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—Universal Life.
The cycle of insurance
When you're starting out, bare-bones life 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.
Universal life policies bundle insurance protection with a tax-favoured investment component, often made up of guaranteed interest accounts, bond index accounts and stock index accounts. "Although the premiums are paid with after tax dollars, the money you invest grows tax-deferred," advises Bob Allebone, Manager, Advanced Financial Planning Support at Investors Group. "As the value of the investment increases, so does the policy's potential death benefit." 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. Universal Life 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 tax on registered funds and capital gains." 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 Universal Life, and whether this is a financial planning strategy worth pursuing, call your Investors Group Consultant.
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This article, written and published by Investors Group Financial Services Inc., is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, nor is it intended to provide professional advice including, without limitation, investment, financial, legal, accounting or tax advice. For more information on this topic or on any other investment or financial matters, please contact your Investors Group Consultant.
© Copyright 2007, Investors Group. All rights reserved. Do not reproduce without the express written consent of Investors Group.
