Details of the EXPANDED Canada Emergency Wage Subsidy

On August 11th, the Government of Canada updated the calculator and Canada.ca with the changes to the Canada Emergency Wage Subsidy (CEWS).

If you’re a business owner who has suffered losses as a result of COVID-19 and did NOT qualify previously for CEWS, you may now qualify.

The changes expand the program to include more businesses for periods 5 to 9 (July 5 to November 21, 2020) and have been published on Canada.ca, here are some of the changes:

  • the subsidy rate varies, depending on how much your revenue dropped

  • if your revenue drop was less than 30% you can still qualify, and keep getting the subsidy as employees return to work and your revenue recovers

  • employers who were hardest hit over a period of three months get a higher amount

  • employees who were unpaid for 14 or more days can now be included in your calculation

  • use the current period’s revenue drop or the previous period’s, whichever works in your favour

    • for periods 5 and 6, if your revenue dropped at least 30%, your subsidy rate will be at least 75%

  • even if your revenue has not dropped for the claim period, you can still qualify if your average revenue over the previous three months dropped more than 50%

  • the maximum base subsidy rate is 60% in claim periods 5 and 6

  • the maximum base subsidy rate will begin to decline in claim period 7, gradually reducing to 20% in period 9

The Government of Canada has updated the CEWS calculator to reflect these changes and can be found here:

How Will COVID-19 Impact the Insurance Industry?

During this stressful and challenging time, many are wondering what effect COVID-19 could have on their life insurance. Some may be worried that the insurance companies would make changes to their existing policy due to coronavirus concerns, resulting in an increase in their premiums or a restriction to their coverage. It should be reassuring to all that insurance companies are generally not able to change the contractual provisions of the insurance policies that are in force.

This does not mean, however, that future products will not be changed to protect the insurer against unforeseen events or that the insurance companies are doing business as usual. It is possible that they will make changes to their future products as a result of their experience with COVID-19 but these changes are not likely to be immediate.

Insurance companies rely on actuarial (mortality) tables to price their products. Once this pandemic is over and all the data is processed, there is a possibility (albeit slight) that actuarial tables might have to be amended which would necessitate an increase in premiums. This may take some time, but if you consider that the cost of life insurance is going up each year as you get older, one thing is certain, life insurance will cost more in the future. How much COVID-19, or other events yet to unfold could impact the pricing, is yet to be determined.

It may bring comfort to know that in Canada, life insurance companies are required by the Office of the Superintendent of Financial Institutions (OSFI) to run a pandemic scenario each year. It is assumed that pandemics will occur once every 100 years. Considering the last major global pandemic was the Spanish Flu ending in 1919, the modeling would appear to be accurate. As a result of the testing, life companies are adequately reserved for pandemics and since it is already built into the pricing, unlikely to increase premiums solely due to COVID-19.

The immediate challenge in obtaining new life, disability and critical illness protection will be in the area of underwriting – the process of assessing and approving the insured for coverage.

Life insurance companies prefer to deal with certainty

While COVID-19 might be like other viruses, it is new and unique. “We just don’t know” is how many medical professionals preface their reply to many questions about this virus. Some have suggested that even after recovering from COVID-19 there might be some delayed impact on your future health.

Going forward, insurance companies may amend some of the questions on their life applications dealing with medical history. This certainly might have a significant effect on disability insurance or critical illness applications. It is possible that we may see an increase in policies issued with exclusions as well as an increase in cost.

Applying for new coverage today

Life insurance companies require satisfactory medical evidence in order to issue a life policy at standard rates. This usually involves a paramedical exam and possibly a report from any doctor who has treated the applicant. The immediate problem is, with social distancing, it is now impossible to obtain paramedical examinations. The major providers of paramedical examination services have suspended the face to face examination. Also, there is no opportunity to obtain blood or urine tests on the proposed insured.

Fortunately, many life providers have recently increased the amounts of coverage that could be purchased without having to be examined or provide bodily fluids. The insurance company always reserves the right to ask for additional information and requirements, but for many applications, a telephone interview may be all that is necessary.

Changing the procedures that insurance companies have been following for decades to a format that accommodates no face to face interaction is taking time to implement. In the short term, this will increase the length of time necessary to have new coverage underwritten, settled and put in force.

Concerns with international travel

In today’s environment, if you are applying for life insurance and you have been out of the country within the past 30 days, your application will be postponed for a minimum of one month.

