Life insurance or life assurance is a contract between the policy owner and the insurer, the insurer agrees to pay a lump-sum of money at the insured's death. In return, the policy owner agrees to pay a stipulated amount called a premium. A benefit is paid to the designated Beneficiaries should the insured pass away.
Life insurance may be divided into two basic classes – temporary (term) and permanent (Whole Life and Universal Life).
Term Life Insurance is primarily for persons seeking coverage for a limited period. (young adults, young couples or young families for example).
Persons wishing to meet their need for insurance despite budget constraints.
Four permanent options are available:
Your sum insurance and premiums are guaranteed for the term of your insurance.
You have the opportunity to maximize the growth of your tax-sheltered savings through a full range of investment options offering competitive returns.
Life Insurance's most obvious and significant benefit is the lump sum payment it provides when the insured person dies. This lump sum is paid directly to the beneficiary designated in the life insurance policy and it's not taxable.
Another use of life insurance proceeds is to pay debts, tax liabilities and other estate costs so the estate's assets don't have to be eroded or borrowed against to cover these expenses.
Below are some of the financial liabilities that can threaten your estate and how life insurance can help protect the assets you worked so hard to build.
Life Insurance can provide funding to pay for capital gains tax that you owe.
When you pass away any registered funds you own will create a tax liability of the estate. Life insurance offers an effective way to offset that liability.
As we all know, it's not easy to accumulate money and it's even harder to amass significant funds to leave behind.
Because exempt life insurance policy's proceeds are paid tax-free to the beneficiary, life insurance can be an efficient way to create an estate and to transfer wealth to later generations.
Once a significant cash value has accumulated within an exempt life insurance policy may be accessed directly through a cash withdrawal or policy loan. These transactions would be considered dispositions of the policy and are potentially subject to taxation.
Leveraging is another option that allows the policy owner to access the value with the policy without triggering the tax consequences that often accompany a disposition. It involves creating an income stream by using the life insurance policy as collateral security for a loan.
Life Insurance and segregated fund products and services offered through professionals representing Alliance Financial Group in the provinces of Alberta and Ontario only. Some advisors are dually licenced and may also offer mutual fund products and services through Wealthforce Inc., Mutual Fund Dealer, in the provinces of Alberta, Bristish Columbia and Ontario only.