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Canadians like fixed income investing but Canada's high tax rates reduce the growth of fixed income investments over time.
To invest without tax erosion, three choices remain: TFSA, RRSP, and Life Insurance. PAR life insurance combines fixed income investing with life insurance, in a tax-free solution. PAR stands for "participating" because the investment returns participate in the success of the investment pool managed by Canada Life, Sun Life, or Manulife. As of September 2024, PAR policies offer these dividend scale interest rates (DSIR): Canada Life @ 5.5% DSIR Sun Life @ 6.25% DSIR Manulife @ 6.35% DSIR DSIR, the annual investment return rate for a PAR insurance policy, is not subject to taxation. Each PAR policy can be owned personally, by a private corporation, or by a family holding company. |
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With PAR insurance, the annual dividend paid into policy will not be subject to tax because the investment is "wrapped" in life insurance.
Why? Life insurance just works that way in Canada. Whether the policy is owned personally, or corporately, the investment is shielded from taxation for the life of the policy. When the person(s) named as the life insured passes away, the payout amount of the death benefit, say $1M, will flow tax free to the beneficiary(s) whether the beneficiary is a person(s) or a private corporation. If the policy was corporately owned, the death benefit payout creates another tax credit which allows some or all of that amount to be distributed as a tax free dividend to a shareholder(s) or a shareholder's estate. A PAR policy grows very well as a fixed-income, tax-free (x3) investment. For example, a 40 year old business owner or insured professional, investing just $25k per year over ten years only ($250k total) in their corporation, could create up to $2M of tax-free monies to their estate or surviving family members at life expectancy, using PAR life insurance. |
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For many decades, PAR life insurance has been an attractive investment to successful entrepreneurs and their families as a means to protect their capital and grow their wealth. That success continues today with the high DSIR rates offered by Canada's major carriers.
Whether the investor has a particular goal such as affording to pass their business ownership to the next generation, protecting their employees and investors from an unexpected event, lowering their annual tax bill, or making a low risk investment that creates higher long term growth and value, PAR insurance should be considered by every successful owner and investor. Financial goals for family, estate, and philanthropic objectives can be greatly aided through the use of PAR insure as an alternative investment vehicle. Image: In St. Maarten a few years ago, a young Don Anderson aboard "Canada One", a 12-metre class racing sailboat. |