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Bank Fair launches a line of credit attached to a life insurance policy


Alain Thériault

6 December 2018 13:30

Mahima Poddar

Bank Fair , has just launched a line of credit that is based on the cash surrender value of a whole life insurance with participation of the Great-West Life, London Life and Canada Life. The bank is positioning the product as an alternative to the Canadians of 50 years to fund their retirement.

Subsidiary of the Group Fair (no link with Life Insurance Fair), a Bank Equitable announced on its website that the client can borrow up to 90 % of the surrender value of the policy, tax free. Small bank 650 employees based in Toronto, she has 26 billion dollars ($B) assets under management and specializes in the lending and mortgage lines of credit, depository services and commercial lending.

Its line of credit comes on the heels of its reverse mortgage Plan residential Course, which was launched in may. A reverse mortgage allows a home owner to borrow a portion of its equity to free up cash for retirement. However, the CEO of Bank Fair, Andrew Moor, believes that the demand of Canadian is steep for this kind of products. The Bank plans to expand its range of finance solutions for aging Canadians.

Market of a billion

Bank’s Fair to note that 22 million Canadians have one or another form of life insurance, for a total coverage in excess of 4.3 trillion dollars (1 trillion = 1 000 billion$). During this time, the value of the policies grows with age. Bank Fair estimates that the value of loans guaranteed by a life insurance policy will grow to a billion dollars (G$) by 2023.

“Line of credit redemption value (RV) Bank Fair gives to a fringe demographic of a growing Canadian financial flexibility, take a comfortable retirement and achieve their retirement dreams, whether to start a business or help a loved one,” said Mr. Moor. He said he wanted to offer a variety of financial options to meet various needs.

Alternative to the big banks

Vice-president, product and corporate Bank Fair, Mahima Poddar said in an interview in the Journal of insurance that Bank Fair focuses on products that cater to seniors across Canada, because the traditional banks might not meet their needs. “Their products to mortgage or margin will be based on criteria of income. Often, older people have lower incomes or less predictable than what is needed to the major banks. We have simplified the process and made our products available to the mass market. “She added that Bank Fair targets a niche similar to that of rivals such as Manulife Bank.

Yet, the needs are growing. Ms. Poddar has cited figures from Statistics Canada according to which there were 4.2 million Canadians over the age of 65 in 2005, and that there will be 10.1 million in 2035. “This is an increase of 140 %,” she pointed out.

Go through your advisor

The new line of credit is akin to what the industry calls a loan collateral in its jargon. “You’ll enjoy fast access to funds and no regular payment is not usually required as the value of your policy continues to grow,” says the bank. In its brochure marketing, Bank Fair encourages the client to go through a consultant to purchase the margin. “Meet with your financial advisor or insurance broker professional to complete an application. By working with them, we will review your situation to determine if you are eligible, ” one can read there.

The document mentions that when the client is accepted, he can choose between four different funding options : a single lump sum paid only once, an advance one-time an advance scheduled monthly, or a combination of these options. Ms. Poddar has stated that the loan of 90 % of the surrender value must correspond to a minimum of $15,000.

Paul Desmarais III, partner

Co-founder of Portag3 Ventures, Paul Desmarais III (a member of the family that owns Great-West and its subsidiaries) is pleased to partner with Bank Fair in this offer to help people get the most out of their life insurance contract, which it considers as an asset traditionally under-used.

Ongoing Expansion

The range of insurers available, Mahima Poddar has stated that Great-West and its subsidiaries were only a starting point. “We are actively looking at other insurance companies,” she added.

Ms. Poddar has also charged that Bank Fair would like to extend its offering to other products, insurance-based, such as funding agreements, immediate (Insurance Financial Agreement). This niche is currently being courted by the big insurers.

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