WHEN TO INVEST IN LIFE INSURANCE.
You’ll notice that I used the word ‘invest’ rather than ‘purchase’ Life Insurance. While the words virtually mean the same the concept is totally different.
In several posts I’ve finished with the line, “when you decide to invest in a Life Insurance policy it’s important to first understand what you’re trying to accomplish.”
When a spouse or parent dies there is a significant emotional impact on the survivors. That is what the outside world sees. What most don’t see is the sometimes-monumental financial burden. Family and friends can say goodbye and walk away. You’re the person that must deal with tomorrow and all the next tomorrows’ because those bills keep coming in. Your family’s future is now solely in your hands.
If you want, Life Insurance can be used to pay of the balance of your mortgage. The benefit amount should be enough to allow your family to stay in the home and maintain their current lifestyle without your income. It’s hard enough losing a spouse or parent. Imagine not been able to afford to stay in the house. Having to move to a new neighbourhood. Having your children start at a new school.
Pressure, on top of pressure, on top of pressure. Life Insurance is that pressure release.
A lot of companies offer employee benefits but to keep the overall cost down the Life Insurance portion is generally a flat $25,000 benefit amount. Will this help? Sure. Is it enough? Maybe. Maybe not. In most cases, when you retire, leave the company, or the company shuts down, you will lose the Life Insurance coverage. At about the time that your family may really need this, it’s no longer there or it is so high priced, that you’re unable to get the benefit amount benefit amount you want with the budget you have.
Being self-employed is one of the most wonderful, rewarding, and challenging things anyone can do. Business owners often have the highest need for protection, but it’s one of the last things they think about. I’ve used this metaphor in the past. The self-employed are the engine that drives the bus. Without the engine that bus goes nowhere.
Yes. Taxes continue even when the person dies. There is the final income tax return. If you’ve been successful in business, have bought a cottage, rental properties, vacation home (not your primary residence) or have had significant gains in your investments, all of this will come out on your final tax return. One guess as to who is first in line. CRA. By working with your accountant, they will be able to predict the amount of taxes due. You can simply invest in a Life Insurance policy that pays out tax-free to the beneficiary. The beneficiary takes this money and pay the taxes. The beneficiary receives everything that you want to give them.
It’s been my experience that business owners want to go from being successful to being significant. Using Life Insurance can help make this happen. Most people have a particular charity they are very passionate about. They want to leave a legacy that has a positive impact on others. By naming a charity as a beneficiary of your life insurance policy, this money passes, tax-free, to the charity. The benefit amount avoids probate and bypasses your estate. That way it cannot be contested by family members or other beneficiaries.
The other aspect is the charity will then provide a receipt for the charitable donation. This receipt is then used on your final income tax return potentially lowering your taxes. They win. You win.
Throughout your life, you may have the need for one or all these options. Some at the exact same time. With proper planning and working with your team (that should include your accountant, an experienced life insurance professional, and a lawyer) together we can understand what you’re trying to accomplish.
SERVICE INSIGHT YOU CAN USE
$18,500 a month! That is the cost for a client’s targeted Chemo pills in 2023. $18,500 a month! I make no bones about the fact that I am a huge fan of and advocate for Critical Illness insurance. The reason is very simple. Long before I became an insurance advisor my best friend Rob, at […]
Seriously. I like surveys. I just did a random search “What is the purpose of a survey?” 245 million answers are available. The top response. ‘They’re used to find out what people think about a subject and why they feel that way about it.’ As the owner of an Insurance Agency, I wanted to get […]
Almost every week I speak to someone whose Term Life Insurance policy is coming up for renewal. In many cases, I get this call because either the person that originally sold the policy has not kept in touch. That person has left the industry. The policy owner did not want to meet because they felt that […]
We work with curated insurance partners to find the best protection for your unique needs. We will take the time to assess your personal needs and make impartial recommendations that serve your interests – not the interests of the insurance providers.Contact Us