It is conceivable that you could be denied or postponed coverage if you plan on travelling to any of the hot spots in the next 12 months – these will likely include Italy, Spain and possibly parts of the United States. We just don’t know at this point how this will unfold. It is possible that foreign travel will likely be looked at very closely in the future.

What else could happen?

Possibly insurers could build into their future policies provisions that would protect them from unexpected or unusual losses. Hopefully, this will not happen, but at this point, nothing is certain.

A frequently asked question right now is – Should I buy my extra life insurance now or wait?

Many people are feeling more financially vulnerable right now and want to make sure they have adequate protection for their families. The bottom line is, if you have been considering increasing the amount of your life insurance coverage don’t let the immediate challenges stop you as I can assist you with the process.

Reach out to me if you have any questions. As always, please feel free to share this information with anyone you think would find it of interest.

Copyright @ 2020 FSB Content Marketing – All Rights Reserved

Canada Emergency Wage Subsidy expanded to include more businesses!

On July 17th, Finance Minister Bill Morneau announced proposed changes to the Canada Emergency Wage Subsidy (CEWS) that will expand the number of businesses that qualify for the program.

The major changes he announced were:

“First, we’re proposing to extend this program through until December 19th.”

“Secondly, we know that it’s also critical that we have the businesses able to continue to hire people even as they get into the restart and we know that the requirements in businesses have a 30% reduction in revenue is not helpful in that regard.”

“businesses will get the wage subsidy if they’ve had any reduction in revenue so it’s going to go all the way down to businesses who even have a small amount of revenue reduction they’ll get the subsidy and it will be in proportion to the amount of the revenue reduction that they will get a subsidy.”

“Third, we’ve tailored the program so that it helps those organizations that are particularly hard hit. So for organizations with over a 50% reduction of revenue over the last few months they’ll actually get a top up, they’ll get up to 25% additional subsidy so that they can deal with this really challenging time for their businesses.”

“What that means for businesses, those that were already in the program that have that 30% revenue decline that will continue to be the case for July and August. For those businesses as I said that are particularly hard hit it will be even more. It will go up to 85% wage subsidy or $960 per person.”

“For those businesses less hard hit but still hit they will be able to get into the program. The program will continue but as we restart, the program will be tailored to help businesses appropriately in that restart.”

The new rules will be retroactive to July 5th but require parliamentary approval.

Canada Emergency Wage Subsidy extended into December!

On July 13th, Prime Minister Justin Trudeau announced the extension of the Canada Emergency Wage Subsidy (CEWS) until December. The Prime Minster stated:

“You’ve seen me come out to talk with Canadians about what we’re doing to help you and your family, your employer, your local businesses deal with this Pandemic.

We’re going to continue to do that vital work.

This week we’ll be announcing an extension to the wage subsidy program until December to give greater certainty and support to businesses as we restart the economy.”

More details will be released during the week.

Term Life Insurance – Two Valuable Options

For many Canadians, especially those with young families, term life insurance is most often the product of choice for protecting one’s family.  The major reason for this is that it is the lowest entry-level cost to purchase life insurance.

While permanent, cash value life insurance presents tax-advantaged opportunities for growth, the paradox of this type of insurance is that it is cheapest when you can least afford it.  For those wanting to make sure that their loved ones are adequately protected should they die, term life insurance is an easy decision.

The good news is that once the life insurance is in place, you have protection guaranteed for the lifetime of the policy contract.  The bad news is that with renewable term life insurance, upon renewal, the premiums increase substantially.  

How to keep your insurance premiums affordable

  • Reapply before the renewal date to obtain current rates for a person in good health

  • Convert at the earliest date possible to level cost or cash value insurance

The amount of the premium increase can be reduced if the insured re-applies for the coverage by providing new medical and other underwriting evidence.  Sadly, the possibility of becoming fully or partially uninsurable before the renewal date exists.  Should this occur and the coverage is still required, the insured might have no other option but to renew if it were not for two particularly important provisions contained in most term insurance policies.  These two options go a long way in protecting your future insurability. 

Two options to consider

  • Conversion option – At any time before age 70 or 75 (depending on company) the term insurance policy can be “converted” to a permanent plan without any medical evidence.  This is a valuable option for an insured who now requires lifetime protection for estate planning needs, such as payment of taxes upon death.  There is no medical exam required for this option, so your insurability is not considered.  Generally, the term policy can be converted to any permanent plan offered by the company including Whole Life, Universal Life or Term to Age 100.

