Insurance can complement your ability to achieve goals in a cost effective, tax-efficient manner
Life insurance offers financial protection in the event of sudden unexpected events, but it’s also a flexible tool to help you build wealth and achieve your goals. That’s because permanent life insurance accumulates cash value while offering the advantage of deferring taxes. Also, unlike many other classes of investments, life insurance benefits are guaranteed. These unique features can contribute to safeguarding and transferring your financial legacy, whether you’re planning a business succession, property succession or considering a charitable gift.
“Insurance can be a cost effective, tax-efficient strategy to help prepare for the future. This includes keeping a family business intact, creating a philanthropic legacy, or being in a better position to pay taxes on capital gains realized or to offset estate settlement expenses.
Life insurance is tax exempt, allowing you to invest in a properly structured permanent policy:
- By investing within a permanent life insurance policy, you can shelter an additional part of your personal or corporate investment portfolio from taxes.
- Premium deposits can create cash value that grows over time, by investing in either mutual funds, GICs and ETFs, or by participating in policy dividends.
Thinking about insurance, particularly when it comes to more complex financial matters, can be overwhelming for many, often because of a less-than-favourable experience with insurance.
That’s why it’s important to speak with your financial advisor about how insurance can be used more effectively as a financial tool to address your unique goals and objectives.
Insurance as a tool
In addition to discussing your requirements and goals, here are some key topics you should discuss with your advisor:
- Do you have a will?
- Does your will provide instructions for carrying out your affairs the way you choose?
- Do you have a business structure? A shareholders’ agreement? A holding company?
These are very important questions, particularly if you have concerns surrounding business succession or vacation property succession and the tax implications for the next generation.
The objective is to understand your long-term financial goals and concerns, whether that’s providing for the care of a disabled child or managing illiquid assets with major tax implications. Insurance is not a panacea for every problem, but it can be a creative solution that can complement or help achieve your goals,
Insurance and philanthropy
Insurance can also play a key role in helping to safeguard your legacy. Many generous Canadians seek professional advice to increase the impact of their charitable giving. If philanthropy is a top priority, your wealth team can explain the difference between giving an annual gift to charity in perpetuity and utilizing an insurance strategy that can amplify the value of a future bequest from your estate. This can not only support your financial goals, it can also create a lasting impact for the causes you care about.
The role of your advisor goes far beyond recommending insurance solutions. It’s about understanding your complete financial picture, exploring the opportunities and challenges unique to your situation, and providing integrated advice that aligns with your goals. While insurance may or may not form part of that strategy, when used appropriately it can be a powerful tool for protecting wealth, supporting your legacy and helping you achieve what matters most.
