Life Insurance

- Other than the obvious, why consider life insurance?
- Insured Annuities Are a Good Option for Retirement
- Health Services no longer covered by Ontario


Other than the obvious, why consider life insurance?

Life insurance is a critical part of estate planning – both for personal and business reasons. Outside the desire to preserve your estate and provide basic financial security for family members,
other needs should be considered. Here are a few areas to think about:

Collateral for a Business Loan
If your company has expansion in mind or would like to secure funds to buy-out a retiring share holder, a life insurance policy could be the answer. Here’s an example of how it works. Excess corporate funds can be invested in an exempt life insurance policy where they grow tax-free to build significant cash value in the policy. At a later date when your company needs cash, the cash value of the corporate-owned policy can be used as collateral for a bank loan.
And, there are significant tax advantages. The bank loan is tax-free. The loan interest may be tax deductible if it is used for investment purposes. The bank loan can be repaid when the life insured dies. When this happens, the tax-free death benefit is used to repay the loan and any remaining death benefit is available for the company to use.

The benefits are clear: it provides businesses liquidity, tax-deferred benefits and insurance protection.

Transfer of Family Business
Similar to the above example, a life policy purchased by the company could be a part of succession planning. If a family owns and operates a viable business, succession planning should not
only consider who should take over running the business but how the ownership of that company will be divided. For example, a business owner may decide to give only one of his/her children
an executive position and/or ownership in the company after they die. However, the owner may still wish other family members to receive financial benefits of ownership in the business. In this case, the owner could purchase a life insurance policy to provide funds for the successor to “buy-out” the shares of the company from relatives without borrowing or using his/her own funds. That way, the successor takes control of the business and other family members receive money for their share of the business.

For a check list of things to consider while you’re estate planning, click on the following link to Great West Life’s website

Charitable Giving
More and more, individuals bequeath large sums of money to their preferred non-profit organizations. One way to secure funds for a favourite charity is to purchase life insurance and bequeath those funds to one or more charitable organizations. This is one option to preserve the bulk of an estate for immediate family, relatives and friends and give back to the community.

Because there are always potential risks in any financial and insurance investment, you should always consult your legal and accounting advisors. To learn more about the available life insurance products and how they fit your particular needs, contact Don McGowan at (416) 805-9999.

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Insured Annuities Are a Good Option for Retirement

There are many financial choices to consider for retirement. An insured annuity is one of them. It has two parts. First, there is a life annuity which is a contract that provides for a steady stream
of equal payments during a person’s life in exchange for a lump sum purchase price. And, secondly, an insurance policy is purchased to secure the capital (lump sum) that was invested in the annuity. The objective of the annuity arrangement is to provide a better return on investment than traditional fixed-rate investment vehicles, while preserving the capital invested.

How does it work?
An investor uses a sum of money to purchase the annuity in return for a steady stream of income as long as they are alive. Life insurance is also purchased which has a death benefit equal to the capital invested in the annuity. Part of the money from the annuity is used to pay for the life insurance premiums. In the case of death, the annuity typically stops payment (depending on the terms and conditions) and the life insurance death benefit is paid to the estate. Therefore, the capital is preserved for loved ones.

This is only a basic overview of the insured annuity. Other types of annuities can also be considered. For full details on all the options and the risks associated with insured annuities,
contact Don McGowan at (416) 805-9999 or

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Health Services no longer covered by Ontario

As a reminder, the following changes were announced in Ontario’s spring budget.

  • Eye Exams – effective November 1, 2004 the provincial health plan no longer covers the cost of routine eye exams. The only exception is for seniors age 65 and over and those under the age of 20.
  • Chiropractic – effective Nov. 30, 2004, Ontario will no longer pay for chiropractic services.
  • Physiotherapy – As of March 31, 2005, the province will no longer cover the cost of physiotherapy. The only exception is that seniors will continue to receive physiotherapy through home care, long-term care facilities and hospitals.

Contact Don McGowan at (416) 805-9999 to discuss your employee benefit plan and possible amendments in response to these changes.

Disclaimer: The opinions and advice in this e-News Bulletin are provided for the general guidance and benefit of McGowan Insurance Services Ltd. customers based on information we believe to be accurate. We cannot guarantee its accuracy or completeness for individual circumstances. While we strive to provide reliable, informative material herein, we cannot account for all industry conditions and legislative changes that occur.

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