The Federal government has introduced changes to the Income Tax Act that will affect the taxation of life insurance policies. If you are considering using the shelter contained within a permanent life policy, it may be in your best interest to secure your coverage NOW.
Under the new legislation, strategies such as maximum funding tax-exempt life insurance policies will allow less tax-advantaged accumulation over the long run, resulting in reduced tax efficiency.
By acting now, you can take advantage of the following benefits:
• Larger deposits over the lifetime of your tax-exempt policy
• Larger tax-free benefit at death on corporate-owned policies
• Larger deduction on collateral life insurance
• Lower costs for Level Cost of Insurance
The new taxation rules will result in price increases for Level Cost of Insurance (LCOI) in tax-advantaged plans because the investment income tax that insurers must pay will rise. Generally, insurers absorb this tax and include it in the price that is paid by the client. The projected increase for LCOI rates is 5% to 15%. In addition, insurance companies are raising rates even further to offset the continued impact of low interest rates.