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Why life insurance is essential

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What would your family do if you were to die suddenly? Would your family be able to manage without your income?

Life insurance ensures a source of income for your family to help them maintain their lifestyle if you pass away. It can also help build your wealth while you’re alive and provide a way for you to pass on your assets to the next generation. 

Let’s look at two types of insurance, their characteristics and their place in your life: term insurance and permanent insurance. Many people start out with term life insurance because it is the most affordable. As their needs change, they may move to permanent life insurance.

Term life vs. permanent life insurance

Choosing the type of life insurance that is appropriate for you can be a difficult decision to make on your own. Here’s what you need to know about the two main types of life insurance.

Term life insurance

Permanent life insurance

Provides a specific amount of insurance coverage for a specific period (e.g., 5, 10 or 20 years)

Provides insurance coverage (that can increase) for your lifetime

Is generally the most affordable type of life insurance because it covers you only for a specific period

Has premiums that usually stay the same throughout your life; offers some payment options, if you want to cash in or borrow against the policy

Provides your beneficiary with tax-free death benefit proceeds if you pass away during the period of coverage

Provides your beneficiary with tax-free death benefit proceeds no matter when you pass away

Talk with your MD Advisor* to evaluate your needs — family, estate or other — and personalize your insurance so that it will fit with your financial plan. You might need permanent insurance, term insurance or perhaps a combination of both based on your objectives and your budget.

How life insurance helps

Insurance can be used in both traditional and innovative ways to help you build, protect and share your wealth. Whether it’s for providing income when you’re unable to work or reducing your tax burden, insurance can help you achieve your financial goals.

Protect income: Life insurance can help protect your family from the financial impact of your death by ensuring your family’s standard of living can be maintained.

Minimize taxes: Sheltering some of your assets inside a life insurance policy could help reduce your annual tax burden, minimize estate taxes and create a tax-advantaged income stream in retirement.

Maximize your estate: Life insurance policies can help reduce the taxes that would otherwise be payable in the future. Your policies can also provide funds to pay your taxes at death so that more of your assets can pass to your loved ones.

Maximize your wealth: Maximizing wealth is a balancing act between growth, risk and protection. Including insurance as part of your overall wealth portfolio can lower your overall risk and lock in returns as they occur, allowing you to take a more aggressive investment approach with other assets.

Leave a legacy: You may want to transfer assets to your children or grandchildren or support a meaningful charity or organization. Insurance strategies can play a key role in your overall estate planning to provide a tax-efficient way of reaching these goals.

Talk to your MD Advisor about how you can make life insurance a part of your financial plan.

*MD Advisor refers to an MD Management Limited Financial Consultant or Investment Advisor (in Quebec), or an MD Private Investment Counsel Portfolio Manager.

All insurance products are sold through Scotia Wealth Insurance Services Inc., an insurance agency and subsidiary of Scotia Capital Inc., a member of the Scotiabank group of companies. When discussing life insurance products, advisors are acting as Insurance Advisors (Financial Security Advisors in Quebec) representing Scotia Wealth Insurance Services Inc.  

The above information should not be construed as offering specific financial, investment, foreign or domestic taxation, legal, accounting or similar professional advice nor is it intended to replace the advice of independent tax, accounting or legal professionals.