insurance asset

Life Insurance as an Asset

March 7, 2018 4:20 pm Published by

When I ask people if they invest in their business, invariably, most contend that they do. However, beyond the more traditional forms of investment, what they’re not always aware of is that there are other beneficial investment strategies to explore.


This usually leads to these more specific follow up questions:

  • Do you need life insurance for risk management?
  • Do you prefer to invest in longer-term investments within your corporate or personal net worth?

If the answer is “yes” to both of these questions, a successful course of action would be to do BOTH, using one of the misunderstand and yet powerful attributes of life insurance as an asset.


Putting the “Life” into Life Insurance

In essence, it’s about obtaining life insurance that works for your “life,” and not solely posthumously. It’s then about using your life insurance now to finance the purchase of your longer-term investments.


Beyond Risk Management

When most people think of life insurance, they predominantly understand it to be insurance used as a risk management technique, normally utilized to guarantee a set amount of compensation to beneficiaries as a result of the passing of the insured. And they would be correct, as this is indeed a common use; however, that is only one use…


The Pros of Permanent Life Insurance

A lesser-known benefit of life insurance is that it can also be used as an asset–an economic resource that can be owned and controlled to produce further value. When you put these two concepts together, you have permanent life insurance–a powerful asset that addresses risk management issues while concomitantly working to grow your net worth.


The Power of NOW.

Whole Life and Universal Life are the most common forms of asset-based life insurance. Both types of insurance accumulate cash value over time, which grows on a tax-exempt basis. Policy owners can borrow against its cash value, and use the borrowed proceeds for business, investment or personal purposes–a solid way to make your insurance work for you now.


Tax Efficiencies

One of the major benefits to Whole and Universal Life Insurance is it’s an asset that grows on a tax-exempt basis; therefore, using them for associated borrowing for your business or investment purposes can create significant tax efficiencies in your day to day operations.

Under current income tax rules in Canada, a loan used for business or investment purposes can result in deductible interest; therefore, when using a life insurance policy with cash value as collateral for a business or investment loan, the net cost of pure insurance associated with that policy can also become deductible for tax purposes, a significant advantage!


The Best of Both Worlds

We work closely with public practice accountants to ensure that our clients benefit from life insurance as both a tool for tax-exempt growth risk management and as a tax-efficient asset for the purposes of business or investment use.


Let MGF Advisory Help

If you would like to know more about permanent life insurance and how it can work for you, we would be happy to help!


Marco Faccone, CPA, CA, CFP has long specialized in the area of corporately held insurance and estate planning, advising and assisting shareholders with succession and wealth accumulation strategies. Marco has worked alongside estate lawyers and tax accountants to offer his clients a professionally tailored and value-added plan. Contact MGF Advisory for more information regarding corporately held insurance and succession planning.


Categorised in:

This post was written by Marco Faccone