Note: cosmetic medical or dental procedures are excluded from coverage).
A PHSP can be set up for sole-proprietors or an incorporated company. Under current CRA guidelines, sole-proprietors have restrictions on the amount of claims that can be submitted through the plan each year. To set up a PHSP, expect to spend between $200 and $400 initially.
Administration fees of 10% are charged on paid claims, and are the only ongoing cost, which makes them a great option for the budget conscious. All of the set-up and administrative fees, along with the paid claims, are deductible as business expenses.
Employee Benefit Plans allow small employers the opportunity to offer staff coverage at group rates. One of the biggest perks of group coverage is that the benefits are provided to employees without the need to disclose medical evidence or medical history.
Increasingly, benefits are being implemented to retain valued staff and lure key people away from larger businesses. Insurers have improved their offerings to allow small employers to provide customized plan designs.
Some of the most popular benefits include: life and disability insurance, health, dental and vision care, and employee wellness programs. Flexible health spending accounts, which operate like a bank account for health and dental costs, and critical illness insurance, which pays a tax-free lump sum benefit in the event of a covered condition such as cancer or heart attack, have recently become available for small employers.
A group plan is available for companies with two or more employees; however, feasibility increases when there are at least five. There is ongoing administration required in the form of updating the insurer of new hires, terminations, and changes in earnings, in addition to educating employees about the coverage. All eligible employees are expected to participate, and cannot pick and choose their coverage.
Costs for group benefits can range significantly and will be heavily dependent on the coverage design, employee demographics and employer’s industry. It definitely pays to have your advisor shop for the best rates from a variety of insurers. Each year, the plan will renew and the insurer will have an opportunity to adjust your rates based on plan utilization. This can mean that heavily used plans will result in rate increases for the group, so looking into a pooled plan arrangement may be beneficial.
Group plan premiums are deductible as business expenses, and the benefits can often be provided to employees on a tax-free basis.
Entrepreneurs who are interested in learning more about their health and dental coverage options should talk to an advisor who specializes in working with small business owners.
Rachel von Sturmer is a Benefits Specialist with True Benefits Financial. She holds the Certified Financial Planner (CFP) and Group Benefits Associate (GBA) designations, and can be reached at email@example.com or 604.872.2866.
Did you know the following facts about mortgage and creditor insurance offered through banks and trust companies?
1. They are “age banded” and your rates may increase as you enter the higher age bands. The premium that the bank quotes you may be valid for only one year.
2. These insurance programs do not offer contractually guaranteed rates. The insurer may increase their rates at any time without consultation.
3. The program can be cancelled with thirty days notice, potentially leaving you without mortgage life or critical illness insurance coverage.
4. Coverage terminates if you move your mortgage to another lending institution.
5. Creditor mortgage coverage does not leave you the option of taking the death benefit in a lump sum cash payment and continuing to pay the mortgage, which may be advantageous in a rate-increasing environment.
6. It also does not allow you the option of retaining the insurance coverage once your mortgage is paid off.
7. Unlike an individual Term Life Insurance policy, creditor mortgage coverage is not a legal contract that can only be terminated by you.
8. If a spouse dies prematurely, the other spouse may no longer be insured.
9. When a mortgage is retired early through a bank or trust company, a penalty is assessed. This penalty generally equals approximately three months interest. This penalty cannot be insured as part of the “creditor mortgage” coverage offered by banks and trust companies. However, it can be insured as part of an individual term insurance policy.
10. Under creditor life coverage people with health issues are not offered coverage. Generally, if any of the health questions are answered “yes” on the creditor’s application, coverage is automatically denied – and no additional underwriting takes place. Individual policies applications offer investigation into the history and current status of the health condition and, in many cases, coverage can be obtained at a slightly higher than normal premium.
The advantages of an Individual Term Life insurance policy are:
1. Premium remains consistent and guaranteed for the term of your policy.
2. Coverage will never decline even as you pay down your mortgage.
3. You can choose who the beneficiaries of your policy are.
4. In the event of a premature death, your beneficiaries can either pay off the mortgage right away or invest the money - it’s their choice.
5. You can keep the coverage even after you pay off your mortgage or move to another lender.
6. Only you can cancel the policy - not the bank that holds your insurance.
7. The insurance company does a full underwriting before the policy is issued, not at time of claim.
8. If one spouse dies prematurely, under a combined plan the other spouse is still insured.
One of the most common questions about life insurance we get is how to qualify for it. What is "evidence of insurability", what is a pre-existing condition, and what if I have been diagnosed with a major illness like cancer, a heart attack, or diabetes, or declined for insurance in the past?
It is not impossible to qualify for insurance even if you have been diagnosed with a serious illness. Insurers call a medical condition that has been diagnosed a "pre-existing condition". The rates may not be standard, but insurers may be able to offer coverage depending on the specific condition, how long ago you were diagnosed, and your current treatment and lifestyle.
True Benefits has recently been able to secure coverage for clients with past: skin cancer, Type 1 Diabetes, Gestational Diabetes, heart attack, and cancer. Other situations that we've been able to secure coverage for clients include: past drug or alcohol abuse, and dangerous sports or avocations such as scuba diving, heli-skiing, and racing cars.
