Does Life Insurance Fit into Your Financial Strategy?

Life insurance is the foundation of a well-crafted financial strategy from a protection point-of-view. When you look at the value of the assets you have accumulated over time, it’s comforting to know that your investment portfolio can remain intact because your insurance program will cover the financial needs associated with premature death. People purchase life insurance because it can be a very affordable method of generating a tax-free lump sum of money for their survivors. This death benefit is commonly used for income replacement, debt elimination, tax payment and estate equalization.

For business owners, life insurance can be an ideal solution for estate equalization. Consider how you would equitably divide your estate if you had children who may or may not be involved in the family business. While one child may inherit the company, the others can receive their fair share using the death benefit proceeds from a life insurance policy.

Who isn’t interested in saving tax? Life insurance is one of the few tax-favoured products still available. If you have maximized your RRSP contributions and have significant non-registered assets then you may want to explore how re-allocating those assets to a tax-deferred universal life insurance policy may be of benefit to you. Investments inside a universal life policy grow on a tax-deferred basis and the death benefit is tax-free.

Sometimes, a life insurance policy is donated to a favourite charity. This is a way to leave a sizable donation yet not diminish the value of an estate. If you are the owner of your life insurance policy and the charity is the beneficiary then a tax receipt for the full amount of the insurance proceeds would be issued upon death. This would lower the tax liability of your estate.

Life insurance has many applications. Used creatively it can work hand-in-hand with the other aspects of your financial strategy as one of the last remaining tax deferred vehicles. Should you wish to learn more information about how life insurance may fit into your financial plan, call me at (604) 535-4306.

All insurance products are offered through BMO Nesbitt Burns Financial Services by licensed life insurance agents, and, in Quebec, by financial security advisors. Life insurance sales are made by Estate and Insurance Advisors.