A Few Good Reasons To Secure Permanent Life Insurance Before January 1st 2017

One of the major benefits of permanent life insurance policies is the built-in cash value that grows tax-free. If, at some point, the values inside the policy grows to exceed the tax sheltered limits, then the insurance company that carries the insurance will automatically modify the policy to retain the tax-exempt status by either paying out cash values to the client, or by increasing the death benefit amount; whichever option was selected at the time the application was submitted.

New tax legislation set to take effect on January 1st 2017 will limit the use of permanent insurance products as investments, as well as standardize tax rules across all insurance carriers. These changes by the CRA will decrease the tax-sheltering limit in the long-term. This essentially means that policies purchased after January 1st 2017 will have less room to grow tax sheltered. As the Net Cost of Pure Insurance (NCPI) decreases along with mortality rates after these coming changes, the Adjusted Cost Basis (ACB) will increase and drive up premiums. In layman’s terms, you will be paying more in premiums for less of the benefits of owning a permanent life policy.

Below are some reasons to get permanent life insurance today before the changes are in effect:

  1. Get More Tax-Free Growth – If you buy today, permanent insurance products will have more room for tax-free growth for optimal estate planning.
  2. Pay Lower Premiums – Minimum premiums will increase with the new rules; especially for Universal Life policies.
  3. Deposit Freedom – There will be less freedom to deposit lump sums of money to pay for premiums.

Almost all permanent policies purchased before January 1st 2017 will be ‘grandfathered’ with the current CRA taxation guidelines. Reach out to me today to discuss your unique estate planning needs and to determine if adding a permanent insurance policy could help you save for the future as well as protect the ones you love.