What is CDIC and how does it work? “CDIC” stands for the “cost effective competitive” insurance strategy adopted by a number of Canadian insurance companies. As of this writing, this group has about 30 companies and plans to expand in the future as more of Canada’s top companies embrace this new approach to their business. As CDIC becomes more prevalent throughout the business world, more business owners will realize the benefits associated with this type of insurance strategy.
CDIC, as well as most other insurance strategies, focus on two main components: the premium and the benefit. With CDIC, you get the premium, but you also get the opportunity to earn a terminal bonus, or return bonus, which may be capped at a certain amount during your term life policy. Essentially, this means that your premium is not tied to any particular investment and CDIC allows you to maximize your potential profit while minimizing your risk.
Most people who purchase term life policies are unaware of the fact that, unlike CDIC, the interest rate on CDIC premiums is variable. This is good, because it means that you can change it as needed. If you find the interest rate is too high, for example, you can adjust it yourself until you find something that works. If you find the rate too low, on the other hand, CDIC allows you to invest money internationally without having to take a loss.
Many people have misconceptions that term life policies are easy to obtain. CDIC requires that you first become a member of an approved financial institution. This is because the savings aspect of CDIC is tied directly to the credit rating of the company offering you the insurance. You must have a good credit rating to effectively protect yourself and your family from the risk associated with CDIC.
Another myth, many people believe is that there is little difference in the tax treatment of CDIC over term life policies. The tax treatment is significantly different, especially when it comes to investment earnings. In general, CDIC is a less attractive option than term life insurance, so it is important to remember this before investing in any type of insurance.
The one area where CDIC has been able to separate itself from other insurance companies is with regard to the investments portion. Although many other insurance companies offer investments, their limits tend to be quite limited. CDIC offers several hundred investment choices, and these are not tied to the credit rating of the company offering them. As a result, you can choose a portfolio that is in line with your own personal investments and abilities. Because most insurance companies only offer a few investment options, CDIC allows you more room for growth.
As with any investment, you should be aware that there can be risks involved with investing in CDIC. As stated earlier, CDIC offers several investment choices, but these choices are not guaranteed. If your investments do not perform well, you do not lose any money; rather, you will lose less money than you would have otherwise. Also, remember that even if your investments perform poorly, you do not lose any cash as a result of these poor performances. This is different than traditional investments in which you may experience losses if the market drops. With CDIC, if the market drops, you do not incur any losses, even if the market does drop to the point that your CDIC investment loses value.
The one area in which what is CDIC likely to shine is when it comes to the coverage provided. CDIC policies are usually available for up to 30 years, making them long-term investments. Because they offer such long-term coverage, many people who purchase long-term CDIC policies find themselves in excellent financial shape at the end of their contract. As with any type of long-term investment, what is CDIC insurance and how should you use it can be considered your own individual inquiry. However, many people tend to be more comfortable with CDIC policies, due to their flexibility.
