Many questions arise when you are buying insurance. What type of policy should I buy, how much should I get, what company should I purchase it through, etc, etc, etc. This article will discuss them briefly.

Some terms that will come up:

• Face Value: The insured value of the policy. If you buy a $200,000 policy, the amount paid out by the insurance company is the face value ($200,000).
• Fee: The fee you pay the insurance company to have the face value of the policy.
• Investment Pool: Extra money you have invested in the insurance policy above and beyond the fee

Types of Insurance Policies

Whole Life

These policies have a fixed rate you pay in for your entire life. There are two components to whole life policies. The face value (the value you are insuring yourself for) and the investment pool (where you can put extra money into and earn a modest rate of return). Financial planners say the benefit of the investment pool is that once you have built it up enough (by contributing extra money every year), the interest earned off this pool will be enough to cover the payments for your policy for the rest of your life.

Universal Life

Very similar to Whole Life. These policies are paid at a fixed rate for the rest of your life. There are two componenet. The face value (the value you are insuring yourself for) and the investment pool (where you can put extra money and earn interest). Same advantage as described above, except you have more control over what investments the extra money is put into.

Term

These policies have a fixed rate for a span of 10, 15, or 20 years. They are intended for temporary needs and because of they expire, are quite a bit cheaper (for the same face value) than whole life or universal life policies.

My reasons for having both policies are this.

• Term policies cover temporary needs and are cheap. So mortgages, children, business debt, or other loans represent needs that are temporary. They are quite large and will go away eventually. Term life insurance is a great way to give you piece of mind for your family.
• Universal is coverage for life. This will give you insurance to clear up any matters outstanding even if you live for quite awhile. It can help with funeral arrangements, lawyer fees, inheritance taxes, and other unforeseen costs.
• Universal also has the investment pool aspect to it. The advantage with this is you are able to add extra money into this side and it will be "tax sheltered". You can buy and sell funds (typically mutuals and indexes) without having to claim any capital gains on your tax returns. If you draw out of this later in life you will have to pay the tax, but if you pass away, the beneficiaries will receive all these capital gains tax free.
• There is also another feature to universal policies. Some banks will loan you up to 75% of the value of the investment pool as a "monthly payment". Since this payment is not income as it is a loan from the bank, you do not need to pay income tax on it. When you pass away, the investment pool side of your policy is then used to pay back the bank and because it taken out after your death the capital gains are not taxed. This could be a great way to supplement your income after retirement, while avoiding tax. A couple pitfalls here though. The market has to perform well for your investment pool and you are limited as to how much money you may contribute per year (government restriction to prevent high income individuals from tax sheltering too much).

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These are an investment vehicle like stocks or mutuals. The most common types used to be real estate and natural resources. They usually pay monthly dividends to the share holder and enjoy some tax benefits because of how they are structured so are able to pay higher dividends than a typical corporation. This has changed recently in Canada due to a change in tax policay by the federal government. However, these changes will not take effect until 2011 in Canada so they are still a good option for investors looking for a steady monthly income.

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Mutual funds are one of the most common investment vehicles for the average investor. They are comprised of a group of stocks and other investment options all rolled into one that someone else manages. You can pick a lot of different flavours when its comes to mutuals so look around. They are great for those who do not want to think about the investments all the time, but this does not mean you should not follow them at all. You would think that a professional fund manager would be able to make you a decent return, but this is often not the case. Funds can perform differently for variety of reasons.

• Difference in style by the fund manager. Some can be quite aggressive with most of the money invested in higher risk areas. Others can be very conservative, invested in a wide range of conservative areas, or they might even sit on large pools of cash and invest only when they believe the time is right.
• Mutuals are part of different sectors. Oil and gas as well as real estate have enjoyed significant gains the past couple years.
• Management Expense Ratio (MER). How much money does it take to maintain this fund. This is the money paying for the stock transactions, fund manager and his employees, other expenses related to managing a fund. A high MER cuts into your return. If the fund manager is a very aggressive trader this can be higher due to the transaction fees and number of analysts he has working for him.

The bottom line is...NOT ALL FUNDS ARE CREATED EQUAL. My biggest recommendation is to compare,compare,compare. When you are picking a fund (or your advisor is picking one for you), compare its performance to other funds of the same industry or classification. My favourite site is GlobeFund. You can get a good 2-4 page report from their site with a quick breakdown and comparison against funds that are in the same category over time. If a fund made 10% last year, but the average for its category was 15% you need to ask yourself, why? Or if the average over the past 10 years was 5% and the fund made 10%. Most likely it is the fund manager. If you are going to expose yourself to an industry, look for the fund manager who has had the most success, chances are, it will carry on.

