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Uses for Life Insurance
Retirement income
needs
As we live longer and count less on government and company
pension plans to provide all the retirement income that
we are going to need, life insurance is receiving a new
look as a funding vehicle. Life insurance companies have
responded by developing new products that can be used effectively
to create additional retirement income. Universal life has
rapidly become the most popular, especially where a need
for life insurance exists. Usually, these are maximum funded
policies during the accumulation period, with payments coming
out at retirement. A broad range of investment options that
allow you to switch between options without triggering taxes
and tax sheltered growth for as long as the funds remain
in the policy facilitates rapid and tax-effective growth
to fund additional retirement income.
At retirement cash values are accessed through withdrawals.
In most cases, the full amount withdrawn is subject to income
tax. Withdrawals will cause a reduction in policy cash values
and death benefits.
Financial
planning opportunities
The combination of new life insurance products, creative
financial planners and a thorough understanding of the Income
Tax Act have led to a growing number of attractive financial
planning opportunities. They fit personal and or business
situations and cover areas such as estate-friendly investing
and charitable giving, just to mention a couple.
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The Financial Planning Analyzer
(FPA) program on this site can assist you to determine
if these opportunities are applicable to your financial
circumstances. |
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Business Needs
Business continuation is helped considerably through life
insurance policies that are bought for specific uses.
Many small businesses rely heavily on the talent and knowledge
of a particular person. That key person, who could be the
owner or an employee, is vital to the success of the business.
Life insurance can help the business continue if that key
person died.
Life insurance is frequently used as a funding vehicle
to provide for additional retirement income for selected
employees when they retire.
A buy-sell agreement simply means that if something happens
someone has agreed beforehand to buy all or part of a business
for an agreed price and someone else has agreed to sell.
If the agreement is triggered because of death, life insurance
is the only financial instrument that can deliver the money
when it is needed for a cost known in advance.
Family Income Needs
When a person dies, his/her assets are gathered by the
Executors and distributed to beneficiaries. The survivors
of a deceased may have income from several sources; Government
Benefits, Pension Benefits and Income Producing Assets.
For most survivors this is not enough. Life insurance can
provide the necessary capital at the moment it is needs
to produce the necessary additional income. For more information,
visit the "Preview
Your Planning Needs" section on this site.
Estate Preservation
and Maximization
When you die, your business and other capital assets in
your estate, such as stocks, bonds, real estate, jewellery
etc. may be subject to capital gains tax. If so, the value
of your estate may be eroded by the taxes. In addition,
estate settlement costs and final expenses such as funeral
costs, probate and legal fees may reduce the value of your
legacy.
You can help yourself by getting answers to questions such
as "how much tax may have to be paid?" and "how
can you protect the value of you estate from erosion due
to taxes?" Just visit the "Preview
Your Planning Needs" section on this site.
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