Changes to the Exempt Test Legislation for Permanent Life Insurance Policies in 2017
(Scroll down for infographic)
Important news for all owners of permanent life insurance policies in Canada (Whole Life and Universal Life policies) and those looking to get a new permanent policy in the future. There are lots of technical details about how and why everything is changing, but this infographic outlines the main points in layman's terms.
The short version: Permanent life insurance has an investment component - and that investment component has some tax advantages for individuals and for companies. The new rules coming into play in 2017 will limit these tax advantages.
It has been confirmed that all policies approved and issued until Dec 31, 2016 will be grandfathered under the old rules (G2 policies). Any policies issued Jan 1, 2017 and later will fall under the new rules (G3 policies). (Note: depending on which company you own your policy(ies) with, changes to your existing policy made after the rule changes may result in you losing the grandfathering. Changes could include putting in more cash or reducing your payments, or changing aspects of how your policy works. The rules are different per each company depending on how they handle the changes. This is a great time to call your advisor and find out how these new rules will affect you.)
If you are thinking about purchasing permanent life insurance the time to do it is before Dec 31 2016. These will still be great policies with advantages under the new rules in 2017 - the advantages are just greater now under the existing rules.
This infographic explains some of the major changes. For more detailed information specific to your case, please call us or call your advisor.
Additional resources:
- PPI Advisory What your Clients Need to Know About the Updated Exempt Test for Insurance (PDF)
- Pierre Ghorbanian BMO Life Assurance Company - New Law Will Impact Insurance Tax Benefits
- Sun Life 2017 Individual Life Insurance Tax Changes - Guide to Grandfathering (PDF)
Contact Us
At Safe Pacific Financial, we specialize in helping Canadian business owners, incorporated professionals, and investors structure life insurance for maximum wealth protection, tax savings, and business growth.
If you would like to discuss whole life insurance or investments, we’re happy to chat and see if we can be a good fit to work with you. Fill out our contact form and we will get back to you within 24 hours on business days.
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