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This is a stressful time when buying your home. You are locking yourself into debt for what feels like a long, long time. There are many choices and every bank would love to have your business. Shop around, you will find there are big differences between them and please, DO NOT JUST GO WITH YOUR CURRENT BANK. You are their best kind of customer because you do not usually question the terms. Most people that look around will probably end up NOT going with their own bank. No one bank is always better either.

There are a few things to consider here.

• Length of the Mortgage Terms
• Amortization Period
• Payment Frequency
• Fixed/Floating/Mixed Interest Rate
• Pre-payment Options

Length of the Mortgage Terms

This is how long you will be in contact with the bank. Common lengths are 6 months, 1 year, 2 years, 3 years, 4 years, 5 years, or 10 years. The longer you lock in with the bank the higher the lending rate will be (you are paying for the security).

Amortization Period

How aggressive will you pay off you mortgage? Typical amortization period is 25 years. This means in 25 years of making your payments (no more or no less) with no change in interest rates, you will have paid back your entire loan plus interest. You can knock this down to 20 or even 15 years if you have the cash flow to do so (your payments increase as your decrease the amortization period). Keep in mind that when you mortgage terms are up you have to renegotiates your terms and interest rates or your own cash flow will have changed by then.

Payment Frequency

Monthly, bi-weekly, or other. This is how often you will make a payment to the mortgage provider. A common trick is to switch to bi-weekly from monthly as you are paying the same amount of money, but you pay less interest so it can knock a few years off your amortization period without actually paying more.

Fixed/Floating/Mixed Interest Rate

The hot topic nowadays. You geta fixed rate which means you will be paying the same interest rate on your mortage for the entire length of you mortgage terms. This give peace of mind and security in case the markets change drastically. You know what payment you will be making 5 years from now. Floating rate changes based on the prime lending rate (typically). As interest rates go up and down so does your rate. These rates are always better than the fixed rates at the time you sign your mortgage, but that can change and that is where you have to have the nerve to go with it. You can save yourself a lot of money.

Mixed interest rates are a combination of the two. It allows you to take on an acceptable level of risk with a floating rate while fixing the remainder of the mortgage.

Pre-payment Options

This is important if you have the cash flow to make use of it. Just paying off your mortgage in the middle of your mortgage terms does not go over so well with the bank (they are out the interest) so there is usually a penalty for doing so. Pre-payment options are avenues the bank has given you to throw extra money down on the mortgage and save yourself the interest. Common ones are the ability to double your payments whenever, put down a percentage of the value of the mortgage every year, increase your payments by a fixed percentage. If you do the math on any of these, they can be a big help and take years off your mortgage.

Go to Canada Mortgage for lots of useful information and calculators for figuring out different values concerning your mortgage.

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So you want to buy an investment property? This is always a huge step the first time. I am by no means an expert and I am just going to give advice based on what I did. If you have any other tips or good links, send me an email and I'll add it to the page.

One way to lessen the learning curve is to look at your first home as an investment property. This is what I did. My wife and I were unsure of how long we would be staying in a particular city and did not want to get caught trying to sell a house in a down market. Our rule was that the property had to have at least a basement suite. This would give us some rental income, a few tax writeoffs, and if we had to move, we could keep it for awhile as a rental. Also living in the upstairs let us keep a close eye on our tenants and we could quickly respond as landlords to any needs they had until we got the hang of it.

Choosing an Investment Property

Educate yourself, look at houses, talk to people (anyone), and find a way to compare for yourself. If you look at one place and ask "How do I know if it is a good investment?", I can answer that for you, you have no clue if it is. Doing the real estate game involves a mind-set and understanding of what is important.

Educating yourself can be done a variety of ways. Pick up some books at the library and there are lots of audio books available that explain the basics of owning a house. Talk to people you know. If you know anyone who has been a landlord before or was a tenant, they will have advice and tips on what might work and what will not. There are web sites galore on this subject matter and lot of them will be annoying and more of an advertisement for some product they are selling, but there are good ones out there.

Look at properties. Lots of them. I went to a seminar once and the goal was to look at 100 properties in a month. This does not mean physically going to each one, but it does mean looking at one and analyzing it.

