Whether you have accumulated a portfolio of non-registered assets or are simply looking for alternatives to RRSPs and traditional investments, life insurance may be a great option to complement your overall portfolio.
Life insurance in a portfolio of assets, can be used to both build long-term growth and maximize your estate. Many investors may not think of cash value life insurance as an investment option and are not aware of the ability to grow investments within a policy to help support your financial goals.
Part of determining what types of investments you hold in your non-registered portfolio depends on the tax advantages of each. Your financial advisor should look at the tax consequences of investments to determine what the best options are to protect you from tax and diversify your portfolio.
Life insurance is an extremely valuable tool in tax and estate planning. If you have specific savings earmarked to leave behind in your estate or if you are accumulating assets for use in retirement, either way life insurance can tax shelter these investments and provide an estate benefit for beneficiaries.
Benefits of cash value life insurance in your portfolio:
Tax advantaged growth: Depending on the type of insurance, you can build cash value within a life insurance policy. If the cash value stays in the policy, it allows for tax-advantaged growth. The cash value accumulation within a policy’s prescribed limits is only subject to tax if it is withdrawn from the policy. This allows for tax efficiencies within your portfolio and potentially higher savings for you in the future.
Provides access to funds when needed: Life insurance can help replace income if something happens to the income earner in the family. You have the ability to access the policy’s cash value to generate additional cash flow for personal use. The death benefit would also provide an immediate tax-free benefit for potentially less cost and risk than many other asset classes.
Provides income to your family if you can’t: The payout from your insurance can go directly to your beneficiaries tax-free when you die and provide a tax-free benefit for potentially less cost and risk than many other asset classes.
Provides an alternative to traditional fixed income investments: Consider cash value life insurance – specifically participating life insurance – as a complement to your fixed income portfolio. It is a unique asset class that can add stable growth, risk management, balance and tax advantages to your portfolio. Tax efficiencies can create opportunities in asset efficiencies and growth in the long term.
Leave a legacy: The tax-free death benefit can be paid out to whomever you choose. Whether it is your family or a favourite charity you can feel confident that your estate will be preserved and your beneficiaries will receive a tax-free benefit.
Life insurance is designed to reduce risk and deliver long-term value. Talk to one of our financial advisors to discuss your portfolio and determine if life insurance fits in your plan.