February 2, 2022
Author: The Link Between
If you want a basic understanding of your life insurance options, here’s the 101. All life insurance plans start with the same basic precept. The policyholder pays a premium in exchange for a tax-free lump sum benefit that’s payable to their selected beneficiaries upon their death. But there’s more! Because life insurance enjoys favourable tax treatment under the Income Tax Act¹, it’s a valuable financial instrument that can do more than just pay a lump sum death benefit. Most Insurers design plans that offer features and benefits—added value for consumers that comes at a premium.
As always, we’re here to help you sort out your insurance needs and get the insurance that best suits your circumstances. But if you want the 101 on the options, we’ve separated the plans into five main categories below. Check them out!
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¹ Along with the tax-free death benefit, the tax treatment of Canadian exempt life insurance policies includes tax-deferred accumulation. When there is a disposition of the life insurance policy (for instance on withdrawal, surrender, or policy loan) or when a dividend is paid to the policyholder, taxation may apply. Ask us about the taxation of life insurance policies.