Every insurer asks for medical evidence with the application for insurance. The type of evidence will depend on several factors: the applicant's age, the amount of coverage applied for. To give you an idea of the range, a 25 year old applying for $200,000 of insurance may not be required to provide any medical evidence besides a health questionnaire, whereas a 60 year old applying for $2 million of coverage will need to see a nurse for blood and urine samples, a resting EKG, blood pressure, weight and height readings.
If you have been diagnosed with a medical condition, declined for insurance or offered non-standard rates in the past (also called a "rating" or "substandard rates"), insurers will also likely ask for an APS (Attending Physician Statement).
All of these items are paid for by the insurer, and True Benefits can arrange to have the lab results sent to your doctor so you can review them.
One of the best things to do if you suspect getting insurance may be a challenge is to ask your advisor to gather preliminary guidances for you. This is something we do for all of our clients.
A confidential description of your medical history, lifestyle, build, age and treatments is provided to the top Canadian underwriters (no names, birthdates or other identifying information should be provided to the carrier in a preliminary request). The insurer can then provide us with an estimate of potential rates, allowing the client to choose the most attractive insurer to apply with. It is best to do this before completing any applications.
A recent preliminary guidance for a client with a history of cancer showed that one carrier was able to offer standard rates, whereas the others indicated sub-standard ratings would likely be applied. The client applied to the insurer with the best offer and was able to obtain standard rates. The guidances allowed True Benefits to recommend the best underwriter, whereas if we had gone with the insurer offering the "cheapest" standard rates, the client may have ended up paying more than necessary.
Did you know that up to one third of applications for life and critical illness insurance are rated or declined? If you have any questions about applying for insurance, please feel free to call us at 604.872.2866 to discuss.
Assuris is a not-for-profit organization that protects Canadian policyholders against a loss of benefits due to the financial failure of a member company. All life insurance companies in Canada are required, by the federal, provincial and territorial regulators, to become members of Assuris. This means if you buy a policy from a Canadian insurer, you are protected. What is the coverage offered by Assuris? If your life insurance company fails, your policies will be transferred to a solvent company. Assuris guarantees that you will retain at least 85% of the insurance benefits you were promised. Insurance benefits include Death, Health Expense, Monthly Income and Cash Value. Your deposit type products will also be transferred to a solvent company. For these products, Assuris guarantees that you will retain 100% of your Accumulated Value up to $100,000. Deposit type products include accumulation annuities, universal life overflow accounts and dividend deposit accounts. Products that are covered by Assuris: Life Insurance, Critical Illness Insurance, Health Expense, Disability Income, Long Term Care Insurance, Annuities, Segregated Funds and Group Insurance. True Benefits sells only Canadian insurer products. All of our clients have Assuris' protection. For more information, visit www.assuris.ca.
Assuris is a not-for-profit organization that protects Canadian policyholders against a loss of benefits due to the financial failure of a member company.
All life insurance companies in Canada are required, by the federal, provincial and territorial regulators, to become members of Assuris. This means if you buy a policy from a Canadian insurer, you are protected.
What is the coverage offered by Assuris?
If your life insurance company fails, your policies will be transferred to a solvent company. Assuris guarantees that you will retain at least 85% of the insurance benefits you were promised. Insurance benefits include Death, Health Expense, Monthly Income and Cash Value.
Your deposit type products will also be transferred to a solvent company. For these products, Assuris guarantees that you will retain 100% of your Accumulated Value up to $100,000. Deposit type products include accumulation annuities, universal life overflow accounts and dividend deposit accounts.
Products that are covered by Assuris:
Life Insurance, Critical Illness Insurance, Health Expense, Disability Income, Long Term Care Insurance, Annuities, Segregated Funds and Group Insurance.
True Benefits sells only Canadian insurer products. All of our clients have Assuris' protection. For more information, visit www.assuris.ca.
"Rachel is professional, courteous and very knowledgeable while providing outstanding customer service. She is well prepared, delivers personal service, and understands our desire to provide the best possible benefit plan to our employees in the most cost effective manner."
"I appreciate having a person who is both local and accessible, and was impressed with the initial presentation outlining the options available to us. It is extremely helpful to have Rachel advocating on our behalf."
"True Benefits has totally met our needs. Rachel gives personalized attention, and is very thorough. She has suggested many good ideas that we have used to benefit our employees."
"I have referred many clients to Rachel in the past, and without exception, they have all commented to me on her professionalism, vast industry knowledge, great service, and fast response time."
Thank you for everything that you have done for our family. We are grateful for all your hard work. We look forward to working with you again in the future.
"Thank you Rachel. Great service as always. You anticipated our needs."
"True Benefits has an understanding and awareness of the importance of an effective benefits program. They're proactive in looking for cost effective improvements to plan design and cost containment strategies. My expectations were exceeded - Rachel delivered as promised in a timely manner."
I used True Benefits to sort through a tricky health insurance issue related to immigration status and an expired work permit. Rachel recommended a cost effective solution and quickly verified the policy was the best choice for my situation. My new health coverage was effective within 2 hours of my initial call to Rachel! I highly recommend working with Rachel at True Benefits for cost effective solutions and friendly and efficient service.
Your attention to detail and willingness to never to never take "no" for an answer on my behalf left me in awe of your business ethics.
I will continue to use your services, based on your work ethic and my ability to trust that the policy you are suggesting is perfect for me.