More than family protection

It used to be that life insurance was meant to protect your family from the financial risks associated with premature death. We've come a long way since then. These days there are often two people supporting the family. Your estate needs protecting, and so does your livelihood. Here's a brief overview of how insurance is used today to safeguard your family, your assets and your business.

Life insurance comes in two varieties: term and permanent. Term - as the name implies - insures you for a fixed period of time and pays a benefit only if the person who's covered dies during that period. Sometimes you can renew at the end of the term and establish new premiums. The advantage is that the payments you make are usually lower than those for permanent insurance. People use this type of insurance to cover needs that disappear over time-things like mortgages or car loans.

Permanent insurance is for life and is guaranteed to pay the death benefit as long you make your regular payments. The most common forms of permanent insurance are Whole Life and Universal Life. With Whole Life policies, the premiums are usually level over the life of the policy. Your premiums don't rise as you get closer to your life expectancy.

With Universal Life policies, you choose the premiums and the period over which you want to pay them. A cash value can accumulate in these policies like an investment, and you can borrow against it. You can also invest the cash in different investments that come with the policy, such as savings account rates and segregated funds. Although premiums on a Universal Life policy are not tax deductible, the growth inside accumulates on a tax-deferred basis. This feature is particularly attractive to investors who want to continue to build assets without paying taxes until after retirement or as a tax-free death benefit.

Universal Life insurance has become a significant factor in estate plans where it can be used to pay the taxes on your estate or any debts you may have. The death benefit is paid immediately and allows your family to pay the estate's obligations without liquidating your assets. This saves you valuable time and effort during a sensitive period. Universal Life has also taken on importance in business and succession planning where it can be used to protect the business against the owner's death.

Regardless of how insurance is used, there's one undisputed fact, to meet your needs, insurance should be considered in light of everything else in your life. It's a very personal thing. To learn more about retirement and estate planning, speak to a CIBC Wood Gundy Investment Advisor.

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The information contained herein is considered accurate at the time of posting. CIBC and CIBC World Markets Inc. reserve the right to change any of it without prior notice. It is for general information purposes only.

Insurance services are available through CIBC Wood Gundy Financial Services Inc. In Quebec, insurance services are available through CIBC Wood Gundy Financial Services (Quebec) Inc.