Life Insurance as an Asset: Shifting the Mindset

Insurance

Chances are you have heard some buzz about whole life insurance, with a mix of negative and positive remarks. Likely the negative you have heard is “it’s too expensive”. I get it, I’ve heard that too. When I used to work in the family market, that was the answer 99% of the time I proposed it to clients. Canadians are stretched thin, asking a young family or professional to increase their life insurance cost by a substantial amount can be intimidating. But what if we shift the mindset surrounding whole life insurance? Instead of looking at the annual premium as a bill, why not look at it as an investment? We don’t look at our TFSA contribution as an annual bill, rather we have a positive, warm and fuzzy feeling when we invest. We associate it with retirement (in my case, hitting golf balls all day and drinking margaritas all night). So what would it take to have that good feeling about your whole life insurance?

A whole life policy is the multitool on your belt when you’re camping, especially when owned inside a corporation. Can you name another investment vehicle that does the following?

    • Is treated like an asset on a balance sheet
    • Grows in a tax-sheltered manner
    • Provides collateral to borrow against
    • Does not count against the passive investment income rules
    • And most importantly, leaves behind tax-free money to your family or charity for estate planning purposes

If you’re still scratching your head thinking for a similar product, let me say in my best Alex Trebek impression: “Not the answer we were looking for”. May he rest in peace.

If you come to a point where you want to look at whole life insurance as an option, be sure to get the right advice. Any advisor can sell you a whole life policy, but few can turn it into a full-blown strategy that is going to maximize tax efficiency and help you reach your goals. If you’re running the strategy through your corporation, make sure your accountant is involved and understands the numbers. If the advisor you work with does not want to involve your accountant, well, do your best Forrest Gump and run. Anyways, don’t just take it from me. There are lots of articles that discuss this strategy.

As always, if you want to chat further, I’ll be here. Thanks for listening.