Disability Insurance vs. Critical Illness Insurance

I really didn’t understand the difference between these two different types of insurance policies, but luckily I have smart friends who answer my dumb question like, “What is the difference between Critical Illness Insurance and Disability Insurance?”.

Chantal Marr answered my query (she is part of LSM insurance one of my advertisers, and she is also my insurance consultant for this blog as well), and I think I now understand the big difference between these two policies.

Critical Illness Insurance

Critical Illness Big Winner! (really?)

Chantal’s answer is concise and easily understood:

Disability Insurance pays out a monthly benefit that is tied to your ability to earn an income.  Critical Illness pays out a lump sum benefit but is is not tied to your ability to earn an income.  Disability Insurance underwrites your occupation and Critical Illness does not.

Chantal has also written a more detailed description and discussion of these insurance vehicles with: Critical Illness insurance vs. Disability Insurance Why You Need Both.

I do not agree that you need both insurances, I think Critical Illness insurance strikes me as a bit ghoulish, in that you get a big pay out for getting a critical illness. Do you need a large lump sum payment if you are diagnosed with a critical illness? I am not sure, I would have thought that if you have a good health insurance plan, and you have some kind of disability insurance, that would be nearly enough, but I am sure Insurance folks would argue you need the critical illness to be completely covered (again, I don’t agree with that).

As for the Disability Insurance, read over your policy carefully if you are purchasing one to ensure you understand how “Disabled” is defined, and how you qualify (or don’t qualify) for funds (but you should do that with all Insurance policies). Understanding what Disabled means, is the key to the policy, as what you think of as disabled and what your insurer thinks of as disabled may not be the same thing.

The other part of any Disability Insurance Policy is figure out who is insuring you. I have written previously about Self Insured Disability Insurance that decimated many families during the Nortel fiasco. Make sure that whoever is insuring you, is financially sound.

Image courtesy of Ambro/ FreeDigitalPhotos.net


Inflation Stays up in June in Canada

The good news is  that on Wednesday last week the Bank of Canada kept their key over night rate at 1.0% for now, however on Friday Stats Canada confirmed what we all already knew, inflation continues at its torrid pace in June, specifically:

The Consumer Price Index (CPI) rose 2.4% in the 12 months to June, following a 2.3% increase in May.

Remember that over 2.0% starts the Bank of Canada taking notice of Inflation. The graph for Inflation does not look very good, as you can see:

Inflation in Canada

Inflation over the past little while in Canada

Quite the spike going on, what caused this jump? A very good graph in the report shows where it is hurting the most.

Inflation in Canada

Where the Inflation Came From, by category

Note tobacco and booze is up big time, just in time for the summer.

Bank of Canada’s core index

Remember that the Bank of Canada is the worry point, in that they might raise interest rates to “cool down” inflation. I guess the good news here is that the Bank of Canada’s measures seem to say our inflation isn’t bad (yet).

The Bank of Canada’s core index rose 1.8% in the 12 months to June, after increasing 1.7% in May.

The seasonally adjusted core index rose 0.2% on a monthly basis in June, matching the increase in May.

Note this helpful graphic from the Bank of Canada and how they notice inflation.

Inflation-Control Target

Inflation-Control Target

Operational Guide

Operational Guide

The Big Table

For those who aren’t sure, let me show you where the big increases are in a big table!

