How to Make Canadian Life Insurance Work for You

There is no doubt that life insurance is a useful asset. In some cases, life insurance might last a lifetime, or it might only last a few decades.

Life insurance shouldn’t be something that people are afraid of. In fact, by looking at all of the options, life insurance can be very helpful to every unique situation.

The following are some of the ways to make life insurance work for you:

  1. Selling Your Life Insurance Policy for Cash in Canada


Many people have no idea that they have the option of selling their life insurance policies. Some of the best life insurance companies in Ontario don’t always share this information.

People often decide that their money could be better spent somewhere else. In this case, they can have their policy converted to cash in a life settlement agreement.

The policyholder sells their life insurance for a price that is more than they would have gotten from the insurance company. All kinds of policies can make this change, including term life, whole life, universal life and more.

Reasons to Choose a Life Settlement:

  • Too Pricey

The insurance policy is too expensive to keep. Those who decide to stop paying and let their policy end will be losing everything they have put in.

With a life settlement, however, they have the chance to make some of that money back.

  • Too Much Coverage

Over time, some people need less coverage than what they asked for. In this case, a settlement may be smart to get rid of some of the coverage in their premiums.

This kind of situation may occur if the coverage helped to cover a mortgage debt, and the house has already been paid off.

  • More for Retirement

Retiring Canadians might be putting off retirement for longer, but it’s always nice to have that financial padding for the next step in life.

Selling an insurance policy may help with a retirement income, or allow for bigger purchases, vacation funds, etc.

  • Medical Support

People who require medical help or who have medical expenses may choose to sell their policy for extra cash.

  • Too Much Debt

Some Canadians are sitting in a lot of debt, and it can often be too much to bear. By selling an insurance policy, individuals may be able to help themselves by taking away some of that unwanted debt.

  1. Utilize Tax-sheltered Investments

Assets that grow in a life insurance policy have no annual income tax. People who are using an insurance policy that allows for investing (whole life, universal life, etc.) can increase their investments inside the policy, without worrying about being taxed.

  1. Passing Down Assets Effectively


Some families have more assets than they will be able to use in one generation. In this case, the assets will be passed down to the next generation.

In some cases, these assets and estates can come with big tax liabilities, if not planned out properly.

Families can make life insurance work for them by having the present generation insure the next generation. By doing so, the family can avoid high tax numbers when assets are passed along.

  1. Creating an Additional Source of Money

Some people make their insurance work by using it to build rates of return after tax. Having this extra source of income can be a huge asset.

Instead of taking the cash right from the policy, these insured people and families instead borrow against it. (This is more tax-efficient).

  1. Return on Investments

Many Canadian insurance companies offer whole life policies. Furthermore, these policies usually have high returns, in the form of dividends.

For those who are asking, ‘What are dividends?’, they are payments made by a company to its shareholders. These dividends can be added to life insurance policies, to the growing balance.

What makes this option so nice, is that the returns are fairly consistent, and payouts are tax-free when the insured dies. Many people take advantage of this option since it’s so affordable.

  1. Reducing Holding Company Taxes 


A holding company that has a high level of value isn’t always a good thing for a family at the time of the insured’s death.

The higher the value of the company, the more likely the tax liability will be high as well. To avoid this, people can purchase life insurance back-to-back with an annuity by the holding company.

As a result, the holding company’s value is lowered, and tax on the company is lowered as well.


Life insurance doesn’t have to be a scary thing. Policies are created to offer peace of mind that loved ones will be taken care of should anything happen.

When it comes to finding life insurance that works for you, it’s a good idea to shop around for options. Every single insurance company is unique, which means their policies and guidelines are different as well.

Comparing quotes will give people a better idea of what they can afford. Furthermore, they’ll also learn what each company can provide at that price.