Solutions for your future needs.

Book a meeting



What tax advantage does life insurance offer?

Article Licenses: CA, DL
Advisor Licenses:

Compliant content provided by Adviceon® Media for educational purposes only.

There are certain life insurance policies offered with interesting tax-planning advantages. Legal tax exempt rights are allowed in our tax legislation in relation to life insurers, which allows the possibility to accomplish the following.

  • Premiums over and above the associated costs of insurance, and premium tax are invested and can accumulate tax-deferred within certain plans.
  • Tax-deferral of the investments continue until such time that withdrawals are taken from the policy.
  • Tax is avoided on both the face amount of the insurance, plus any ongoing cash accumulation in the policy, when paid out to the beneficiaries on the death of the insured. Thus, tax is permanently avoided, after the insurance costs prefunding any estate liabilities have been paid out of tax-free dollars within the plan.

Here are some uses within an estate:

  • Final tax liabilities in an estate such as on capital property or on the remaining RRSP/RRIF value is taxed fully as income and can be pre-funded.
  • In some cases, tax exempt plans can be used as a pledge to secure a loan that can be used to create additional cash flow in retirement. Cash resulting from a loan is not taxable. Where the loan is later paid from the death benefit, payment can be deferred until death. Repayment of the loan is thus partly repaid using pre-taxed dollars.

Others may borrow directly from their policy subject to the policy terms.





Publisher's Copyright & Legal Use Disclaimer

All articles are a legal copyright of Adviceon®Media.

The particulars contained herein were obtained from sources which we believe are reliable, but are not guaranteed by us and may be incomplete. This website is not deemed to be used as a solicitation in a jurisdiction where this representative is not registered. This content is not intended to provide specific personalized advice, including, without limitation, investment, insurance, financial, legal, accounting or tax advice; and any reference to facts and data provided are from various sources believed to be reliable, but we cannot guarantee they are complete or accurate; and it is intended primarily for Canadian residents only, and the information contained herein is subject to change without notice. References in this Web site to third party goods or services should not be regarded as an endorsement, offer or solicitation of these or any goods or services. Always consult an appropriate professional regarding your particular circumstances before making any financial decision.

Mutual Funds and/or Segregated Funds Disclaimer

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investment funds, including segregated fund investments. Please read the fund summary information folder prospectus before investing. Mutual Funds and/or Segregated Funds may not be guaranteed, their market value changes daily and past performance is not indicative of future results. The publisher does not guarantee the accuracy and will not be held liable in any way for any error, or omission, or any financial decision. Talk to your advisor before making any financial decision. A description of the key features of the applicable individual variable annuity contract or segregated fund is contained in the Information Folder. Any amount that is allocated to a segregated fund is invested at the risk of the contract holder and may increase or decrease in value. Product features are subject to change.