Frequently Asked Questions

Here are some of the most frequently asked questions about financial services and insurance coverage. Click on the question to read the answer.

Financial Services

What is a mutual fund?
How is income tax collected on mutual funds?
How can I calculate my net worth?
When should I update my net worth?
How can I increase my net worth?
What is the "Rule of 72"?
How much should I be saving?
How can I maximize my RRSP contribution?

Insurance

Is my swimming pool covered by my home insurance policy?
My insurance policy covers all of the goods contained in my house. Why should I take out additional insurance for a specific item?
Is a home-based business covered under my residential policy?
Is my insurance coverage adequate?
Do I need a will?
What is a power of attorney?
Your web site constantly tells me to count on you for the details. Is that really necessary?
Is there other coverage I should consider on my auto policy?
Is there other coverage I should consider on my home policy?
Can I be sued for more than the amount of liability insurance I purchase?
What does "replacement" value mean?

 

 

Financial Services

What is a mutual fund?

A mutual fund is a pool of assets contributed to by investors who share similar investment objectives. The mutual fund is managed by professional portfolio managers and advisors in accordance with a disclosed investment strategy in order to achieve the mutual fund's objective. Mutual funds provide a cost-effective way of owning diverse investments based on the knowledge and attention of professional money managers.

There is a wide variety of mutual funds available in Canada (some 4000) to help investors achieve their personal financial goals. For example, the investment strategy of any given fund can be designed to provide lower or higher risk options. This in turn provides opportunities for investors who plan to invest their money for longer or shorter periods of time. Some funds are designed to provide investors with regular income; others may provide capital growth and income. There are also funds that can be turned into cash easily if the need arises.

Funds can be invested entirely in the stocks of Canadian companies, Canadian bonds issued by companies, federal or provincial governments, or other Canadian assets. Some funds focus on foreign investments; still others are a blend of Canadian and foreign investments. For each mutual fund, a prospectus is filed with the relevant securities commission. A prospectus provides a detailed description of the mutual fund, including:

  • the recent performance of the fund in terms of earnings for investors
  • the composition of the fund e.g. bonds, equity (stocks), foreign content, real estate
  • the objective of the fund e.g. achieve above-average, long-term growth and capital protection
  • the investment style of the money manager

Disclaimer: commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

 

How is income tax collected on mutual funds?

It is a good idea to find out what the fiscal repercussions will be when you select a mutual fund. A financial professional can answer many of your questions. However, it is recommended that you talk to a tax consultant, who will assess your personal situation.

 

How can I calculate my net worth?

Your net worth is obtained by adding up your total assets (what you own) and subtracting your liabilities (what you owe). Calculate your Net Worth easily by using our online tool.

 

When should I update my net worth?

Update your net worth calculation at least once a year in order to track your progress.

 

How can I increase my net worth?

  • Improve the rate of return on your investments.
  • Invest more of your income by spending less and minimizing taxes.
  • Reduce your debt by paying off loan and credit card debt and accelerating your mortgage payments.

 

What is the "Rule of 72"?

A simple rule of thumb for estimating how quickly your assets will grow. Take the number 72 and divide it by your rate of return – this will tell you how long it will take to double your assets. If you are earning 8%, your assets will double every 9 years, (72/8).

 

How much should I be saving?

Get into the habit of saving a regular amount of at least 10% of your income each month and use the balance for your expenses. This is known as the "pay yourself first plan". Have this amount regularly transferred to a separate account on a monthly basis.

 

How can I maximize my RRSP contribution?

You should start by building a financial plan to ensure you:

  • Take care of your current financial needs and obligations
  • Provide for your short-term goals such as vacations, home renovations, etc.
  • Provide funds or insurance coverage for unexpected events
  • Secure a worry-free retirement

Once you have assessed all of your family's needs, you can develop a strategy to maximize your RRSP contributions. The sooner you start investing in an RRSP, the greater your tax-free earnings will be.

Your RRSP will grow faster when you make regular contributions up to your maximum allowable amount. Your maximum allowable amount is shown on the notice of contributions issued by the federal government when you file your tax return each year. The amount is a percentage of your earned income for the previous year.

When the time comes to make your RRSP contribution, you may not have enough cash available to make the full contribution. You may want to consider a loan to make up the difference. There are loans specifically designed for investing in an RRSP. If you can pay off the amount you borrow in one year, borrowing money can be a great way to keep your RRSP growing. As an added benefit, you will receive a tax refund on your contribution amount that will help you pay back the loan.

Consult one of our financial professionals to help you build your plan.

 

Insurance

Is my swimming pool covered by my home insurance policy?

