The life insurance industry is a tax haven. It was a way of sheltering money from taxation long before RRSPs came into existence and is a strategy used by the wealthy. It is essentially a plan that allows you to deposit money into a life insurance contract and to shelter all of the growth of the investment from income tax. Canada Revenue Agency allows insurance companies to issue policies and maintain their tax shelter status under certain conditions. These insurance plans are considered exempt under Sections 12.2 and 148 of the Income Tax Act. You must pay for a minimum amount of life insurance to keep the plan tax-exempt. The life insurance industry has developed these tax-exempt products for years and can help you meet several objectives.
First, regardless of the amount that you have sheltered from tax, the entire amount of the cash and/or the death benefit (depending on the type of contract) is paid tax-free and probate-free upon death. It is a great way to pass on wealth to the next generation tax-free. Second, it allows you to grow and protect your wealth inside a tax-free insurance contract. While your account grows there is no taxation, and you can choose from a wide range of investment options. Third, the life insurance contract can provide you with tax-efficient retirement income and, if structured properly, can provide you with tax-free retirement income. Under a special arrangement, you can leverage your investments inside the plan with a bank. The leverage is only repayable upon death and is guaranteed by the life insurance proceeds.
Most Canadian chartered accounting firms have published materials promoting the tax-advantaged benefits of insurance tax shelters. Ask your _ nancial advisor or tax professional whether an insurance tax shelter can work for you and your family.
Accept yourself as you are. Otherwise you will never see opportunity. You will not feel free to move toward it; you will feel you are not deserving.
– Maxwell Maltz