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Permanent Life Insurance |
Permanent life insurance can protect you for your lifetime. It can build a tax-advantaged cash surrender value and provide a death benefit.
Permanent life insurance is a form of life insurance such as whole life or endowment, where the policy is for the life of the insured, the payout is assured at the end of the policy and the policy accrues cash value.
This is compared with Term life insurance where insurance is purchased for a specified period where a death benefit is only paid to the beneficiary if the insured dies during the specified period.
Permanent life insurance originally was offered as a fixed premium fixed return product known as whole life insurance also known as cash surrender life insurance. This offered consumers guaranteed cash value accumulation and a consistent premium. Consumers later wanted more flexibility which was offered in the form of universal life insurance. Universal life insurance allows consumers flexibility in when premiums are to be paid and the amount that they would be. Universal life policies also allowed consumers to permanently withdraw cash from the policy without the interest associated with the loan provisions in whole life policies.[citation needed] Universal life policies retained the fixed investment performance of whole life policies. Variable life insurance follows the mold of whole or universal life, but it shifts the investment risk to the consumer along with the potential for greater returns. Variable universal life insurance combines this with the flexibility in premium structure of universal life to create the most free form option for consumers to manage their own money . Variable universal life insurance policies are considered more favorable to other permanent life insurance alternatives due to the favorable tax treatment of all permanent life insurance policies and their potential for greater returns than other permanent life insurance products.
Permanent life insurance offered at Canada Insurance Plan is either in the form of Whole Life Insurance, Universal Life Insurance, or Term-to-100 Insurance.
Permanent Life Insurance for Estate or Retirement Planning
Permanent life insurance is used for estate planning and retirement planning. The primary difference here is that the need is not temporary and you want the insurance to pay when you die – hopefully at a very senior age. Many clients do not know they have a need until we spend time discussing what they want to have happen on their death and discover some major differences between what they thought would happen and what would really happen.
We at Canada Insurance Plan, suggest the reasons for choosing permanent life insurance are as follows:
•To ensure your spouse will have sufficient money to retire even if you spend more than anticipated during your retirement.
•To guarantee that you will leave some money to children – it goes to them tax free and probate free if the beneficiaries are set up properly
•A major use is to provide money to pay capital gains or estate taxes so that your beneficiaries can keep the assets or property on your death and not have to sell some to pay the taxes.
•Part of a tax planning strategy is to transfer money in an RRSP which will be taxed at over 40% on death to an insurance policy where the proceeds will pass tax free to the designated beneficiaries on death with no probate or executor fees - this is frequently done as part of the previous strategy for covering capital gains taxes.
Should you have any further question, please feel free to contact us.
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