Hard-Working Canadians Should Invest with Whole Life Insurance
Trying to figure out the best way to save money and make it grow can be confusing. With tons of options like stocks, bonds, and real estate, out there, it can be difficult to know where to put your money.
Stocks shoot up and tumble down in a way that nobody really seems to understand (or at least, predict). Real estate investments can seem more stable, unless a housing bubble bursts, or you have to bust open the bank for unexpected and expensive maintenance costs.
How about another choice? Whole Life Insurance is a low-risk investment vehicle that has a variety of perks you might not have heard about. Let’s talk about what it is and why it could be a good idea for your money.
How is Life Insurance an Investment Vehicle?
You might be thinking, “Isn’t Whole Life Insurance… life insurance?” It’s easy to think life insurance is like any other insurance, only paying out if something bad happens. If nothing does, you might feel like you’ve wasted money on it.
But it doesn’t have to be that way! Whole Life Insurance not only acts like an insurance policy that provides a death benefit — it’s an incredible low-risk investment vehicle. As an investment, Whole Life Insurance gives you access to capital and continues to grow without the CRA taking off chunks of it (like it does for other investments).
Unlike other types of insurance, you don’t lose out on your premiums! Instead, the policy generates wealth for you, which you can actually spend on whatever your heart desires (and you don’t need to wait for a terrible thing to happen to do it).
Cash Value Accumulation
The cash value in a Whole Life Insurance policy grows over time with a minimum yearly increase in your cash value and a yearly dividend payment. There’s a set interest rate that’s usually higher than what you’d get from a regular savings account (or even other low-interest tools like GICs).
What sets this apart? You can use this cash value while you’re still alive.
That’s right. Unlike other types of insurance, where you can only benefit after a tragedy, Whole Life Insurance gives you access to cash for whatever you want: retirement, emergencies, your child’s college tuition, or even vacations. Like, why shouldn’t you be able to use the funds while you’re still alive, right?
Plus, this cash value is guaranteed to grow, which makes it a safe place to save money, especially when the economy is shaky.
Tax Advantages for Canadians
Canadians understand better than anyone that taxes are a headache.
Filing returns is often a complicated and time-consuming process. There are ways to minimize taxes legally, but navigating the system often feels like a maze. Just when you think you understand the tax codes, they change on you! And if you dare make a tiny mistake, a huge punishment often awaits.
Many investments require you to pay taxes on the interest/capital gains you earn annually, which can seriously dwindle the total value of your investments. But with Whole Life Insurance, the cash value grows tax-free until you take it out. This means you don’t see the numbers go down every tax season.
You can also borrow against your policy’s cash value without paying taxes on the money you take out (if the lending facility is structured through a bank, which it often is). This makes Whole Life Insurance an ideal way to manage your money and reduce your tax bill.
Long-Term Wealth Preservation
Whole Life Insurance helps you keep your money safe for the long run. Your premium stays the same for the life of the policy, even if your health changes.
When you pass away, the death benefit goes to your family tax-free, which helps preserve your wealth and makes sure your family is well taken care of.
Comparing With Other Investment Options in Canada
Canada offers lots of ways to invest your money. They all want our money somehow, right?
Here’s how Whole Life Insurance stacks up against some other options:
The Tax-Free Savings Account (TFSA)
The Tax-Free Savings Account (TFSA): TFSAs let you grow your investments tax-free, but there’s a limit to how much you can put in each year. You can withdraw from it at any time without penalty.
Registered Retirement Savings Plan (RRSP)
Registered Retirement Savings Plan (RRSP): RRSPs help you save for retirement with tax-deductible contributions and tax-deferred growth. But when you take money out, it’s taxed. Like the TFSA, you can carry forward unused contribution room to future years.
GICs and Bonds
GICs and Bonds: GICs and bonds are safe but often have low returns; maybe 4% at today’s interest levels, but 50% of that is typically taxed by the CRA.
Stocks, ETFs, and Cryptocurrency
Stocks, ETFs, and cryptocurrency can give higher returns but come with much much higher risk. They can and could play a role in your high-risk investments within a diversified portfolio. It’s crucial to stay informed and monitor these investments as they can lead to significant gains or losses.
What if You Already Have an Existing Insurance Policy?
If you already have term life insurance, you might wonder why you’d need Whole Life Insurance. The great news is that it can work alongside your term policy to give you comprehensive coverage and actually build your wealth (not take away from it).
Achieving Financial Prosperity
Whole Life Insurance is a smart way for Canadians to save and grow their money while protecting their families. It offers tax-deferred growth, a guaranteed return on your cash value, and a tax-free death benefit. If you’re looking for a stable and flexible way to manage your money, Whole Life Insurance could be a great choice.
Talk to a financial expert to see how it can fit into your financial plan. Reach out to us today to learn more about how Whole Life Insurance can help you achieve a secure financial future.