Your ever-changing insurance needs
Even though your children are grown and your home is almost mortgage free, you may need more insurance than you think. And you may want to start thinking about a different type of insurance—permanent life insurance.
The cycle of insurance
When you're starting out, bare-bones term insurance is a fail-safe way to protect your family. It's an income replacement, a college fund and a source of cash to pay off the mortgage and other debts. But as you enter your peak earning years, you're looking for two things: tax relief and a way to preserve the value of your estate.
Permanent life policies bundle insurance protection with a tax-favoured investment component. "Although the premiums are paid with after tax dollars, the cash value grows tax-deferred," advises Bob Allebone, Manager, Advanced Financial Planning Support at Investors Group. "As the cash value increases, so does the policy's potential death benefit depending on the type of permanent life insurance you choose." This helps it keep up with the increasing value of the assets you want to protect.
As you approach retirement, you may be looking for a way to bolster your retirement income. Permanent life insurance allows you to tap into its accumulated cash value by making withdrawals or by borrowing against it.
Estate benefits
"It's also an estate planning tool," says Allebone. "If the policy is still in force at death, its full value can be paid out to your estate or heirs to offset estate liabilities such as probate fees, debts, and income tax on registered funds, and capital gains." Income tax on capital gains could be in respect of a cottage, land, rental properties, shares of a small business corporation or stock or mutual fund holdings outside of a Registered Retirement Savings Plan.
To discuss the benefits of permanent life insurance, and whether this is a financial planning strategy worth pursuing, call your Investors Group Consultant.
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Written and published by Investors Group as a general source of information only. It is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax, legal or investment advice. Readers should seek advice on their specific circumstances from an Investors Group Consultant.
© Copyright 2010, Investors Group. All rights reserved. Do not reproduce without the express written consent of Investors Group.
