Life insurance is a financial tool. If it is used for the right purpose it can do a great job.
“Life insurance is a misunderstood and maligned product,” says Karin Rimnyak, Investment Advisor with Action Financial Group, iA Private Wealth and Insurance Advisor with Action Financial Group LTD* in St. Thomas.
“If you’re using the right tools for the job, life insurance can be a very good tool for things in addition to protection.”
When we think of life insurance the obvious thing it does is to replace funds when somebody passes away; it can be used to pay off debt or to replace income. “It’s important for people to know there are life insurance products that have features that go well beyond the basic life insurance,” Rimnyak says.
When you purchase permanent life insurance, you may also build up a savings or investment account on the side.
However, there is a disclaimer.
“Within prescribed limits if the policy is paid out upon someone’s death then the insurance plus the investment are paid out tax free,” says Rimnyak.
Prior to the tax-free savings account, life insurance was virtually the only way for people to invest that was truly tax free.
“Unlike when you contribute to an RSP, you put money in and you get a tax deduction, but when you take it out it’s taxable,” says Rimnyak. “With a permanent life insurance policy or TFSA, the withdrawals could be tax free. These products can be used to complement one another.”
When it comes to disability insurance (DI), there is a very simple difference in how that is taxed.
“If the individual pays for DI themselves, if they ever have to collect on it, what they receive is tax-free,” says Rimnyak. “That’s advisable. If their disability insurance is provided as a benefit and paid for by the employer, it’s taxable income.”
Rimnyak offers one other good piece of advice.
If people buy travel insurance, it can be claimed on your tax return under medical expenses. And if you have not claimed it in the past, you can always go back and refile.
Action Financial Group, iA Private Wealth in St. Thomas is a team of investment advisers who have been offering solid financial advice as well as investment products and services for more than 23 years. Financial services include investment and insurance products, retirement planning, income tax planning and much more.
Karin Rimnyak is an Investment Advisor for iA Private Wealth. Opinions expressed in this article are those of the Investment Advisor only and do not necessarily reflect those of iA Private Wealth. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.
*Insurance products and services are offered through Action Financial Group Ltd., an independent and separate company from iA Private Wealth Inc. Only services offered through iA Private Wealth Inc. are covered by the Canadian Investor Protection Fund.
This story was created by Content Works, Postmedia’s commercial content division, on behalf of Action Financial Group, HollisWealth, a division of Industrial Alliance Securities Inc.