The Wealth-Building Power of Insurance

It’s not just about a payout when you pass away—permanent life insurance policies, such as Whole Life or Universal Life, come with built-in investment components that grow tax-sheltered. These policies can:

• Build cash value over time

• Be borrowed against for tax-free access to capital

• Protect your estate from high taxation at death

High-net-worth individuals use these policies to:

• Shelter excess income they don’t need today

• Transfer wealth efficiently to the next generation

• Access liquidity in retirement without triggering taxable income

Insurance as a Strategic Asset – Not Just Protection

We recently worked with Paul, a business owner in Vancouver, who was earning more than he needed to live on. Instead of investing in fully taxed GICs or mutual funds, he redirected $2,000/month into a participating whole life insurance policy.

Here’s what happened:

• His policy grew in cash value every year (compounded growth, tax-free)

• He borrowed against the policy at age 55 to fund a property purchase—no taxable event

• Upon his passing, the death benefit will pay out tax-free to his children, bypassing probate

Key Insurance Strategies You Can Use Today

1. Permanent Life Insurance for Tax-Free Growth

Whole and Universal Life policies accumulate cash value, which can be used as a long-term savings and estate planning vehicle.

Pro Tip: This can be a powerful tool for business owners or incorporated professionals with retained earnings they don’t want taxed in the company.

2. Critical Illness Insurance with Return of Premium

Protect yourself in case of major illness—and get your money back if you don’t claim. It’s protection with a built-in savings plan.

Pro Tip: A critical illness payout is tax-free and can help cover income loss or medical expenses without dipping into your investments.

3. Insured Retirement Strategy

Use a permanent insurance policy to grow wealth during your working years, then borrow against the policy in retirement to access funds tax-free.

Pro Tip: Because loans aren't considered income, you may qualify for more government benefits and avoid Old Age Security (OAS) clawbacks.

WHAT IS LIFE INSURANCE?

A life insurance policy provides a designated beneficiary with a lump-sum, tax-free sum of money when you have passed away. There are two different types of life insurance – term and permanent.

Term life insurance provides the payout benefit if you die within a specific period of time or before a certain age. The premiums for the insurance are generally established for the term of the policy, and increase when/if you renew it, but are less expensive than permanent life insurance premiums when you first purchase it.

On the other hand, permanent life insurance pays the beneficiary no matter when you die and builds up cash value – this means that you can still get some cash back in the case that you cancel your policy. There are two kinds of permanent life insurance: whole life insurance and universal life insurance. Whole life insurance provides coverage for your entire lifetime, with constant premiums and have a guaranteed minimum cash value. Universal life insurance is a blend of life insurance and an investment account that can be withdrawn from. Learn more about the differences by setting up a no obligation quote at www.mrtaxes.ca/mrinsurance

WHY WOULD I NEED LIFE INSURANCE?

Although hard to think about, there are many things that will affect your loved ones financially after you pass. Some costs to consider include: funeral expenses, debt payments, providing for children/dependants, etc. Without a life insurance payout, the costs that you leave behind after your death may cause financial hardship on your loved ones. Even if this is not the case now, you may incur debts or have dependants in the future that you may want to leave money for.

HOW DO I GET LIFE INSURANCE?

It is never too early or too late to get life insurance. Insurance policies are fulfilled by insurance companies, but can be made with insurance brokers or providers. These individuals can connect you with the best policies that include the amount of coverage and premiums that best support your needs and financial situation. For policies with over $1 million in coverage, you will likely need to take a medical test as part of the process of getting approved.

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