Low-cost life insurance solutions

life insurance smiling couple permanent

Do you need life insurance but would prefer to keep your money for other purposes instead of paying big premiums?

If so, an immediate financing arrangement (IFA) may be what you’re looking for.

An IFA allows you to get the life insurance you need, at a very low cost.

Have you ever gotten a mortgage before? An IFA works the same way.

Your life insurance policy is used as collateral, just like your house is collateral with a mortgage, and the insurance company loans you money against your policy.

If you had a $30,000 annual premium for $1,000,000 of permanent life insurance, the insurance company would loan you back 90%-100% or $27,000-$30,000, leaving you with interest-only payments on your life insurance which can be tax deductible. 

A portion of your life insurance premium is also tax deductible. 

Now you have the life insurance you need and you can use your money for any purpose you like. 

How does it work?

It’s a two step process.

Step 1 – Purchase a whole life policy.

Since a whole life policy comes with life insurance and an investment account (known as cash value), you can use the cash value as collateral and borrow against it through the insurance company or a financial institution.

Step 2 – Borrow back 90-100% of your premium and pay interest only on it. Additional collateral may be needed to borrow back 100%.

This instantly gives you your money back, leaving you with interest only payments on your life insurance premiums.  

Do you have to pay this outstanding balance back? Life insurance companies will deduct the balance owing from the final life insurance payout.

If you’re a business owner you’ll also receive a credit to your capital dividend account (CDA) which allows you to remove assets tax-free from your corporation to your estate and family. Often, the CDA credit is higher than the life insurance premium which is an enormous benefit.

For example, if the CDA credit was $2,000,000 and the life insurance payout was $1,500,000, this would allow you to take out the entire $1,500,000 life insurance payout from your corporation tax-free as well as an additional $500,000 worth of corporate assets, such as cash, tax-free out of your corporation. 

This results in significant tax savings on the additional $500,000 worth of corporate assets that you can now take out of your corporation tax-free.

It’s not only the low cost of insurance that makes this beneficial for you, but the CDA credit is an enormous benefit as well.

Overall, an immediate financing arrangement allows a person or business to finance a life insurance policy at a low cost, create tax deductions and ultimately transfer assets tax-free from the business to the shareholder’s estate.