  • The Exchange Option – The “exchange” option allows you to switch to another term insurance policy with no evidence of insurability. This feature allows for the policyholder to start a term policy with the lowest entry level premium (10 year renewable term) and without any risk of losing his or her insurability exchange it for a 20 year or 30 year renewable term during the first five policy years.  This option generally can only be used once but the exchanged policy would still have the full conversion option available for a future non-medical change to permanent coverage. While the conversion option is a feature included on almost all term life plans, the availability of the exchange option may not be available with all term insurance policies.  

If you have recently purchased a term insurance policy and want to look at securing rates for a longer term, you may want to investigate exercising either your conversion or term exchange option.  

If you are currently considering purchasing term insurance, you will want to make sure that the plan you are considering offers both conversion and term exchange features.  

Reach out to me if you have any questions. As always, please feel free to share this information with anyone you think would find it of interest.

Copyright © 2020 FSB Content Marketing – All Rights Reserved

CERB Extended | Business Owners who did not qualify previously – expanded CEBA starts June 19th

CERB Extended 2 more months

Great news for Canadians out of work and looking for work. The CERB will be extended another 8 weeks for a total of up to 24 weeks.

As the country begins to restart the economy, the Federal government will be making changes to the program to encourage Canadians receiving the benefit to get people back on the job. From Prime Minister Justin Trudeau’s website:

“The Government of Canada introduced the CERB to immediately help workers affected by the COVID-19 pandemic, so they could continue to put food on the table and pay their bills during this challenging time. As we begin to restart the economy and get people back on the job, Canadians receiving the benefit should be actively seeking work opportunities or planning to return to work, provided they are able and it is reasonable to do so.

That is why the government will also make changes to the CERB attestation, which will encourage Canadians receiving the benefit to find employment and consult Job Bank, Canada’s national employment service that offers tools to help with job searches.”

More small businesses can apply for CEBA $40,000 no-interest loans

Applications for the expanded Canada Emergency Business Account (CEBA) will be accepted as of Friday, June 19th, 2020. Small businesses that are:

“… owner-operated small businesses that had been ineligible for the program due to their lack of payroll, sole proprietors receiving business income directly, as well as family-owned corporations remunerating in the form of dividends rather than payroll will become eligible this week.”

Apply online at the financial institution your business banks with:

There are restrictions on the funds can be used. From their website https://ceba-cuec.ca/:

“The funds from this loan shall only be used by the Borrower to pay non-deferrable operating expenses of the Borrower including, without limitation, payroll, rent, utilities, insurance, property tax and regularly scheduled debt service, and may not be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.”

Insurance Planning for Business Owners

For business owners, making sure your business is financially protected can be overwhelming. Business owners face a unique set of challenges when it comes to managing risk. Insurance can play an important role when it comes to reducing the financial impact on your business in the case of uncontrollable events such as disability, critical illness or loss of a key shareholder or employee.

This infographic addresses the importance of corporate insurance.

The 4 areas of  insurance a business owner should take care of are:

  • Health

  • Disability

  • Critical Illness

  • Life

Health: We are fortunate in Canada, where the healthcare system pays for basic healthcare services for Canadian citizens and permanent residents. However, not everything healthcare related is covered, in reality, 30% of our health costs* are paid for out of pocket or through private insurance such as prescription medication, dental, prescription glasses, physiotherapy, etc.

For business owners, offering employee health benefits make smart business sense because health benefits can form part of a compensation package and can help retain key employees and attract new talent.

For business owners that are looking to provide alternative health plans in a cost effective manner, you may want to consider a health spending account.

Disability: Most people spend money on protecting their home and car, but many overlook protecting their greatest asset: their ability to earn income. Unfortunately one in three people on average will be disabled for 90 days or more at least once before the age of 65.

Consider the financial impact this would have on your business if you, a key employee or shareholder were to suffer from an injury or illness. Disability insurance can provide a monthly income to help keep your business running.

Business overhead expense insurance can provide monthly reimbursement of expenses during total disability such as rent for commercial space, utilities, employee salaries and benefits, equipment leasing costs, accounting fees, insurance premiums for property and liability, etc.

Key person disability insurance can be used to provide monthly funds for the key employee while they’re disabled and protect the business from lost revenue while your business finds and trains an appropriate replacement.

Buy sell disability insurance can provide you with a lump sum payment if your business partner were to become totally disabled. These funds can be used to purchase the shares of the disabled partner, fund a buy sell agreement and reassure creditors and suppliers.

