Are the Underlying Assumptions for Your Insurance and Investment Portfolios Still Accurate?


Your life doesn’t stand still. Neither should your insurance and investment portfolios. To ensure that your insurance and investments remain appropriate for your evolving personal and practice needs, it’s important to review your portfolios periodically. If you find that any of the underlying assumptions which your portfolios are based upon have changed, for example, the level of your income, your family situation or your practice set-up, adjustments to your portfolios may be required. The hypothetical scenarios below illustrate the potential impact of certain events on your portfolios.

Scenario #1: Change to Income

Let’s say your income increases but you neglect to update your long-term disability insurance. If you suffer a disabling illness or injury under these circumstances, your disability benefits may not be sufficient to cover normal personal expenses such as the mortgage or groceries. Your household may also have to contend with extra costs, such as medical expenses related to your disabling illness or injury. Obtaining the maximum monthly benefit amount that is available for your income level, and adjusting your coverage when your income increases, can help your household cope financially during a period of disability.

An increase in your income could also require you to adjust your investment portfolio for better tax efficiency. For example, you may consider introducing corporate class funds into your non-registered investment portfolio. These funds can help you defer taxes into the future, similar to a registered account. They are also structured to convert less tax-advantageous interest and dividend income into unrealized capital gains, effectively lowering the taxation rate.

Scenario #2: Change to Family Situation

The birth or adoption of children is a change to your family situation that could require you to increase your life insurance. Having adequate life insurance will help your family cover the immediate and ongoing expenses that could arise if you died unexpectedly. Immediate costs may include outstanding debts, loans and mortgages, your funeral expenses, final tax bill, and capital gains taxes due at your death. Ongoing expenses may include groceries and other household expenses, and child care and post-secondary education costs. Your insurance advisor can help you review your current situation to determine your need for life insurance.

If this is your first child, your family may want to open a registered education savings plan (RESP). You’ll have to apply for a social insurance number for the child to open an RESP. If you have other children and have already established a family plan RESP, the birth of additional children could require some adjustments to your family’s education savings strategy. It could be simple adjustments, such as obtaining a social insurance number for the new child, so he or she can start receiving government grants under the education plan, and increasing the amount you contribute to the RESP. Or, the adjustment may be more complex. For instance, you may decide to set up separate education plans if there is a vast age difference between the youngest and oldest children, since rules may require the existing education plan to be dissolved within a certain number of years (before the youngest is ready for university). Your financial advisor can assist you with these types of decisions.

Scenario #3: Change to Practice Set-up

It’s wise to have the right insurance for your practice situation (e.g. sole practitioner, partner, associate or cost-sharing arrangement). Otherwise, you could expose yourself to unnecessary financial risks. If you have decided to open your own practice, you’ll have some increased obligations that can be covered by expanding your insurance portfolio. Since practice expenses such as rent, utilities and employees’ salaries will be your responsibility as a practice owner, adding office overhead expense insurance will help you cover the ongoing expenses of the practice if you suffer a disabling illness or injury. Office contents coverage will also be important as a practice owner, so you can pay for the repairs or replacement of office equipment and supplies that may be lost or damaged during an insured incident. You’ll also need practice interruption coverage, which reimburses your income loss when the practice has to close due to a covered incident (e.g. fire, water damage, theft and vandalism). Additionally, commercial general liability coverage can protect against third-party legal actions arising from the practice (excluding malpractice claims). Remember to update these coverages over the years as the practice grows.

As a practice owner, you’ll also have to determine the best way to invest the practice’s earnings. For example, you may consider establishing a non-registered investment account to invest the practice’s earnings tax-efficiently, rather than keeping a significant portion of your dental practice’s money in a low-interest-rate bank account. You may also decide to adjust your retirement savings strategy if you will be operating your dental practice through a professional corporation, since the corporation may be able to set up a defined benefit pension plan on your behalf (e.g. individual pension plan) and make tax-deductible contributions to the plan. Your accountant and financial advisor can provide guidance.

These are just some of the possible life and practice events that could trigger changes to your insurance and investment portfolios. To obtain personalized advice for your specific personal and practice situation, contact a licensed advisor at CDSPI Advisory Services Inc. at 1-877-293-9455, ext. 5002 (insurance) or ext. 5023 (investment).


Ms. Roberts, BA, FLMI, ACS, AIAA, is a licensed life and health insurance agent, licensed general insurance broker and the director and deputy principal broker, Insurance Advisory Services at CDSPI Advisory Services Inc.

Mr. Haik, MBA, CFP, FMA, FCSI, CSWP™, is the vice-president of Investment Services at CDSPI Advisory Services Inc.