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Life Insurance is designed to provide a tax-free lump sum of cash at this critical time. In the event of a premature death, the surviving relatives of the deceased are faced with many challenges. Dependent family members may need financial support to pay for funeral expenses, outstanding debts and income tax.


Through the CNLA Group Insurance plan, owners and employees can purchase enough coverage to protect their business and their families from creditors or to provide a long term income for their loved ones. The coverage is inexpensive and provides many features not available in privately offered life insurance. Life insurance can be a unique and valuable financial planning tool, especially when it comes to looking after the needs of your loved ones.


Nothing else can provide the same degree of financial security for your dependents as life insurance. But how much insurance do you really need? The answer depends on your age and your circumstances. Children, for example, have little need of life insurance, although parents sometimes buy policies in their name as a savings vehicle. Young singles have less need for life insurance except perhaps to cover funeral expenses and any debts not insured elsewhere. Mortgages and car loans...protection will be more costly through the lender in comparison to the optional life insurance available under the CNLA Program. If, however, you have dependents — a spouse, children, or others — then life insurance is often the only feasible way to provide financial security in your absence.

The question of how much insurance you need depends on your family's income requirements. To calculate how much insurance you need, first you must add up your family's expenses, deducting any income they would receive from pensions, survivor benefits, or from their own employment. A rule of thumb is that you should multiply their annual income needs by ten to arrive at the coverage you require.

For example, if your dependents will need $50,000 per year, a $500,000 policy might be appropriate. You must then consider various other expenses, such as unpaid taxes or debts, or the cost of funeral arrangements. There may also be special costs, such as post–secondary education for your children. These costs can be offset by assets you already have, such as RRSPs, GICs, or other property that can be sold to help cover living and other costs.


Life insurance can be useful in planning your estate. There are no inheritance taxes in Canada, but when you die, your estate executor must file a final tax return. Normally at this time, all accrued gains on assets like stocks and real estate, and the proceeds of all registered plans (RSPs, RRIFs, LIFs, and certain pensions) become taxable at once. On large estates the result could be a tax bill close to half the total value of the estate.


Various strategies can be used to reduce the impact of this inevitable tax bill, including life insurance. For example, say you own a cottage and want to leave it to your children. Accrued gains on the property may give rise to such a large tax bill that they are forced to sell. Tax-free life insurance proceeds could be used to cover the taxes instead, so your children can keep the cottage. Or, say you want to divide your estate equally amongst three children, but it consists of a $200,000 house and a $200,000 RRSP. Rather than selling the house to accommodate a three–way split, life insurance can be used to pay all taxes and provide another $200,000 bequest. Business assets can also be preserved using life insurance.


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