Consumer Price Index and major components, Canada - Not seasonally adjusted

Rel import1 June 2013 May 2014 June 2014 May to June 2014 June 2013 to June 2014
% (2002=100) % change
All-items Consumer Price Index (CPI) 100.002 123.0 125.8 125.9 0.1 2.4
Food 16.60 132.5 135.7 136.4 0.5 2.9
Shelter 26.26 128.5 132.6 132.2 -0.3 2.9
Household operations, furnishings and equipment 12.66 114.2 115.8 116.4 0.5 1.9
Clothing and footwear 5.82 91.2 94.5 92.7 -1.9 1.6
Transportation 19.98 130.2 132.7 133.1 0.3 2.2
Health and personal care 4.93 118.4 119.2 119.0 -0.2 0.5
Recreation, education and reading 10.96 106.6 107.8 108.2 0.4 1.5
Alcoholic beverages and tobacco products 2.79 140.9 146.2 146.7 0.3 4.1
Special aggregates
Core CPI3 84.91 121.0 123.3 123.2 -0.1 1.8
All-items CPI excluding energy 91.44 119.9 122.1 122.2 0.1 1.9
Energy4 8.56 162.1 172.7 173.0 0.2 6.7
Gasoline 4.62 188.5 194.8 198.7 2.0 5.4
All-items CPI excluding food and energy 74.85 117.2 119.1 119.1 0.0 1.6
Goods 48.18 114.8 117.9 117.8 -0.1 2.6
Services 51.82 131.1 133.6 133.9 0.2 2.1
1.2011 CPI basket weights at January 2013 prices, Canada, effective February 2013. Detailed weights are available under the Documentation section of survey 2301 (www.statcan.gc.ca/imdb-bmdi/2301-eng.htm).
2.Figures may not add up to 100% as a result of rounding.
3.The Bank of Canada’s core index excludes eight of the CPI’s most volatile components (fruit, fruit preparations and nuts; vegetables and vegetable preparations; mortgage interest cost; natural gas; fuel oil and other fuels; gasoline; inter-city transportation; and tobacco products and smokers’ supplies) as well as the effects of changes in indirect taxes on the remaining components. For additional information on the core CPI, consult the Bank of Canada website (www.bankofcanada.ca/rates/indicators/key-variables/inflation-control-target/).
4.The special aggregate “Energy” includes: electricity; natural gas; fuel oil and other fuels; gasoline; and fuel, parts and supplies for recreational vehicles.


All Stars, Al Stars and the #BestOfFinancialForWeek

So the World Cup is finally over, congrats to the German team, we hope this means the beginning of a thousand years of supremacy in Football (maybe that isn’t the right phrase to use, but congrats). Interesting game to watch, glad it didn’t go to penalty kicks.

Bastille Day

Le 14 Juillet Bastille Day!
Image courtesy of noppasinw / FreeDigitalPhotos.net

For those that may have missed it on le 14 juillet it was Bastille Day, which might explain why any of your French associates seemed overly patriotic on that day.

The baseball All-Star game was played this week, in Minnesota. This game actually matters since the winning team’s League will have home field advantage for the World Series this year. Who won the game? Tokyo?!? I didn’t really watch it, but I heard it was good. Did the Human League win?

Weird Al Yankovic has a new set of videos out, and a topical one is included at the end of this article. I enjoy Al’s parodies of current hits, but nothing will ever top his classic White & Nerdy (with Donny Osmond).

Word is that Montreal would be an excellent site for a Major League Baseball team, as a die-hard Expos fan (I was in the original Rusty Staub fan club), I can only hope, but they better not play in the Big Owe. Must Keep Calm on this one (there is a video about that too at the end).

TigerDirect (CA) Summer Savings Event

My Writings for Week Ending July 18th

I have varmints eating my tomatoes and peppers in my back yard, aside from a shot-gun, can someone tell me the best way to get rid of them? A falcon sounds like a good idea, but I don’t know where to get one on short notice.

  • Employment in Canada continues to be better, but unemployment is still up last month as well, when will we see the boom of jobs that has been promised? Old farts like me are finding jobs, but the young folks are having a harder time, as Stats Canada Pointed out.
  • Meet the new Budget, same as the Old Budget was the initial title of my “New” Ontario Budget 2014 article, but I didn’t want the Who’s lawyers to call me about copyright infringement.
  • If you have half an hour, a kindle reader and $1 please read How Millenials Can Get Rich Slowly, by William Bernstein, it is well worth the time and money.

[click to continue…]


Michael James told me about a booklet entitled If You Can How Millenials Can Get Rich Slowly by William J. Bernstein (ASIN: B00JCC5JKI) (Publisher: Efficient Frontier Publications ) (the Amazon Kindle link is included as well), and I am very impressed by the writing style of Mr. Bernstein and the message he is sending with this inexpensive booklet.

