Can You Hedge Your Bets With Life Insurance In Ontario?
Introduction
Families are aware that insurance helps to save their lives, but they are unaware of how it can be used as a financial tool. That is why they act surprised when you tell them it can be a tax strategy.
Is Life Insurance Taxable In Ontario?
We sat down with a few financial experts to find out more. It turns out, according to those we spoke with, that yes, life insurance could be used as an estate and financial planning tool.
The experts we talked to said there is a significant difference between “if I die insurance” and “when we die insurance.”
Do Both Have A Place?
Concerning the question, “is life insurance taxable in Ontario,” they both have a place, yes. The insurance covers the “if I die”aspect of the problem. The “when we die” part is covered through financial planning, estate planning. And taxes.
An Example
Say, for instance, that you work your whole life and retire. You have managed to pay down your student debt. You have raised two kids and get them out on their own. You manage to save up some money for retirement. That is the dream scenario for most people, right?
You managed to pay down all your “in this life debt,” but somehow, you forget about what happens to your estate once you die.
The larger your estate and retirement investments, the more you pay at the end.
That is why you have life insurance. Life insurance helps with some of the liquidity and other assets you might have. The only issue is in selling this need to the clients. Some of the premiums can be expensive. That makes some clients a little anxious about committing to something like that.
Which Type Of Life Insurance Is Better?
You have your term life(short period) and your permanent (whole life). Which one is going to be better suited for real estate planning? Concerning the cost, the term is going to be much cheaper in the beginning. However, term insurance is going to get more expensive in the long-term. It is a variable rate, not a fixed one.
Permanent insurance is expensive but comes with a fixed rate. That way, you will not have to worry about a price increase over time, unlike the term insurance. You also get a break with the price increase if you buy a policy at a younger age.
You do have to commit to making payment for at least ten years or more. That is why they call it permanent.
An Analogy
Think about life insurance in the context of purchased versus borrowed car. Permanent life insurance is similar to purchasing a brand new car.
Term insurance is similar to a borrowed car. All you want is fun and rash driving. You do not care about the car’s performance and mileage.
You also don’t care about anyone and want to move whenever you want.
Conclusion
It depends on your needs, as to which one is best for you. Some of the universal policies give more options but lack the commitment value. The one thing an insurance policy will do is build up enough assets for later. That way, you can use the policies to pay the taxes you accrued and have money left to spare.
You can find out more answers to questions related to life insurance and can compare the prices by visiting Myinsurancebroker.com.
