Life Insurance Solution
High net-worth individuals are a key demographic when it comes to life insurance.
Life Insurance Solution
High net-worth individuals are a key demographic when it comes to life insurance. However, with their complicated financial investments and sometimes demanding lifestyle, their life insurance needs can be very complex. Over the years, the financial services industry has developed specific uses for tax-exempt life insurance, for both personal and business needs. When you choose any of the following strategies, you are taking advantage of tried-and-true solutions currently benefiting many thousands of investors across Canada.
There is a common perception that the sole purpose for life insurance is providing for dependents should the policyholder pass away prematurely. Though important, that particular use is only one part of the story. Certain life insurance products are commonly utilized as investment vehicles that accumulate assets in a tax-sheltered environment. Quite often, the only reason such a product is missing from an investors wealth management program is that the investor is unaware of tax-exempt life insurance.
These investment vehicles are permanent life insurance products, which provide life-long insurance coverage and include a savings component. The investment opportunity stems from tax rules found in section 148(3) of the federal Income Tax Act. That’s where it specifies that assets in a life insurance product accumulate free of annual taxation.
This tax-free growth is much the same as tax-deferred investment growth within a Registered Retirement Savings Plan (RRSP). In fact, tax-exempt life insurance is often used by individuals who are maximizing their RRSPs and looking for an additional way to continue tax-deferred investing. In addition to tax-sheltered investing, rules in the Income Tax Act provide for a second tax advantage: Proceeds from the policy, including any accumulated assets, are ultimately distributed to the estate or directly to beneficiaries tax-free.
Types of tax-exempt life insurance
A distinguishing feature of permanent tax-exempt life insurance, compared to other types of life insurance such as term insurance, is that these policies may include a cash value. And cash value is quite simply a savings component. The essential differences between these three products involve flexibility and the nature of the investments:
- Whole life insurance
- Universal life insurance (variable)
- Universal life insurance with guaranteed investments
Personal Benefits of tax-exempt life insurance
- Maximize your estate
- Supplement your retirement income
- Preserve your estate
- Leave a legacy to a charity


Business Benefits of tax-exempt life insurance
- Insure and retain your key people
- Shelter a portion of corporate profits from taxation
- Enhance the funding of a buy-sell agreement
- Assist your family if you are the sole owner