Life Insurance Basics

Life Insurance receives special treatment in the Canadian taxation system both for individuals and private corporations.

  • tax-free death benefit
    • the beneficiaries receive the death benefit tax-free
    • if the beneficiary is a corporation, the death benefit less the ACB can be paid to shareholders tax-free through the Capital Dividend Account
  • tax-free investment growth
    • deposits above those used for insurance charges grow tax-free and are paid out tax-free as death benefits
    • RRSPs also give tax-free growth, but there is tax on death and minimum withdrawals are mandated
  • tax-free retirement income
    • the savings in the contract (the "cash value") can be used as collateral for loans ("leveraging")
    • financial institutions treat the cash value like commercial paper and loan up to 90% of the cash value

Many individuals and businesses face financial risks related to

  • taxation
  • investments
  • retirement
  • estate

Life insurance can be used to structure many innovative solutions. Examples:

  • provide tax-free retirement income
  • increase cash flows over using interest for retirement income so that the capital can pass to the next generation.
  • provide liquidity to pay capital gains tax on real estate (including the family cottage)
  • enhance investment returns by 2-3% per year for individuals or corporations in the highest tax brackets
  • transfer retained corporate earnings to next generation tax-free

PS Network

Market Better
twitter.png Twitter
blogger.png Blog
marketingreflections.png Newsletter
Spark Insight
website.png Website
Grasp Risk
twitter.png Twitter
blogger.png Blog
website.png Podcast
website.png Website
Tame Risk
website.png Taxevity
Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-NonCommercial-ShareAlike 3.0 License