Life Insurance
What would your financial future look like if you, your spouse, or business partner died?
Life Insurance provides a tax-free payment upon death to your named beneficiary.
Life Insurance is used as a cost-effective way to protect future financial obligations after the death of an individual. Your greatest asset is your ability to earn income. If your income suddenly stopped for the next 10 or 20 years, how would that affect your loved ones? The most common uses of life insurance are to cover debt(s), income, and funeral expenses. There are also many other common uses to life insurance (i.e. financial/investment planning, funding buy-sell agreements among business owners, covering capital gains or estate taxes, etc.).
If you’ve ever wondered how a widow carry’s on financially after a loved one has suddenly passed away, in most cases it is because of proper life insurance planning. Life Insurance is an unselfish gift because it ensures those that you love will not suffer financially after you die.
JWL Benefits offers only the best life insurance options with coverage tailored to meet your individual needs. There are two general categories of life insurance which can be broken down into either term insurance or permanent insurance. Permanent Insurance is offered in a few different ways (whole life, universal life, and term to 100).
Types of insurance
Term Insurance – offers insurance for a stated period of time. This is the most cost-effective method of covering temporary needs. Common types of term insurance include Term 10, Term 15, Term 20, Term 30, Term to 65, and Term to 75. Term policies offer lower initial premiums, although premiums increase at the end of the term. It is extremely important to ensure that your term policy includes the option to convert. A convertibility option is included in most term policies and ensures that you have access to change your term policy to a permanent policy non-medically. This is especially important should you develop a health issue after you purchase your term life insurance policy.
Permanent Insurance – offers insurance with higher initial premiums, although premiums are generally locked in for life with coverage that extends for the life of the insured. This type of insurance is also known as “lifetime coverage.”
Permanent Tax-Exempt Life Insurance For Incorporated Business Owners:
When structured properly, a tax-exempt life insurance policy for an incorporated business owner in Canada, can check off a lot of boxes and can be a very effective tool as part of ones overall long-term planning.
Here are some of the main attributes of Corporately Owned Tax-Exempt Life Insurance:
Using the Corporate Dollars to Purchase the Insurance: By using the corporation to purchase the life insurance, it allows for faster accumulation of wealth. The policy is funded using corporate dollars, rather than after personal tax-dollars.
Investment Income inside the policy grows tax-free: investments within an insurance policy tend to outperform those within a standard investment account on an after-tax basis because of the personal and corporate tax rates on investment income in Canada. All of the growth inside the policy is done so on a tax-free basis. Some refer to this as a “corporate TFSA”.
Tax Efficient Distribution: When an individual dies, and is insured under this type of policy, the corporation receives the tax-free death benefit from the insurance company, which includes the original death benefit, plus all the tax sheltered accumulated growth along the way. The corporation can then pay all this money out to the intended beneficiaries, in many cases tax free.
Creates liquidity to pay estate tax liabilities at death: Most assets flow tax-free from one spouse to another at death, but upon the second spouses’ death, is when the tax bill gets triggered on almost all assets. The insurance proceeds can be used to help fund the tax-bill, rather than having the intended beneficiaries of the estate being forced to potentially sell-off valuable assets.
Access to the cash within the policy during your lifetime: When most think of life insurance, they think of making an insurance payment to the insurance company and simply getting life insurance in return. What many don’t recognize is that with a whole life policy, you are able to access the wealth accumulated within the policy during your lifetime, not just after death. There are a few ways of doing this on a tax-efficient basis. This allows the insured to access the cash inside the policy for potential business investment opportunities, to help fund unexpected long-term care needs in retirement, to help a child out with a down payment of their home, etc..