The Odd One Out

One of these things is not like the others, one of these things doesn’t belong:

• Going to the dentist
• Buying life insurance
• Taking a vacation
• Having a colonoscopy

Although they are all important, there’s only one we really look forward to. But we’ve all seen what happens to people who ignore the others. And hey, look at how far dentistry has come! I am glad that I go, and I am glad I am going in 2016, not 1916. I think the experience would have been substantially different 100 years ago. Still no fun though.

Life insurance falls in to the same category as the first and last on the list — no one really wants to leave their families destitute, but many people want to avoid the topic as much as possible. But it’s important to consider life insurance as a significant component of building a sustainable family legacy.

As in dentistry, much has changed in the last 100 years and much has remained the same in the world of life insurance.

On the side of change, there’s how incredibly affordable term life insurance has come. As we live longer and healthier and as insurance companies get better at figuring out mortality rates, the cost per $1,000 of insurance has nose-dived. For the vast majority of Canadians, affordability is not an issue when it comes to term insurance.

Another huge change has been the recognition of permanent life insurance as something that can enhance and protect your family legacy. Many providers in Canada have been around for over 100 years and during that time most have paid dividends every year, including during the depression and both world wars.

Changes are coming to the industry in January 2017. This will change the permanent or whole-life products offered going forward from that date. If permanent life insurance is to be considered part of your portfolio, I would recommend you speak to your advisor.

However, there are some changes coming to the industry in January 2017. This is a hard line established by the federal government that will change the permanent or whole-life products offered going forward from that date. Permanent life insurance calculations are based primarily on what we call endowment at age 85. The new formula will be based on endowment at age 95. In simple terms, that means it will take longer for the guaranteed cash value to equal the insurance face value.

We won’t see what the new offerings will look like until much later this year, so if permanent life insurance is to be considered as part of your portfolio, I would recommend you speak to your advisor sooner rather than later. In the past, the government has always grandfathered active policies so they are governed under the old rules and there is every indication that this will be, too. And, if the new product offering is better, a change can be made after January 2017, as long as insurability is not an issue.

Permanent insurance is an excellent way to pass on tax-free – avoiding probate in most instances – a significant financial legacy. It is also used to grow money on a tax-sheltered basis and when needed accessed without attracting tax. And if you have a privately held Canadian Corporation there are additional benefits for you and your family.

If you would like to know more don’t hesitate to give me a call or drop me an email. I can always be reached — unless of course, I’m busy with one the four things mentioned above.

Hopefully it’s the vacation.

Watch for my next post by mid-April where I will speak to what I mean when I say “building a sustainable family legacy.”

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