There are many arguments in favour of using Life Insurance as investment. At Finkelstein Financial, we assess each individual client’s financial situation in full before recommending type of insurance. Permanent Life Insurance is an investment product by nature, because unlike Term Policy, Permanent Life Insurance is guaranteed to pay out as it cover you until death.
You can read more about Term vs Perm insurance. If Permanent insurance is right for you it can become an efficient investment vehicle. Premiums for Whole Life or Universal Life insurance are split in two parts: one to cover cost of insurance and one to generate Cash Value, much like an investment account.
- Tax deferred growth. If you are already maxing out your RRSP and TFSA contributions, Life Insurance is another tax efficient investment to add to your portfolio. Investment growth tax free inside the policy. It is only subject to capital gains tax at withdrawal.
- Guaranteed Cash Value. Permanent Life Insurance will include guaranteed portion of cash value. It will differ from company to company and product to product. However, you can rest assure that even if markets perform badly you will have some guaranteed dividends accumulating in your policy.
- Borrowing against the policy. If you require some cash you can borrow money against the policy instead of doing the withdrawal of a portion of your Cash Value. Borrowing against the policy comes without penalties (unlike withdrawing from RRSP for example) and without tax consequence. You will pay interest and if you die before repaying the loan the amount owing will reduce the death benefit your heirs will receive.
- It pays out death benefit directly to your beneficiaries, outside the estate. Therefore, benefit is not subject to estate tax.
There are many details to consider when purchasing Life Insurance investment. Contact our expert team for a free consultation