Insurance products are starting to offer tailored solutions to financial and estate planning strategies that offer wealth-growing opportunities in addition to the insurance coverage and provide for attractive tax advantages as well. Specifically whole life and universal life policies take advantage of allowances by the government for tax-free wealth accumulation. The premiums paid in these plans represent an excess of the value of the insurance coverage, the difference being invested as the wealth-building part of the policy. The money invested grows annually without being taxed.
2. Wealth Transfer with Universal Life
Using a Universal Life insurance policy to pass on the assets of your estate to beneficiaries is an excellent means of creating a family legacy and avoiding unnecessary taxes on the transfer. The plan is particularly useful to individuals - parents and grandparents - who have accumulated assets during their working lives and are now looking to a properly managed estate planning strategy.
3. Life Insurance as an Investment
Universal life policies may be especially attractive to investors who have used up the contribution room in their RRSPs and are looking for another method of tax-deferred investment growth. Although withdrawals are not tax-exempt, the policyholder can choose how much to withdraw and when, deferring taxation until retirement when marginal rates will probably be lower, thus minimizing taxes.
4. Life Annuities
Life annuities provide you with a regular income paid at selected intervals for the rest of your life, regardless of the age you live to. These payments will cease at your death and no value will be available to your beneficiaries unless you arrange for a joint annuity or a guaranteed minimum payment period. These regular payments can be monthly, quarterly, semi-annually or annually. A life annuity can only be purchased from a life insurance company. The income payments can be level for the remainder of your life or can be indexed at a pre-selected rate.
5. Critical Illness Insurance
Unlike long-term disability coverage that will pay out only in the case of protracted recovery periods, Critical Illness policies will pay a lump-sum non-taxable benefit, usually 30 or 60 days from the onset of any one of certain specified medical conditions, diseases or ailments. No extended convalescence or proven disability is required to collect; only the fact of diagnosis is required. The funds can be used for any purpose - to supplement lost income, take early retirement, pay off a mortgage or other debts or defray the expenses associated with medical treatments, recovery or rehabilitation.
6. Life Insurance for Business.
Life insurance satisfies many needs in the business environment, particularly for shareholders who have a special connection to the corporation. Life insurance in a small business is more attractive than for an individual because of the lower corporate tax rates that apply.
Insurance products provided through Dundee Insurance Agency Ltd.
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