Basic home insurance policies do not generally cover damage to above-ground swimming pools.

It is, however, possible to obtain additional coverage to protect yourself against anything that could damage your above-ground swimming pool, with the exception of normal wear.

 

My insurance policy covers all of the goods contained in my house. Why should I take out additional insurance for a specific item?

Home insurance policies generally include limits with respect to valuable or unusual items. Such limits apply specifically to jewellery, furs, silverware, boats and certain collector's items.

It is possible to increase the coverage for such items, or to eliminate certain exclusions, by adding coverage specifically for a given item.

 

Is a home-based business covered under my residential policy?

No. Residential policies exclude business or commercial belongings, as well as professional liability.

We can offer you additional protection that covers the business you run from your home by extending your homeowner’s policy and adding commercial general liability or professional liability depending on your type of business.

For more information, contact one of our representatives.

 

Is my insurance coverage adequate?

Have your needs assessed by a professional to determine the coverage you should obtain for material loss, death, disability, illness, etc. In the event of death, a life insurance policy may be essential for giving your dependants a replacement income or paying off your debts, such as a mortgage, or inheritance tax. Take the time to consider disability insurance since an inability to work can have serious financial consequences. Make sure that you have a policy that provides adequate coverage in the event that damage may occur to your home, your automobile and your other belongings.

 

Do I need a will?

If you die intestate (without a will), your assets will be distributed according to provincial law – perhaps differently than you intended. You should review your will about every five years, or whenever there is a change in your family circumstances. You should consult your legal advisor to discuss your will.

 

What is a power of attorney?

It is a legal document which allows you to confer responsibility on someone you trust to do certain things on your behalf, for example, rent an apartment or sell your car while you are on holiday or even if you become incapacitated.

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Your web site constantly tells me to count on you for the details. Is that really necessary?

Insurance and investment products are very complex. The wrong choices can severely affect your financial well-being. Most individuals do not have the expertise to adequately analyze their risk management and investments needs, so it is crucial to get professional advice on these matters.

Is there other coverage I should consider on my auto policy?

Yes. There are a number of options for you to choose from that can enhance your auto coverage:

OptionsDescription
Increased liability limitsUp to $2,000,000. or more or an Umbrella policy
Collision coverageCovers damage to your vehicle in the event of an accident.
Comprehensive coverageProvides coverage for theft, fire, vandalism, cracked windshield and other perils.
Loss of use coverageProvides coverage for a rental vehicle while your vehicle is being repaired after an accident.
Rental vehicle coverageExtends physical damage coverage to rented vehicles in Canada and the United States.
Optional Benefits:
- Income Replacement
- Medical, Rehabilitation & Attendant
- Care
- Caregiver and Dependant Care
- Death and Funeral
- Indexation of Benefits
Can increase the maximum levels of accident benefits coverage on your policy. In addition, you can choose to index your accident benefits coverage to ensure it stays in line with the Consumer Price Index. If you have benefits available through your employer or elsewhere, you may not need to buy optional benefits. We can help you decide which optional benefits, if any, are appropriate for you.

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Is there other coverage I should consider on my home policy?

Yes. Home, condominium and tenant policies are generally issued with a standard set of limits and coverage. You may find that you need additional coverage to meet your specific circumstances. There are a number of options for you to choose from that can enhance your property coverage:

OptionsDescription
Increased liability limitsUp to $2,000,000. or more or an Umbrella policy
Antiques & collectibles coverageSpecifically insures these items so you can realize their true value in the event of a loss. Often an appraisal will be required.
By-laws coverage (for homeowners)Provides coverage for additional costs to repair or rebuild your home to comply with local laws. This is particularly important for older homes.
Earthquake coverageCan be added to your policy.
Coverage for:
- Bicycles
- Business property
- Coin and stamp collections
- Collectible cards and comic books
- Jewelery and furs
- Money and securities
- Spare auto parts
- Utility trailers
- Watercraft
Increases the limits on these items, beyond your standard coverage, to suit your requirements. Contact us for details on your policy.

 

Can I be sued for more than the amount of liability insurance I purchase?

Yes. Your amount of liability insurance is never disclosed to anyone during a lawsuit. If you are successfully sued for an amount greater than the limit of liability insurance you carry, you will have to make up the difference from your own personal assets. This could mean the loss of your home, investments, RRSPs and ultimately bankruptcy. That is why you should review your liability limits with an insurance professional to determine a limit that is appropriate for your circumstances.

 

What does "replacement" value mean?

For home insurance, the replacement value guarantee allows you to replace the insured item with a new item of the same kind and quality if that object is destroyed or rendered unusable. In this case, the insurer does not apply any depreciation.