Analyze properties as frequently as possible. This is what gives you the first clue as to how the market works. You will begin to understand "value". Second, it gives you a way to compare. By establishing a set of criteria, 80 of those 100 houses you look at will be discarded without even walking out the front door of your house.

Read my more detailed article on How to Analyze an Investment Property.

Recommended Information:

• Rich Dad, Poor Dad series are quite good. The Real Estate Riches one gives you lots of advice and is available in audio format. Be careful though, this guy trys to pan himself off as an expert, but has never proved that he has did anything other than tell other people what to do. YOu can read more about his detractors here.
• MLS is the Canadian real estate listings. Just go on and start looking.
• Pay attention to the paper and go to free seminars. 20/20 Properties is one and so is Fast Track to Cash Flow. Whether you think they are full of B.S. or not, you will still learn something from them.
• Any book from the library on being a landlord or buying property.

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The rental value of your property can go up just by following the market (or down if that is the market direction), but if you have the time, you can have more control over this. Improving your property can do two things.

1. Make it more desireable to potential buyers, increasing its potential sale value
2. Make it more desireable to potential renters, increasing its potential rent value. There are two components here. The base amount of rent you can ask for (what they feel it is worth) and what you can charge extra for if they want access to other features to your property (if it is multi-unit and they want to use it for themselves).

We will focus on the second item in this article. The first is covered more in the article Increasing the Value of Your Property

Here is an example. My wife an I purchased an up/down duplex for our first home. We live in the top half and rent the bottom half. One of the biggest things we are missing is a garage. We live in a city with cold, harsh winters where garages are the norm. Should we build one? If we did we would probably notice the two points I mentioned above like as follows:

1. Garages give the house more value. When we went to sell this would be reflected in the sale price. It would also allow us to have our how reassessed if we wanted to increase our borrowing ability from the bank.
2. The garage is now a feature of the property. We can demand more rent from our basement suite because we will let them use the garage. We could put an ad in the paper and rent the garage to the local "mechanic". A lot of people rent garages for a variety of reasons (hobbies, storage, classic car, motorbikes, etc.)

The other question that comes up is, "Is it worth it?" This is another one you would have to analyze. How much is it going to cost me and what is my expected return? Say a nice double garage that is insulated will cost $20,000 (I don't know I'm just throwing a number out there). If you can tie this into your existing mortgage then the cost will be spread out over, say, 20 years at 6.5% interest. This would translate to about $148/month on top of your mortgage payment. So can you charge more than this in rent for the garage? That is a question we would have to figure out. Check out rent prices. At an apartment I used to live at, we paid $50 per parking spot. That would mean $100 for our garage, but it has the added bonus of storage space and they can put their own lock on the door. I would think that clearing $148 would be reasonable. Unfortunately, at our house there are some other circumstances preventing it.

The garage is just one illustration and a fairly dramatic one. Here are some other ones that are good for increasing rent:

Multi-suite situations
If there is a feature of the property that a tenant would want private access to, then it can be an asset. Tenants also like their privacy and the worst situation to have is tenants annoying one another. There are ways to alleviate this.

• Adding washers and dryers so there is no shared laundry (in multi-suite situations).
• Add a dog-run to the backyard and charge monthly rate for using it if they have pets.
• Provide wireless internet and charge a fee to each tenant (remember that the sum should be more than what you pay, you are providing them with a hassle free service).
• If it is a single furnace and only one thermostat to control it, the other suites could have baseboard heaters for a little extra control. I have seen houses with two furnaces too, that would be a dream.
• Seperate hot water tanks or put in a huge one so no one uses up all the water on the other people.
• Seperate access to the suites (not a shared one). They each have their own door, track their own dirt onto their own mat, and have their own porth to clean. You get the idea.

Standalone House or Multi-Suites

• A fully fenced off yard is a dream for parents with small children (if you are in that market).
• Having a nice deck
• A garage
• A shed
• Nice landscaping in the yard. Just a few trees and shrubs is fine. Things that don't take much maintenance.

I'm not saying all these things will equate to money, but if you have the time and resources they don't hurt to add (especially if you are living there and will reap the benefits too). If you treat your tenants right, it will pay off in the long run. The place will demand a higher rent, in turn attracting a higher "class" crowd if I might say. You attract people who appreciate it a bit more. Try tackling one project a year. It gives you a bit of a tax write-off, your tenants will feel you are an "involved" landlord, and your property will become more attractive.

