5 Reasons To Be Nice To Your Insurance Advisor
I know what you’re thinking…
Insurance agents – Yuck!
But, wait a minute – don’t be so fast!
In the past, you may have only been exposed to the “plain vanilla” type of insurance – and a “heavy handed” sales approach…
And for that I am truly sorry because that experience probably left you with a bad taste in your mouth for anything remotely relating to insurance…
But did you know that the rich – those with high net worth – are in fact the largest purchasers of life insurance products?
Why?
Because there are characteristics of some life insurance products that make them extremely useful as a tax and estate planning tool.
First of all, when you are considering buying life insurance you need to first ask yourself these 2 questions:
Question 1: When I die – who will be affected!
Question 2: And do I really care?
Now, I realize that this may seem a crude way of putting things – but at the end of the day – it’s true.
So now, if the answer to Question 1 is nobody will be affected – well then, you probably don’t need – or want life insurance!
However, if the answer is “somebody I care about – or have a business relationship with” then you will want (and need) insurance.
So now, here then are the 5 reasons to purchase insurance – and be nice to your insurance advisor:
(Because in all likelihood it was conversations with your advisor that identified one or more of the following…)
1. To provide for others – If you have dependents who would face financial hardship when you pass – then you need insurance. Why? Because the tax free payout on your death can be used to provide the capital necessary to generate an income stream that you are no longer providing. Additionally, you may want to leave money to others who have needs – such as your favourite charities.
2. To cover final disbursements – just because you have gone – your debts and others costs remain!
Who is going to pay for these? These costs take the shape of things like: funeral costs, legal and accounting fees, taxes still due and owing ;in year of death, executor fees and probate fees, mortgages, credit cards, lines of credit, and other loans. You could saddle your spouse in a horrific situation because they will have to pay for all of this out of their own pocket – unless you have provided a life insurance contract to step in to help out…
3. To provide equitable or larger bequests – if it’s your intention to treat your children fairly and equally – life insurance makes this all possible. For example, imagine that you leave your cottage to your daughter who uses it and your investments to your son. Now, just suppose also that on your passing the cottage gives rise to a tax bill. Where will the cash come from to pay the taxes? Potentially from your son’s share of the estate. This in fact, could leave him short changed! Life insurance can provide the cash necessary to equalize the estate.
4: Maintain business health – as a business owner, insurance can provide cash for a surviving partner to buy out the estate or a deceased partner – all the while still maintaining the stability and viability of the business. Furthermore, if a corporation is the beneficiary of a policy on a life, a portion (often 100 percent) of the benefits paid out upon death of the insured will be credited to the company’s “capital dividend account”. (CDA) Now, amounts paid to the capital dividend account (CDA) can be paid out as tax-free dividends to shareholders of the company! Another major attraction for the use of life insurance in a business setting.
5. Shelter income from tax – certain life insurance policies can provide tax-sheltered growth! You won’t be taxed annually on income earned inside the policy. You can expect slightly lower returns inside an insurance policy because of the provincial tax levy, fees and administrative costs – but historically the returns have been quite stable – and tax sheltered!
About The Author
Mark Huber is a full time practicing certified financial planner (CFP).
Mark has distilled his 22 years of insights and experience in the financial services industry into “The UnCanadian Way” series of eBooks, audios and videos.
For the latest visit: http://HowToBeSetForLife.com
This article may be freely distributed if this resource box stays attached.
