Family Life Insurance Is a Plan for Your Family’s Future
Parents and grandparents have always looked for ways to protect their families and pass their wealth down to future generations. Whether it’s property, a business, cash, or investments, the hope is to provide children or grandchildren with a leg up in life.
Family life insurance is a plan for your family’s future
Parents and grandparents have always looked for ways to protect their families and pass their wealth down to future generations. Whether it’s property, a business, cash, or investments, the hope is to provide children or grandchildren with a leg up in life.
Serenia Life advisors help families develop strategies protect their wealth today – and tomorrow. This includes the use of insurance policies that allow beneficiaries (i.e., the individuals and groups who will receive the money) to preserve their income in the case of a spouse’s death, or receive a tax-free inheritance.
Insurance as a wealth-preservation tool
Throughout your life, insurance provides a way to replace your income in the event of critical illness, injury, or death. If you’re a new homeowner (with a large mortgage) with a young family to take care of, you may take comfort in having insurance coverage that would cover your mortgage payments and the expense of raising children. Here are three common ways people prepare for the unexpected:
- Disability insurance helps you pay the bills if you get sidelined by an injury. A typical plan will cover a portion of your income until you can return to work or reach the age of retirement, as defined by your policy.
- Critical illness insurance provides you with a one-time, tax-free payout that you can use to cover expenses while you recover. You can use this money to pay for things like transportation to and from treatment, medications not covered by insurance, rehabilitation, or anything else you need.
- Term life insurance and whole life insurance provide your loved ones with a lump sum, tax-free payment to help them financially after your death.
All of these policies help you preserve wealth because you don’t have to sell assets or cash in investments before they’ve had a chance to grow. But insurance can also help families build and transfer more wealth to future generations with a smaller tax bill. That’s why taking a multi-generational approach to insurance and wealth planning is so critical to a family’s legacy.
The family life insurance approach
Families that keep each other informed about their insurance plans stand a better chance of getting the right type of life insurance for family members at the most reasonable cost.
The right coverage
Throughout life, the need for insurance varies. A good insurance plan, like a good investment plan, is a flexible and evolving strategy that can grow with you. For example, the type of coverage you need will change when you get married, have children, or become grandparents. This is why advisors recommend periodic reviews of your family life insurance plan, to make sure you are adding or subtracting coverage as needed.
The right price
Family life insurance plans have a financial payoff. When you balance everyone’s needs, you can make the most of your money, and ensure that no generation is “underinsured” or “overinsured” at any time. This means you are never overpaying or duplicating coverage.
For example, family members who manage their insurance needs on their own may be unaware of coverage purchased by grandparents for their grandchildren, causing two generations to effectively overcontribute to insurance when they could be using the money to invest in retirement or education savings.
Here’s what happens when families work together
If grandparents are retired, and living on savings, there is no need for them to replace their income. They can focus on their quality of life and may be in a great position to give their adult children and grandchildren a financial leg up.
For example, grandparents can purchase a whole life insurance policy for their grandchild and transfer ownership when the child reaches legal age, tax-free¹. A Serenia Life advisor can guide grandparents through the simple six-step process of buying life insurance for grandchildren.
Step 1.
Purchase a participating whole life insurance policy for your grandchild.
Step 2.
Name a contingent owner (someone who assumes ownership if the policy owner dies). This will likely be the child’s parent(s).
Step 3.
Pay the premiums (i.e., the amount you pay for an insurance policy monthly or annually). Ask about the option of “paying up” a portion of the premiums in a lump sum.
Step 4.
Transfer ownership to your grandchild at a time of your choosing (the child must be legal age).
Step 5.
Update the beneficiaries for the new policy owner.
Step 6.
Your grandchild can tap into the cash value² through a policy loan or withdrawal.
So how does this work? Well, when you buy a whole life policy, the insurance company invests a portion of your payments on your behalf. As the cash portion of your policy grows, it becomes accessible to you and can provide a lifetime of tax-effective rewards. In the case of a child, the money has a very long time to grow, thanks to decades of compound interest.
Knowing that grandparents have provided some long-term financial security for their grandkids, parents can focus on other priorities, such as their own life insurance needs.
Whether both parents work, or one has decided to be a full-time caregiver to the kids, they both need a plan to deal with all of life’s uncertainties. Knowing that the grandchildren’s financial future is taken care of, the parents may decide to invest more money in savings or take out higher life insurance coverage for themselves.
Adjusting family life insurance coverage
One of the great benefits of working with a dedicated family life insurance advisor is the freedom to make adjustments to your plan as you make more money, pay off debt, or start to accumulate assets – like the family cottage! – that need to be protected from “the tax man.”
When you’re first starting out, you may want the peace of mind that comes with knowing your family can pay off the mortgage if you die. Later in life, you may need half as much coverage if your debts are paid off and you are that much closer to retirement.
All of these decisions are easier and can lead to potential savings when you take a multi-generational approach, discuss your plan openly with everyone, and share the satisfaction of creating a stable and lasting family legacy.
Where to start planning for family life insurance?
Life insurance is widely available throughout Canada. Many first-time buyers are likely to start price shopping online and comparing quotes and features. But if your goal is to craft a personalized, long-term plan that includes other family members, consider working with a professional and objective advisor who can present solutions you may not uncover on your own.
As a member-based organization, both policy owners and policyholders at Serenia Life are considered members, not customers. This structure allows us to provide exceptional value, because we share a portion of our profits with members and their communities, not outside shareholders.
We also provide unique benefits on top of insurance planning and coverage, such as monthly payments for bereaved children, reimbursements for first aid training, a free online will, and financial support for fundraising events. We’ll even help you pay for a lawyer to draft or update your will once every five years.
You can learn more about the benefits of membership on our website.
Is family life insurance worth it?
Planning for unexpected events like illness and disability can provide peace of mind for everyone. The ability to replace income and pass on family wealth or assets, tax-free, makes insurance planning worth it for most families. But is it right for you?
Families that take the time to discuss money issues, on their own or with the help of their advisors, are more likely to spot opportunities they might have otherwise missed. A Serenia Life advisor can help plan a family meeting every five years to review your wishes and coordinate your insurance needs so everyone can live with greater security and confidence in their financial future.
Why should you choose Serenia Life for life insurance?
As a member-based organization that’s been around for nearly 100 years, we encourage kindness by sharing our profits through community outreach, fundraising, and unique member benefits that help Canadians support their family, their community, and the causes they care about. The more we grow, the more we can give.
We provide members with access to a growing collection of member benefits that make a positive impact on their lives and the lives of others.
Benefits, such as:
- $1,000 post-secondary scholarships
- $250 seed funding towards fundraising events
- Free digital wills (value: $189), or money towards drafting/updating a will through a lawyer
and much more!
View a full list of our member benefits.
Together we continue to make a difference.
Disclaimers
¹According to the rules in subsection 148(8) of the Income Tax Act, the transfer of ownership can be tax free to a child or grandchild as long as there was no consideration paid on the transfer. The proceeds of the disposition for the transfer are deemed equal to the policy’s adjusted costs basis (ACB), resulting in no income tax payable by the policy owner when the transfer is made.
2Cash values are accessible via a withdrawal, policy loan, or surrender. These may be subject to taxation and a tax slip may be issued. Accessing the policy’s cash value will reduce the available cash surrender value and death benefit.
