LIFE INSURANCE
Insurance to Protect Your Family & Interests.
Life Insurance creates financial security for you and your family by providing funds to pay for final expenses and debts, leaving income for your family to maintain their standard of living, or even donating funds to your favorite charity.
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Life Insurance isn’t just useful for final expenses. While you’re still living, some Life Insurance policies can build tax-advantaged savings that you can draw upon as needed for personal, business, or retirement use.
Types of Personal Life Insurance.
Term Insurance:
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Term Insurance is well-suited to meet short-term protection (example; a mortgage) for the lowest initial cost. This coverage does a good job of meeting immediate needs and gives you the opportunity to later move or convert to permanent insurance without providing proof of health.
Universal Life:
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Universal Life (a type of Permanent Insurance): Universal Life insurance provides permanent coverage with a tax-advantaged investment component. Cash value accumulates, which can be used to pay part, or all of, the cost your insurance, income for emergencies, income for retirement, or estate planning needs.
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Since your policy grows on a tax-advantaged basis, the insurance proceeds paid to your beneficiary upon death are tax-free and may include the total account value you’ve been accumulating over the years.
Whole Life:
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Whole Life (a type of Permanent Insurance): Whole Life insurance combines permanent protection with tax-advantaged savings component, giving you the opportunity to receive policy-holder dividends.
Life Insurance for Business.
CIRP & IRP:
For business owners who are well-established, have corporate funds to invest, and are beginning to think about how they will retire.
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A Corporate Insured Retirement Plan (CIRP) or an Insured Retirement Plan (IRP) is a strategy that provides life insurance protection as well as a retirement funds. Your corporation uses a life insurance policy and deposits excess funds into the policy - which grow tax-deferred - creating cash values.
When you are ready to retire, the insurance policy is used as collateral for a loan structured as a line of credit. The line of credit can then be used to supplement retirement income.
At death, the insurance proceeds repay the outstanding line of credit balance. Any excess amount is paid tax-free to the beneficiary you had named or through the capital dividend account.
IFA: Immediate Financial Arrangement
For business owners who are well-established (have a steady-cash flow exceeding lifestyle requirements) and have large assets, such as a mortgage-free residence.
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An Immediate Finance Arrangement allows you to deposit extra funds into a life insurance policy. The extra funds are held within an investment and grow inside the policy tax deferred.
The policy is then assigned to a bank as collateral for a line of credit, along with other personal collateral, which can be used to invest in a business, property, or to produce income for the owner.
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Each year, you pay the interest expense on the line of credit and claim both the interest expense and the collateral insurance deduction as a tax deduction from your declared income. Although you must pay the interest expense each year, the tax savings that result from the deduction help to offset the cost.
At death, the insurance proceeds repay the outstanding line of credit balance. Any excess amount is paid to the beneficiary you had named.
Shared Ownership:
For business owners and key executives looking for more flexibility in accessing the extra funds in their corporation.
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The Shared Ownership strategy allows you to jointly own your life insurance policy with your company. The insured person owns the cash value and the company owns the death benefit. By depositing extra corporate funds into the policy, you can access the cash through a collateral loan for personal use and pay less tax.
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Why Shared Ownership?
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you are a business owner and would like to make good use of your Corporate Life Insurance Plan and maximize your retirement income tax efficiently.
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traditional investments such as RRSP’s may not work for you.
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you want to leave money in your corporation.
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you want to offer an executive plan for your Key Person.
Health Trusts:
A flexible Health and Dental Plan that makes expenses 100% tax deductible.
A Health Trust helps business owners reduce taxes and makes health, dental, and wellness affordable for their employees.
There are no monthly premiums.
Succession Planning:
Succession planning for your business is important. As a business owner, you have a number of people that rely on your company (family, partners, customers, employees) and who are invested in your business. Proper succession planning is crucial to alleviate the loss of an owner and to mitigate the financial impact on the business that remains.
Corporate insurance strategies help protect the continuity of your business against the loss of an owner or key person. Furthermore, the strategy helps to preserve the personal wealth and business assets you have worked so hard to build.
Buy-Sell Life Insurance:
Protect your business and your family against the loss of a key shareholder.
Planning for the loss of a business owner or partner is crucial to ensure that the continuity of your business is protected, as well as the financial security of your family and the families of each partner. By implementing a buy-sell agreement, you can specify what will happen if a partner were to die.
Life insurance can be used to buy-out and provide the families of each partner a secure source of funds for the value of their interest. There are many other ways to structure a buy-sell and the insurance funding should be tailored to the objectives of the business owners.
Key Person Life Insurance:
Protect the continuity of your business against the loss of a key person.
Does your business include someone whose contribution is vital to your business?
If yes, then key person life insurance is a crucial component of your business continuity and succession plan, especially if you are a small business owner.
If an insured key person were to die, their life insurance provides a tax-free cash payment that your business can use as working capital to manage issues related to the person’s death such as recruiting, hiring or training another employee; paying off debt; reassuring customers, employees, or investors that the business will continue operating; the list goes on.