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The value of your property can go up just by following the market (or down if that is the market direction), but if you have the time, you can have more control over this. Improving your property can do two things:

1. Make it more desireable to potential buyers, increasing its potential sale value
2. Make it more desireable to potential renters, increasing its potential rent value. There are two components here as well. The base amount of rent you can ask for (what they feel it is worth) and what you can charge extra for if they want access to other features to your property (if it is multi-unit and they want to use it for themselves).

We will focus on the first item in this article. The second is covered more in the article Increasing the Income from Your Property

Multi-suite Situations
If there is a feature of the property that a tenant would want private access to, then it can be an asset. Tenants also like their privacy and the worst situation to have is tenants annoying one another. There are ways to alleviate this making a potential landlord much less annoyed with dealing with them.

• Adding washers and dryers so there is no shared laundry (in multi-suite situations).
• Add a dog-run to the backyard and charge monthly rate for using it if they have pets.
• If it is a single furnace and only one thermostat to control it, the other suites could have baseboard heaters for a little extra control. I have seen houses with two furnaces too, that would be a dream.
• Seperate hot water tanks or put in a huge one so no one uses up all the water on the other people.
• Seperate access to the suites (not a shared one). They each have their own door, track their own dirt onto their own mat, and have their own porth to clean. You get the idea.

Standalone House or Multi-Suites

• A fully fenced off yard is a dream for parents with small children (if you are in that market).
• Having a nice deck
• A garage
• A shed
• Nice landscaping in the yard. Just a few trees and shrubs is fine. Things that don't take much maintenance.
• Upgrades to the interior. Sky is the limit here, but be careful, not everything is of value to someone else.

I'm not saying all these things will equate to money, but if you have the time and resources they don't hurt to add (especially if you are living there and will reap the benefits too). Try tackling one project a year. It gives you a bit of a tax write-off if your have tenants and your property will become more attractive.

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There are many methods of providing income for yourself that are more tax effective than working. Borrowing against your life insurance is one of them.

How it Works

With universal life insurance policies, there are two components:

1. The face value of the policy.
2. The investment pool

This face value is what you are insured for and the investment is the "extra" money you have put in. This is usually in funds or can be cash. These investments are tax sheltered, meaning, you do not pay the capital gains tax when you sell them inside the policy. If you withdraw them for your own personal use however, you will have to.

Banks will treat these investment pools as an asset however. Some banks will loan up to 75% of the value of these pools to the individual upon creating a legal contract that the debt from this loan will be paid back from your policy when you pass away. The kicker here is that when you pass away the money from your policy is now non-taxable. So you have made interest on your investments over your entire life and will not be paying the capital gains on the money since you will never withdraw it. A basic look at it would show that you are only paying the bank's interest rate on the money (because that will be the interest on their loan) which will be a lot lower than government tax if you withdraw it. A loan from a bank is not considered income, so it won't be taxed at all.

Note: I have not done this myself, but I have talked to financial advisors who know of this technique and do recommend it in certain situations depending on their clients.

This might seem like a bit of a "sneaky" trick, but it is completely legal. Banks are familiar with this method and have formulas to set up monthly loan payments that are aimed at balancing out with the investment pool value over a period of time. The bank will require you to sign legal documents as well to guarantee they are the beneficiary of that portion of your will.

I will also note that not that many people do this anyways. This is typically for high income indiduals. In my article Mortgage, RRSP, Insurance Policy ... What do I do? I discuss the priorities of where to put your money. This is third in that list. So only if you can max out the other ones should you worry about it. But, if you are young and wanting a universal policy for the rest of your life, this will give you an avenue to store money when you have the higher income in your later years.

Insurance policies restrict what you can buy as well. You can only put your money in a set list of funds. If you are buying a universal policy, make sure you ask what the investment options are. Most universal funds restrict you to their brand, but there are those out there with a larger pool to choose from.

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My wife bought me the Art & Lutherie guitar the other day. What an fantastic instrument for the casual guitar player. It is a solid top, electric/acoustic guitar with a cutout. Great sound that will improve with time and a very versatile instrument. I would recommend it for anyone.

I purchased it at a store in Calgary, Alberta, Canada. It's called GuitarWorks. The staff was pretty informative and give you a bit of a discount if you pick up a case and accessories too. It is on McLeod Trail just south of Glenmore.

I also picked up a hard case. Has a metal ridge around the opening to get a good tight seal. Very nice to help keep the moisture in from my humidifier plug (I live in an incredibly dry city).

