We do not have any debts except a remaining mortgage of $95,734. We also have life insurance and disability insurance with our employer that would cover our needs if one of us were to die or could not work anymore. The goal of this joint last-to-die policy would be to transfer money tax- free in the future as all other needs are covered either by our savings or our employee benefits.
I am wondering if buying this policy is really a good move and if the cost of this product is reasonable? We can afford the cost without changing our lifestyle but our advisor is not independent so the policy would be sold by its institution and that’s what makes me wary…
A. GICs get little respect, and that’s a shame because these humble investments can play a useful role in a balanced portfolio. Frank, your strategy for substituting GICs for bond funds is an excellent one, albeit with a few caveats.
First, we’ll consider the benefits. GICs offer significantly higher yields than government bonds of the same maturity. At the time of writing, five-year Government of Canada bonds were yielding about 1.9%, while you didn’t have to look far to find five-year GICs paying as much as 3.6%.
Normally more yield means more risk, but because most GICs are backed for up to $100,000 by the Canadian Deposit Insurance Corporation (CDIC), a Crown corporation, they don’t carry any more risk than a federal bond…