Critical Illness: For a lot of us, the idea of experiencing a critical illness such as a heart attack, stroke or cancer can seem unlikely, but almost 3 in 4 (73%) working Canadians know someone who experience a serious illness. Sadly, this can have serious consequences on you, your family and business, with Critical Illness insurance, it provides a lump sum payment so you can focus on your recovery.

Key person critical illness insurance can be used to provide funds to the company so it can supplement income during time away, cover debt repayment, salary for key employees or fixed overhead expenses.

Buy sell critical illness insurance can provide you with a lump sum payment if your business partner or shareholder were to suffer from a critical illness. These funds can be used to purchase the shares of the partner, fund a buy sell agreement and reassure creditors and suppliers.

Life: For a business owner, not only do your employees depend on you for financial support but your loved ones do too. Life insurance is important because it can protect your business and also be another form of investment for excess company funds.

Key person life insurance can be used to provide a lump sum payment to the company on death of the insured so it can keep the business going until you an appropriate replacement is found. It can also be used to retain loyal employees by supplying a retirement fund inside the insurance policy.

Buy sell life insurance can provide you with a lump sum payment if your business partner or shareholder were to pass away. These funds can be used to purchase the shares of the deceased partner, fund a buy sell agreement and reassure creditors and suppliers.

Loan coverage life insurance can help cover off any outstanding business loans and debts.

Reduce taxes & diversify your portfolio, often life insurance is viewed only as protection, however with permanent life insurance, there is an option to deposit excess company funds not needed for operations to provide for tax-free growth (within government limits)  to diversify your portfolio and reduce taxes on passive investments.

Talk to us about helping making sure you and your business are protected.

Small Businesses! Applications for Canada Emergency Commercial Rent Assistance starts May 25th

Lower rent by 75% for small businesses that have been affected by COVID-19

The Application portal for the Canada Emergency Commercial Rent Assistance (CECRA) opens at 8:00am EST on May 25th. The description from the CMHC website:

“Canada Emergency Commercial Rent Assistance (CECRA) for small businesses provides relief for small businesses experiencing financial hardship due to COVID-19. It offers unsecured, forgivable loans to eligible commercial property owners to:

  • reduce the rent owed by their impacted small business tenants

  • meet operating expenses on commercial properties

Property owners must offer a minimum of a 75% rent reduction for the months of April, May and June 2020.”

Application Dates

Due to expected high volumes of applications, the application dates will be as follows:

  • Monday – Property owners who are located in Atlantic Canada, BC, Alberta and Quebec, with up to 10 tenants who are eligible for the program

  • Tuesday – Property owners who are located in Manitoba, Saskatchewan, Ontario and the Territories, with up to 10 tenants who are eligible for the program

  • Wednesday – All other property owners in Manitoba, Saskatchewan, Ontario and the Territories

  • Thursday – All other property owners in Atlantic Canada, BC, Alberta and Quebec

  • Friday – All

Eligibility

From the CMHC website:

“To qualify for CECRA for small businesses, the commercial property owner must:

  • own commercial real property* which is occupied by one or more impacted small business tenants

  • enter (or have already entered) into a legally binding rent reduction agreement for the period of April, May and June 2020, reducing an impacted small business tenant’s rent by at least 75%

  • ensure the rent reduction agreement with each impacted tenant includes:

    • a moratorium on eviction for the period during which the property owner agrees to apply the loan proceeds, and  

    • a declaration of rental revenue included in the attestation

The commercial property owner is not and is not controlled by an individual holding federal or provincial political office.

CECRA will not apply to any federal-, provincial-, or municipal-owned properties, where the government is the landlord of the small business tenant.

Exceptions

  • Where there is a long-term lease to a First Nation, or Indigenous organization or government, the First Nation or Indigenous organization or government is eligible for CECRA for small businesses as a property owner.

  • Where there are long-term commercial leases with third parties to operate the property (for example, airports), the third party is eligible as the property owner.

  • Also eligible are post-secondary institutions, hospitals, and pension funds, as well as crown corporations with limited appropriations designated as eligible under CECRA for small businesses.

NOTE: Small businesses that opened on or after March 1, 2020 are not eligible.

* We define commercial Real Property as a commercial property with small business tenants. Commercial properties with a residential component and multi-unit residential mixed-use properties would equally be eligible with respect to their small business tenants.

NOTE: Properties with or without a mortgage are eligible under CECRA for small businesses.

What is an impacted small business tenant?