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In April of 2005 my wife and I went to Cuba for our honeymoon. We had an excellent time and it was quite relaxing. We waited until a few weeks before our wedding and then found sale prices on all inclusive packages in the Caribbean. One of the best for the price was in Cuba so we bought it. The basics of our trip were this.

• We flew Air Canada direct from Calgary to Varadero Cuba.
• We stayed in the Sandals Princesa Del Mar Resort and Spa.
• We stayed for 7 nights.
• It cost aruond $1200/person

Flight

The flight was fine. Typical Air Canada style where there was nothing really special about it, but it was on time and we didn't have any hassles. The flight took about 5 1/2 hours.

At the airport they don't stamp your passport. They just slide a entry/exit card inside it and stamp it. This is to encourage Americans who are not allowed to visit the country to do so if they want without having evidence of it in their passport.

There are a lot of people there who will transport you if you want, but this was included in our package. Our drivers told us we had to pay $5 each, but we knew it was included so we said we would pay later. Just a little scam they had on the side, but no worries.

Cuban Money

They have two currencies in Cuba. One is the regular peso and the other is the tourist peso. The tourist peso is equivalent to the U.S. dollar, basically all the time. So exchange for some of this when you get there and you will be set.

Princesa del Mar

This was quite a nice resort. It is a 5-star facility in Varadero. For those of you who don't know, the resorts at Varadero are on a peninsula that has restricted access so it feels separate from the mainland somewhat.

Sandals resorts themselves are typically "couples" resorts so there were no children where we were staying. Being April, it was low season so some parts of it were closed down. This wasn't a bad thing, it just meant some nights not everything was open. The pool and main eating areas were always open of course, but just way less busy so it was nice.

There are variety of 2 story buildings on the property that have around 20 or so rooms in them. They are open air and half the rooms have ocean view, which can see gorgeous sunrises. There is a main buffet eating area that is open for breakfast and lunches. However, scattered around the property are different "theme" restaurants that you can eat at. There was a French, steak house, Japanase, Italian, along with others. The only catch is you have to reserve in advance the restaurant you will go to. Because it was low season we just had to reserve the morning of, but in busy season you book all your evening meals when you arrive for the week. If it is your honeymoon, you will be invited to have a "special" dinner at the restaurant on the hill (the fancy living arrangements area). All the food and alcohol is of course included. The food was good, but I wouldn't say amazing. We were told this is typical for Cuba since they can't order anything from the U.S. because of the trade situation.

If you enjoy scuba diving, there is a free dive every day if you want one. They bus you to the Bay of Pigs or other locations and you go with a divemaster from the resort. This can be a bit of a drive though and if you are on your honeymoon you might not feel like doing this (like me).

Havana

We took a day tour by mini van to Havana. This is was a great way to break up the week. I think it was $75 US per person. It seems a bit steep, but you get a good tour around and lunch is included. You'll see the scenery as you drive to Havana which is interesting. When you arrive you will see the old architecture, the old and new capital buildings, markets, and more. We had lunch on a nice little restaurant that overlooked parts of the city. We also saw the little "corner store" type establishments where citizens can come collect their rations (eggs, milk, etc). You even get to see the little bar where Ernest Hemingway would drink his mojitos. Later we visited a rum shop where you can buy their prized Havana Club.

Cuban Cigars

O.K. if you are going to buy the cubans here is some advice. The "legal" cigars are sold like almost everything else in Cuba, by the government. The price will be basically the same, everywhere you go. The same for Havana Club Rum. So buy it at the resort if you want. It might be a bit fresher if you buy it when you go to Havana but that is it. Be warned if you try to sell them when you get back. This is illegal in Canada, since you are supposed to pay the taxes on this if you are doing it. You are allowed to bring back 2 boxes tax free. Shops won't buy them from you here though, unless they are a bit shady themselves. They know how much you paid anyways. Unless you can line up a friend or some other buyer before you go, you might as well just buy them for youself. There will be Cohiba and the ever popular Monte Cristo. A box (25) of Monte Cristo #2 will run you around $240US.

Tipping

You don't need to tip money and you shouldn't. Take lots of little things from the dollar store as gifts and tips. They love them. Everything from paper, pens, coloring books, old t-shirts you don't want, pencil crayons, hair elastics, hair bands, and more. Some people said they would leave aspirin and tylenol, but is a little dangerous I would think.

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