The Benefits of Life Insurance

In Canada, funeral expenses can add up quickly. (1) Common costs include funeral home arrangements and organizing the memorial service. Burial expenses can also be significant, covering things like a burial plot, casket, and headstone. If cremation is preferred, there are fees for the process, along with the cost of an urn and a memorial service. With life insurance, your loved ones won’t have to stress about these costs, allowing them to focus on grieving and managing other important matters during a difficult time.

Losing the income of a primary earner can be a significant challenge for any family, but life insurance can help ease this burden. If you were to pass away unexpectedly, your life insurance policy can help at least partially replace your lost income, so your family can continue paying essential bills like mortgages, car payments, and everyday living expenses. This support allows your loved ones to maintain their lifestyle, save for future needs, and pursue their goals without the added stress of financial insecurity.

Life insurance can help ensure your children’s education plans stay on track, especially as the cost of education continues to rise. (2) The money from a life insurance policy can cover tuition, school supplies, and other educational expenses, allowing your children to pursue their goals. Whether college, trade school, or any other form of higher education, life insurance can provide the resources they need to succeed.

While Canadians are living longer, critical illnesses like cancer and heart disease are becoming more common. (3) Many life insurance policies offer riders or add-ons that cover terminal or critical illnesses like cancer or heart disease. If you’re diagnosed with a serious illness, these riders let you access benefits while you’re still alive. The money can help with medical bills, replace lost income, or pay for treatments that health insurance might not cover. Life insurance can provide financial relief, so you can to focus on your health and recovery.

Life insurance can be structured to provide ongoing financial support for dependents with special needs. By setting up a special needs trust funded by a life insurance policy, you can help ensure that your loved one receives the care and support they need without jeopardizing their eligibility for government benefits.

Life insurance can protect your family’s assets by providing the necessary funds to cover estate taxes and other expenses. It may help alleviate the need for your heirs to to liquidate property, family heirlooms, or investments to pay these taxes, which could diminish the value of your estate. Life insurance can also simplify dividing your assets fairly, especially when dealing with complex holdings like a family business, real estate, or other significant investments. By providing liquidity, life insurance allows each heir to receive their fair share without the need to split or sell off important assets. You can avoid potential conflicts among family members and make it easier to honour your wishes and protect the legacy you’ve worked hard to build.

As a business owner, life insurance is a smart move to help protect your company and the people who depend on it. If you have business partners, life insurance may help fund a “buyout agreement,” enabling them to purchase your share of the business. It can also cover debts you’ve personally guaranteed, helping protect your family and the business from financial strain. Having life insurance in place may help reassure investors and lenders that your business is prepared for the future, making them more likely to support you. Plus, insurance proceeds may be used to cover the costs of losing a crucial employee, which can help minimize disruption and financial loss to the business.

Life insurance can sometimes be used as collateral for a loan. (4) For example, for large personal loans, such as financing a new home or funding a significant renovation, using life insurance as collateral can provide the additional security the lender needs. If you’re seeking a business loan to expand your company or purchase new equipment, using your life insurance policy as collateral can reassure lenders and help you secure better interest rates.

Life insurance policies come with several tax advantages. (5) The death benefit is typically tax-free, so your beneficiaries receive the full amount without having to worry about taxes. This means they can use the funds for important needs like paying off debts, covering living expenses, or investing in the future. If you have a whole life or universal life insurance policy, it builds cash value over time that grows tax deferred. You can also typically borrow against the cash value without triggering taxes, which can give you access to tax-free income when needed.

Life insurance gives you the chance to leave a legacy by providing financial support to your loved ones or making a charitable donation. You can choose beneficiaries for your policy, whether they’re family members, friends, or charities. This way, your values and priorities guide how your assets are distributed after you’re gone. For many people, the ability to make a positive impact on others’ lives is one of the most meaningful aspects of having life insurance. It can also be used to establish scholarships, fund community projects, or support various causes.