Impacted small business tenants are businesses — including non-profit and charitable organizations — that:

  • pay no more than $50,000 in monthly gross rent per location (as defined by a valid and enforceable lease agreement)

  • generate no more than $20 million in gross annual revenues, calculated on a consolidated basis (at the ultimate parent level)

  • have experienced at least a 70% decline in pre-COVID-19 revenues **

NOTE: Eligible small business tenants who are in sub-tenancy arrangements are also eligible, if these lease structures meet program criteria.

** Small businesses can compare revenues in April, May and June of 2020 to that of the same period in 2019 to measure revenue losses. They can also use an average of their revenues earned in January and February of 2020.

For Full Details and to apply:

Expanded eligibility for CEBA $40,000 interest-free loan

“If you are the sole owner-operator of a business, if your business relies on contractors, or if you have a family-owned business and you pay employees through dividends, you will now qualify.” – PM Justin Trudeau

Eligibility

The Prime Minister outlined the expanded eligibility for the Canada Emergency Business Account and highlighted companies such as hair salon owners, independent gym owners with contracted trainers and local physio businesses will now be eligible.  

The eligible amounts are being expanded to include businesses with 2019 total payroll between $20,000 – $1.5 million.

How do I apply?

Prior to applying, please make sure you have this information readily available:

  • Canada Revenue Agency Business Number (BN 15 digits)

  • 2019 T4 Summary of Remuneration Paid (T4SUM)

Apply online at the financial institution your business banks with:

There are restrictions on the funds can be used. From their website https://ceba-cuec.ca/:

“The funds from this loan shall only be used by the Borrower to pay non-deferrable operating expenses of the Borrower including, without limitation, payroll, rent, utilities, insurance, property tax and regularly scheduled debt service, and may not be used to fund any payments or expenses such as prepayment/refinancing of existing indebtedness, payments of dividends, distributions and increases in management compensation.”

A Lifetime Gift for Your Grandchildren

The Cascading Life Insurance Strategy

If you are a grandparent wishing to provide an asset for your grandchildren without compromising your own financial security, you may want to consider an estate planning application known as Cascading Life Insurance.

How does the Cascading Life Insurance Strategy work?

  • The grandparent would purchase an insurance policy on his or her grandchild and funds the policy to create significant cash value;

  • The grandparent would own the policy and name the parent of the grandchild as contingent owner and primary beneficiary;

  • The cost of life insurance is lowest at younger ages, maximizing the tax deferred growth of the cash value in the policy.

What are the benefits of the Cascading Life Insurance Strategy?

  • Tax deferred or tax free accumulation of wealth;

  • Generational transfer of wealth with no income tax consequences;

  • Avoids probate fees;

  • Protection against claims of creditors;

  • Provides a significant legacy;

  • Access the cash value to pay child’s expenses such as education costs. (Withdrawal of cash value may have tax consequences);

  • It’s a cost effective way for grandparents to provide a significant legacy.

For the grandchild, he or she ultimately receives a gift that will provide significant benefits:

  • A growing cash value that can never decline;

  • Access to borrow from the policy for education, down payment on a home, or to invest in a business;

  • The policy could also provide an annual income by changing the dividend option to cash;

  • Life insurance which continues to grow in death benefit to protect his or her future family.

Case Study

Let’s look at an example of this strategy. Grandpa Brian is 65 and has funds put aside for the benefit of his grandson, Ian.

  • Grandpa Brian purchases a 20 Pay Participating Whole Life policy on Ian, age 11, for an annual deposit of $5,000;

  • Brian’s daughter, Kelly is named as contingent owner in the event of Grandpa Brian’s death and beneficiary in the event of Ian’s death;

  • At Ian’s age 31, the policy becomes paid up with no future premiums.

If Grandpa Brian were to die at age 85 the following could happen:

  • The ownership of the policy now passes to Ian’s mom Kelly;

  • The cash value of the policy (at current dividend assumptions) would be $ 134,049 and the death benefit of the policy would be $679,634;

  • Kelly has a choice to remain the owner of the policy or transfer the ownership to her 31-year-old son without any tax consequences.

Because of Grandpa Brian’s legacy planning, Grandchild Ian, now age 31, has a significant insurance estate that will continue to grow with no further premiums! By Ian’s age 45, the death benefit, at current dividend scale, would be $1,030,045 with a cash value of 311,811.

Please call me if you think your family would benefit from this strategy or share this article with a friend or family member you think may find this information of value.

Note – The numbers shown in the Case Study are using Equitable Life’s Estate Builder 20 pay Participating Whole Life policy with maximum Excelerator Deposit Option.