8 Reasons to get Permanent Life Insurance before 2017

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Depositphotos_80154384_s-2015By Chantal Marr, LSM Insurance 

New tax legislation is set to take effect on January 1, 2017 that will change the way policyholders are taxed for deposits toward certain life insurance policies.

Policies issued after 2016, also know known as G3 tax generation policies, will offer less exempt room over the long term.

This new legislation will mostly affect affluent policyholders as the tax deferral features of these life insurance products typically benefit people in the higher tax brackets.

One major change is that surrender charges will no longer impact the allowable tax-deferral room in universal life insurance policies. Previously, if a policy had high surrender charges it would allow for high deposits eligible for tax deferral. Within the new framework, surrender charges will no longer impact how much tax exempt room is allowed.

Level Cost of Insurance (LCOI) Universal Life Insurance policies will be hit the hardest by the new legislation. Under the new rules, the amount of deposits allowed for tax-deferral purposes will decrease drastically.

Another type of permanent life insurance product known as Participating Whole Life, has an investment element but does not need to be managed by advisors.

Jim-Ruta
Jim Ruta

Industry veteran and life insurance expert, Jim Ruta (pictured on the right), explains in his recent column in the Investment & Insurance Journal why it’s a good investment to purchase Participating Whole Life insurance before the new legislation takes effect in 2017.

Here is a summary covering some of the points he made:

1.) You can’t outlive whole life insurance. Your protection will be there no matter what, so long as your premium is paid.

2.) Once established, it can pay for itself automatically if you can’t or forget – and that means growing cash value too.

3.) Its value is predictable, guaranteed, never goes down and written down in black and white in the contract.

4.) It’s almost like an unlimited tax free savings account because much of the internal gain is tax-sheltered and contributions are not limited.

5.) It’s a financial multi-tasker and automatically converts from asset creator to asset protector to asset over time.

6.) It’s tax-advantaged fund gives you peace of mind when you need cash in health emergencies, financial losses or opportunities. Be your own banker.

7.) Its value is not directly related to markets so you can sleep better knowing you are insulated from volatility.

8.) Whole life is an outstanding counterbalance to traditional investments, which is one of the reasons why it’s always been great insurance for children.

In his column “Corner Office Advice” in the Insurance and Investment Journal, Jim Ruta gives actionable steps on how to succeed as an advisor. He also offers coaching services for agents who need help to launch their career to the next level.

chantal-marr-findependence-hubThis blog was originally posted on LSM Insurance and is republished on the Hub with permissionChantal Marr is President of LSM Insurance, where she is in charge of product development. She has a B.A. from Laval University and Bachelor of Education from the University of Western Ontario. Chantal is a member of the Independent Financial Brokers of Canada, which gives her the flexibility to deal with all major insurance companies. She is fluent in both English and French. For more info on Chantal and others on the LSM Insurance team, click here.

 

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