By city

Infinite Banking in Prince George

In a single-industry region, a downturn does not arrive one problem at a time. The job, the house price and the local economy move together, and no financial plan written for a diversified city accounts for that.

Where the Nechako meets the Fraser

Prince George sits at the confluence of the Nechako and the Fraser, at the crossing of Highways 16 and 97, and is the largest city in northern British Columbia. Fort George was a North West Company post; the city that grew from it became the rail and road hinge of the north. The University of Northern British Columbia is on the hill above town, and the mills, the pulp operations and the service firms that supply the resource sector define the working economy.

What matters financially is not that the work is cyclical. Several pages on this site cover cyclical income. It is that here the cycles are correlated.

Correlated risk, which most planning ignores

This is the page's central point, and it is the thing a plan written for Vancouver or Toronto will get wrong.

In a diversified city, losing a job is one problem. Your house keeps its value because the person buying it works somewhere else, and the local economy carries on. In a region built on one sector, a downturn moves everything at once: the employer reduces shifts, the contractors who supply that employer slow down, the local businesses that serve those workers slow down, and property values soften because everyone wanting to sell wants to sell in the same eighteen months.

So the three things a household would normally rely on in sequence, income, home equity and the option of local work, weaken together. That is what correlation means in practice, and it is why a household here needs a larger reserve than the same household would need in a diversified city, not a smaller one.

Apply that to a thirty-year premium directly. If the contract draws an automatic premium loan against cash value to stay in force during a downturn, that is a real loan with real interest owed to the insurer. A lapse with an outstanding loan and an accumulated gain is a taxable disposition, and in a correlated downturn it arrives in the same year as the reduced income and the soft housing market. Nothing is available to sell at a good price in the year you need to sell.

What follows practically

Size the base premium against your worst plausible year, and for a household here that means the worst year of the sector, not of your own employment history. Ask what the mill or the operation looked like in the last downturn, not what your pay looked like last year.

Put strong-year capacity into paid-up additions. In most contracts the base premium is the binding obligation and additional deposits are the flexible part, and that distinction matters more here than almost anywhere. Ask specifically how the contract treats a skipped additional deposit versus a skipped base premium.

And treat the emergency reserve as covering a regional slowdown rather than a personal setback. The usual three to six months of expenses assumes you can find comparable work quickly, which is exactly the assumption a correlated downturn breaks.

Distance, and who can serve you

Prince George is a long way from the specialist advice the more technical parts of this subject require. That constrains convenience rather than options: the contract available here is the same one available in Vancouver, tax treatment is federal and identical everywhere, and an advisor can serve you remotely provided they are licensed in British Columbia. Verify the licence in the Insurance Council of British Columbia's public register rather than accepting the nearest available person by default.

Where it does not fit

A household whose income, home and local economy all depend on one sector, without a substantial reserve, is a poor candidate for a thirty-year commitment, and saying so is more useful than finding a way around it. Cash surrender value stays below cumulative premiums for many years, commonly more than a decade, so an early exit is a loss.

Dividends are not guaranteed: they are declared annually by the insurer's board based on the participating account's experience, and the scale can be revised downward. British Columbia has no title protection statute of the kind Ontario, Quebec and New Brunswick have enacted, so ask how the person is paid. 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.