Understanding Permanent Life Insurance: What You Need to Know

Hi Friend,

In this episode of Millennial Money Canada, we unpacked the ins and outs of permanent life insurance with Graham Bergsma, founder of G3 Wealth Strategies. With over a decade of experience and more than 3,000 insurance plans implemented, Graham offers a clear, educational perspective on what permanent life insurance is, how it works, and who it’s best suited for.

Here’s a breakdown of what we covered:

What is Permanent Life Insurance? Permanent life insurance is designed to provide coverage for your entire life, unlike term insurance which expires after a set period. It includes a cash value component that grows over time, potentially offering tax-free access to funds down the line. This cash value can be used for various purposes, including supplementing retirement income, funding investments, or covering estate taxes.

Who Benefits Most from Permanent Insurance? Permanent insurance is not for everyone. It’s typically recommended for:

• High-income earners looking for tax-efficient investment options

• Business owners with significant retained earnings

• Individuals seeking to leave a tax-free inheritance or equalize an estate

• People with large estate liabilities, such as real estate or a business, that could trigger capital gains taxes upon death

Cash Value – What It Is and How It Works The cash value component is a savings-like feature that grows over time. It can be accessed through policy loans or withdrawals and can serve as a financial buffer during market downturns. However, Graham emphasizes that the cash value is not a primary investment strategy but rather a secondary tool to complement traditional investment accounts.

Tax Advantages of Permanent Insurance One of the biggest selling points of permanent insurance is its tax-deferred growth. Policyholders can access the cash value without triggering a taxable event, making it a useful tool for high-income earners seeking to manage their tax exposure. Additionally, the death benefit is typically paid out tax-free to beneficiaries.

Planning Considerations: Is It Right for You? Before committing to a permanent policy, consider the following:

• Have you maximized contributions to RRSPs and TFSAs?

• Are you in a high tax bracket where tax deferral would be advantageous?

• Do you have a long-term estate planning strategy in place?

• Would access to tax-free cash value provide meaningful financial flexibility?

Looking Ahead In the next episode, we’ll dive into corporate-owned life insurance and how business owners can use it to mitigate tax liabilities, fund buy-sell agreements, and protect their legacy.

Got questions? Book an intro meeting here to discuss how these strategies could work for you.

See you in the next edition,

Guillaume Girard, CFA, CFP

Millennial Wealth Advisors