August 8, 2019 09:30
Photo : Freepik
From December 2018, the Bank Fair foam through the network of counsellors across Canada a line of credit secured by the cash surrender values of a life insurance policy as a whole. The concept is not new. The majority of the big banks and players dedicated to the advisers, such as B2B Bank and Manulife Bank do.
Gold, Bank Fair said to distinguish itself from its competitors by offering underwriting criteria more flexible to the clients of the advisors, to focus on Mr. and Mrs. all the world. The bank will approve a margin from a minimum of $ 15 000, with no maximum. The insured does not have proof of income to provide to apply its line of credit or reimbursement to do. The bank will reimburse the insured person’s death.
“We are very flexible. The minimum of $ 15 000 is very low and this opens the opportunity to fill the needs of a very large proportion of the canadian population. Competitors aim to increase the public’s very high net worth, ” says Michael Pilz, senior director of business development, product CSV line of credit, a Bank Fair.
In the subscription only based on the value of the police, Mr. Pilz adds that the majority of competitors ready also on the value of the police, but often require the borrower to prove their income and ability to pay the debt.
Retirement plans at the best rate
There are conditions that are more restrictive. For example, the client must be aged at least 50 years old to be eligible, ” said Mr. Pilz. The bank positions itself primarily the margin as a means of financing retirement plans. The bank sets the credit limit to 90% of the surrender value of the insurance policy.
According to the director of Bank equity, margin debt secured by a policy has its benefits on the loan policy with the insurer. By taking a guarantee, the margin let the values accumulate in the policy year after year, while the borrower uses their room according to their needs, ” says the director of development. The four options to advance are available : lump sum, as needed, on a monthly basis, or a combination of the three.
It also boasts the rates it can offer, compared to the rates generally applicable to a loan policy. The difference varies between 50 and 100 basis points, according to him, is of 0.50% to 1 %. Bank Fair offers the margin to its prime rate plus 1.25 %. It is currently able to offer it at a rate of 3.95 %.
The insured must also provide the insurance proposal is complete, a projection-to-date (often referred to as illustration) and a summary of the police.
Another advantage of the loan with insurance policy as collateral : it has no impact on the taxes of the insured. For its part, the loan policy can have one. Withdrawals that are not reimbursed inside of a taxation year will be deemed to be income. This income will be taxable if it exceeds the adjusted cost base of the policy of insurance, or the cost of the cumulative insurance premium pure.
Development on the move… without the universal life
Bank Equitable agreements with Manulife and Canada Life (including networks of Great-West and London Life) and since July with BMO Insurance. Michael Pilz reveals actively discussing with other insurers. “We will announce further agreements in the coming months,” he predicts.
For the time being, the offer extends to all products with values, except the universal life. The bank wants to get more experience before going to a product where the values are subject to greater volatility. Aware of the popularity of the universal life, she knows she will have to consider expanding in the future.