Over the past three decades, the Canadian insurance marketplace has changed dramatically. There was a time that life insurance was acquired primarily by the family breadwinner to provide a financial cushion for their family or to pay off debts and pay for funeral expenses. However, over the years, other types of needs have arisen which require life insurance. Some examples are the payment of capital gains tax, estate equalization and charitable bequests. On the corporate side, it is to provide funding for buy-sells, share redemption, key person insurance, CDA maximization, insurance to cover loans and a few other strategies which can be extremely beneficial to the corporate business owners and incorporated professionals.
Consequently, the types of Insruance policies now available have multiplied, along with their attributes. Today, depending on needs, the consumer can choose from a wide array of products. At the same time, the level of complexity of these policies has risen considerably.
Many Canadians are using life insurance policies as wealth enhancement vehicles in addition to the traditional investments. Currently, the Income Tax Act relating to the taxation of life insurance policies allow substantial accumulation of funds in a tax-sheltered environment within permanent policies. With proper advice, clients can avail the benefits of existing rules to make their estate, corporate or individual insurance plans more tax-efficient.