If You Can booklet from Amazon

Amazon Link for Booklet

I usually shy away from reading books on investing and such (I have a large pile of books I have promised to review, but have not quite got around to doing anything about them), so this booklet took only about 3 months for me, to get around to reading. It takes about an hour to read, but it does have a lot of homework assignments in it that could make it longer, if you want to do the homework (the homework is reading some of the books that you should have read already, if you think of yourself as an investor).

The booklet is a how to save enough money to retire, with a strong how-to theme. The booklet is U.S. based, however it is still very applicable and topical for Canadians, if you simply:

  • Think of a 401k and IRA as being similar to RRSPs, and LIRAs (I do realize there are significant differences ).
  • The distribution of Index Funds in your retirement fund could just as easily be:
    • TSE Index Fund
    • Canadian Bond Fund
    • International Index Fund
    • There are many similar “couch potato” portfolios you could use
  • Social Security is like our Canada Pension Plan

The advice given in this very short essay mimics many of the points I have made over the past ten years, and I have no problem listing them here:

  1. If you can’t save you’ll die poor
  2. You must understand how finances work, or you are doomed to fail
  3. If you ignore the past financially you will fail as well
  4. You can be your own worst enemy when it comes to money
  5. “The financial services industry wants to make you poor and stupid” (that is a direct quote)

Yes (5) sounds remarkably like me, but my guess is Mr. Bernstein is much more qualified to make that statement, so I will be quoting him in the future.

Overall Review

Read this booklet, it would be the best $0.99 (US) you have spent this year. I have bought copies and sent them to my kids to read, with a few comments added to it, and you should read it as well. This is a well written, concise and to the point explanation on how to retire with money, and how to save, just read it, it will take a 1/2 an hour tops (if you do the homework, it will take a lot longer, but that would even be better).

Mr. Bernstein has written a bunch of other books, that I may take out of the library and peruse as well.




“New” Ontario Budget 2014

The Liberals re-introduced the budget that caused the “immaculate election of 2014“™  and the ensuing Majority Liberal Government, however, the reactions to this budget have been mixed.

Some of the economic pundits claims the ramifications of this budget is best described in the following video:

While I feel that is a slight over-reaction, I cannot argue that there are some interesting economic items in the budget.

Enough jocularity, the Video is of the demolition of the Sir John Carling Building here in Ottawa (courtesy Fernando Matias ) but when I saw it and then started reading the reactions to the budget I just could not resist mashing them together.

 Real Budget Highlights

So you can read the Budget here (and I strongly suggest you do so, so you are informed).

  • $2.5 Billion dollars over 10 years to create a Job and Prosperity fund
  • $130 billion in public infrastructure over the next 10 years
  • Birth of the Ontario Retirement Pension Plan , this is gonna be interesting, the details are a bit thin, but do we need it in Ontario? That remains to be seen. Quebec has a Pension Plan, maybe (or maybe not) Ontario needs one too?
  • Lowering Energy costs in some fashion, but given the amount it has gone up thanks to previous budgets, maybe we needed that?
  • Minimum wage is going up to $11 an hour
  • Balanced budget by 2017 (wow)
  • And more taxes for you rich bourgeoisie who make more than $150K (stop oppressing the proletariat).

The really interesting part was at the end of the highlights section:

Going forward, the government will:Introduce an annual program review savings target of $250 million for 2014-15 and $500 million in each of 2015-16 and 2016-17.

  • Introduce an annual program review savings target of $250 million for 2014-15 and $500 million in each of 2015-16 and 2016-17.
  • Continue the call to freeze the Members of Provincial Parliament’s salaries until the budget is balanced.
  • Directly control the compensation of senior executives in the broader public sector, subject to passage of legislation.
  • Hold the average annual growth in program spending to 1.1 per cent over three years.

This is where the Devil is in the details, freezing MPP’s salary is window dressing, however, “Controlling” the senior Execs compensation could be interesting. What is a Senior Executive? Could make for some interesting discussions, and how are you going to hold growth to 1.1 % without either:

  • Freezing Provincial Civil Servants income (including Teachers)
  • Laying off a large amount of the work force
  • Finding new income sources

I wish Premier Wynne luck on this one, could be quite interesting.


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