By city

Infinite Banking in Hamilton

Hamilton has two financial populations living side by side: workers with industrial or health sector pensions, and self-employed trades and contractors with none. The right answer here depends entirely on which of the two you are.

Two cities in one, financially speaking

Hamilton's economy carries a long industrial history alongside a large health and education sector, and beside both a substantial population of self-employed trades, contractors and small construction businesses. Those groups face this strategy from opposite directions, and a page that gave them one answer would be wrong for both.

If you have a workplace pension, whether industrial, hospital or board of education, then half the usual argument does not apply to you. A defined benefit pension already provides an income that does not run out and does not depend on markets, so the retirement income case for a participating policy is substantially weaker than in the American material, which assumes you have nothing of the kind. What remains is access, because a pension is not collateral, and the survivor question, which depends on reading your own plan rather than accepting a general answer.

If you are self-employed in the trades, the opposite is true. You have no pension, no employer matching and no group coverage, and the retirement argument applies in full. But you also have the risk profile this strategy handles worst: income that varies by season, by contract and by weather.

Irregular income is the specific danger, and it has a specific mechanism

This deserves detail rather than a warning. A contractor who signs up for premiums sized against a good year will meet a slow winter, and the contract does not care why the premium was missed. What happens next depends on the contract: some provide a grace period, and many will draw an automatic premium loan against the cash value to keep the policy in force.

An automatic premium loan is a real loan with real interest owed to the insurer. It is not a courtesy. It quietly increases the loan balance, and capitalised interest compounds at the policy anniversary. Two or three difficult years in sequence can leave a policy carrying a loan the owner never consciously took. If the balance approaches the policy's value the contract can lapse, and a lapse with an accumulated gain is a taxable disposition arriving in a year the income already collapsed.

The practical answer is to size premiums against your worst plausible year rather than your best, and to put the additional capacity into paid-up additions in good years rather than into a higher base premium. The base premium is the obligation; paid-up additions are, in most contracts, the flexible part. Ask specifically how the contract treats a skipped additional deposit versus a skipped base premium, because the answers are usually different.

Ontario rules

Insurance in Ontario is supervised by the Financial Services Regulatory Authority of Ontario, and a professional here holds the licence of a Life and Accident & Sickness Insurance Agent. Under the Financial Professionals Title Protection Act nobody may use the title Financial Planner or Financial Advisor without an approved credential, and a life insurance licence alone qualifies for neither. Verify the licence in the public register and ask how the person is paid.

Where it does not fit

A pensioned reader with no dependants, no corporation and no capital need is a poor candidate. So is a contractor in a lean stretch, or anyone carrying high-interest consumer debt or without an emergency reserve. Cash surrender value is typically below cumulative premiums for many years and commonly for more than a decade, so an early exit is a loss.

Nothing on this page is advice. No assessment has been made of anyone reading it, and the author is not a neutral party: he is licensed to sell the contracts this strategy uses and is paid a commission when one is placed. If you have a pension, bring your statements. If you are self-employed, bring three years of income. The answer depends on those more than on anything written here. One closing point on the order of the questions. Many readers here confuse the need for insurance with interest in the strategy. They are separate, and the first is often the more urgent: a contractor with a mortgage and children has a real death benefit need today, and convertible term can cover it without committing to premiums the business cannot yet sustain. Deal with the need first; the strategy will still be there afterwards.