Insurance proceeds are very flexible and can be used to meet the needs of many various financial obligations and tax planning strategies. Permanent insurance is designed to last throughout your life to provide for long-term needs.
Permanent insurance can remain in force until you die. When you pass away, the amount of your coverage, also called the sum insured, is paid to your named beneficiaries.
Permanent insurance is available on either a first-to-die or second-to-die basis. The factor to consider when making your selection of which option is best for you and your family is, simply, when will the money be needed?
If cash is going to be required immediately after the first death, then a first-to-die policy is appropriate. One example of a need that requires a first-to-die policy is business insurance for business partners. At the death of the first partner, the policy proceeds are paid to the surviving partner, who would use the money to buy-out the portion of the business from his or her deceased partner's family.
However, if the insurance proceeds are only required at the second death, then a second-to-die policy would be appropriate. Examples of needs that would require a second-to-die strategy include planning for payment of tax liabilities, which would be triggered at the death of the second spouse. Assets to consider include Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs) as well as your stock portfolio, possibly some business interests, and real estate.
Once it has been established that the need for insurance is permanent, there are a variety of plans available. Generally, the three popular forms of permanent insurance are: term to 100, Universal Life and Whole Life.
Depending on the kind of permanent insurance that you choose, you may also be able to build additional cash values in a tax-sheltered manner. Some policies allow you to increase your insurance premiums and will maintain the excess in an investment environment. Each form of permanent insurance allows for a range of options. Generally, the cash values provide your insurance plan increased flexibility to build up additional savings or insurance coverage as required.
A thorough assessment of your current and long-term goals will assist you in the selection of features and options that best meet your needs. Insurance solutions form an integral role in most financial plans. A life licensed Investment Advisor will work with you to determine which insurance options are right for you.
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