Here is a reason to consider life insurance as an asset. term has its place but is renting.

See below for an example.

Back to Back Annuity (insured annuity)
This example compares GIC vs a life annuity with a matching life insurance policy.

Example:

■Current GIC rate 3.25% (five year rate lock-in)
■65 year old male purchases $100,000 non-reg annuity and $100,000 life

Back to Back Annuity (insured annuity)
This example compares GIC vs a life annuity with a matching life insurance policy.

■Tax bracket 31.41% ($40,970 up to $65,345) Ontario
Insured annuity GIC
Gross income $8,165.28 $3,250
Taxes payable $742.90 $1,012.37
Life insurance $3,240 $0
Total net $4,182.38 $2,237.63

After taxes are considered, a GIC of over 6% is needed to equal the annuity. At higher tax brackets, a GIC paying over 8% is needed! Also, under the annuity strategy, he pays less tax as he is showing less taxable income and is less susceptible to OAS claw backs and age amount (age 65) claw back. This could mean many hundreds or thousands of dollars saved every year.

Currently interest rates are low, but because the way annuities are taxed, they will always pay a higher income than GIC’s at higher rates.

Early Planning is Best

To lower the insurance premium required to cover the annuity and to get an even higher rate of return, permanent insurance should be considered at a much earlier age (and better health) if cash flow permits. Or to give more options in retirement, such as selling the house in retirement and living off the capital. Insurance fills the hole after the money is spent.

Example:

An individual who plans well for their future, could buy a 20 pay life (paid for 20 years) insurance policy at $2700 per year (age 40). The insurance coverage would start at $100,000 and would be worth $215,000 by age 65 and have a cash value of $108,000. Not only would this insurance more than cover the annuity purchase at 65, but the individual would have access to the cash value at age 65. This allows for more options for a comfortable retirement.

Brian Poncelet who is an insurance specialist and independent certified financial planner (CFP) working in the financial services industry since 1994. Along with insurance, Brian Poncelet focuses on mortgage and retirement planning.

@ Future Money Bags If you want to productively save money for retirement, RRSP’s and TFSA’s are great places to hold investments. And the tax refunds are great!

Answer, RRSPs deffer taxes and there is no Tax refunds for TFSA.
If you are disabled (6 months or more)life insurance premiums can continue called wavier of premium (insurance company pays on your behalf). TFSA, and RRSPs …not so much. Plus year to date the S & P returns over the last ten years Jan 1 2000 to Jan 1 2010 is 1% after inflation it is -2%. See moneychimp dot com

You are right about not needing insurance in the future, but if you like to pay less taxes, have 20% more money in retirement then you (or your corporation) will buy permanent insurance. See my calculator on my web site… Person A vs. Person B (who has permanent life insurance).

The two areas people seem to make money are, people who have their own business or invest in real estate. Generally, I don’t see a lot of people who made their money in stocks, bonds or mutual funds it is just a place to put some money.

Term insurance is really renting, nothing wrong with that but in the end you own zero. The insurance companies make a profit with in the first year (term). For permanent cash value (insurance) it can take up to five years just to break even. That you should tell you something.

If I want to pay hardly any tax, have 1000% more in retirement, you may want to start your own business( stop working for somebody) and learn how to budget in order to not retire like over 90% of Canadians; retiring in poverty.

If you want to productively save money for retirement, RRSP’s and TFSA’s are great places to hold investments. And the tax refunds are great!

Ps. I would not plan to invest solely in bonds, paying out dividends, if you wish to retire with any liveable amount of income. But bonds are the things that make high ROR investments guaranteeable. :)
So I am all for bonds to guarantee better than inflation ROR’s.

FMB

If you like renting then term insurance fits!

If you want to pay less taxes, have 20% more money in retirement you may want to read a great book by Robert Castiglione called..LEAP

Right now most people like the TFSA using the right kind of insurance, you have all the same benefits as the TFSA only no down side. Example 2008 the dividends were over 7%!

I’d like to point of few points on whole life “participating”
1. They have been around in Canada for over 150 years
2. They have always paid a dividend
3. In 2008 a number of them paid over 7%
4. The fees for the bonds/stocks/mortgages is pooled and under .50 bp
5. If set the policy up right the ACB is not a problem for at least 15 years.
6. If you can fund the whole policy the same as a UL you will have more cash value/death benefit than UL at about year 20 plus.
7. As a side note, if the whole policy is over funded (a good idea) the commissions dollar for dollar is less than selling term insurance!

I have a calculator which shows Person A vs. Person B. (see free financial tools)
Person B has less money but a permanent policy…yet will pay less taxes and have more money than person B.

Most families with a stay-at-home parent don’t insure the "non-earning" parent. However, should that parent die, expenses such as daycare, reducing work hours, domestic help, etc. can be significant. It is important for both parents to be insured, not only to cover lost income, but to cover expenses should one die.