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Are Life Insurance Proceeds Taxable

Are Life Insurance Proceeds Taxable?

Having a life insurance policy has almost become a necessity for Canadian families. It is now common practice for most Canadian companies to offer group life insurance as a benefits package to all their employees. As a result, nearly 80% of all Canadians have some form of life insurance, which for the most part, offers peace of mind above all else. 

By paying a nominal monthly or annual premium, a life insurance policy protects your loved ones, from a financial standpoint, in case something were to happen to you. Depending on your policy, the death benefit paid out to your chosen beneficiaries or estate can amount to a substantial sum and can be used to pay off outstanding debts, funeral costs, college fees, and everyday expenses. 

However, you likely know this, and what you really want to know is whether your life insurance proceeds would be subject to income tax. To get the answer and all that you need to know about life insurance and its tax implications you have come to the right place!

Are Life Insurance Proceeds Taxable In Canada?

In a word, no! However, there are exceptions. For the most part, an individual’s death benefits or life insurance proceeds are not subject to any form of income tax. 

The beneficiaries receiving the proceeds don’t have to report it as taxable income to the CRA when filing their Canadian tax return either. This is also the case for most types of inheritances and financial gifts in Canada. They are all tax-exempt.

There is also no such thing as estate inheritance tax or death tax in Canada. Any death benefits or inheritance received, regardless of amount, isn’t subject to income tax and the beneficiaries or heirs aren’t liable to pay any taxes to the government. 

This is why many wealthy Canadian families take advantage of estate planning as it offers more control over how death benefits and inheritance are to be passed down to beneficiaries without having any negative tax implications. 

In What Instances Can A Life Insurance Payout Be Taxable?

There are certain instances when a life insurance payout may be taxable. 

  1. Life insurance proceeds can be subject to tax if your estate is the beneficiary of your policy. As estates are considered as an entity and not a person, they are subject to different types of taxes and regulations. This is where things can get a bit complicated as the estate would first have to pay off any probate fees, administration taxes, estate settlement costs, and any outstanding taxes and debts before any of the proceeds can be paid out to the beneficiaries under the deceased’s will. This is why it is always advisable to appoint a beneficiary to your life insurance policy that can then be tied to your estate. Naming a beneficiary on your life insurance policy can also help speed up the settlement process amongst other benefits. 
  1. The type of life insurance policy you have can also determine whether the payouts are taxable. In Canada, there are two forms of life insurance policies; term life insurance and permanent life insurance. Each one of these life insurance policies is then further broken down into several subtypes such as universal life insurance and term-to-100 insurance. This is why it is essential to understand what type of life insurance policy you have to fully grasp its tax implications.
  1. Certain permanent life insurance policies also come with an investable element that allows policyholders the opportunity to accumulate cash value for further long-term gains. This investment portion is separate from the death benefits that your beneficiaries are liable to receive when you die. As a result, any income or interest generated from the portion of premium payments that were being invested, are subject to income tax.  
  1. If you choose to surrender your policy and receive whatever its cash value is at the time, you will only pay taxes on any amount over what you paid. So, for example, if you paid in $100,000 and when you cashed out you received $120,000. The additional $20,000 will be subject to tax. This is because the gain in value is considered as interest earnings and as such would be taxable as income.  

These are some of the most common instances where life insurance proceeds can be taxable in Canada. It is recommended to always consult with a health insurance expert or financial advisor to better understand your life insurance policy and its associated tax implications. 

What Are The Canadian Tax Laws Governing Life Insurance Payouts?

The Canada Revenue Agency (CRA) has a simple process when it comes to tax reporting life insurance proceeds. Essentially, if your life insurance policy doesn’t comprise any interest earnings your beneficiaries don’t have to report anything to the CRA. This is why life insurance policies are often the least complicated component of a financial plan. 

In the case of a permanent life insurance policy that does contain interest earnings, the insurance provider will send the beneficiary a T5 tax slip. The total interest earned by the policy is reported on line 121 of the beneficiary’s return. This interest amount is treated as investable income and will have to be reported as taxable income. However, any associated death benefits won’t require any reporting.

Making Life Insurance More Efficient For Beneficiaries – McIver Insurance

The entire point of having a life insurance policy is to make life easier for your beneficiaries rather than making things more complicated. 

At McIver Insurance we specialize in tailoring life insurance policies that are designed to make things easier and more efficient for both the policyholder and their beneficiaries. Our team works diligently to find you the right policy for your needs at the lowest premiums and advises you on matters of estate and succession planning. 

Those of you who still have doubts about your life insurance policy and the amount of coverage you need, or are unsure if a portion of your life insurance proceeds would be considered taxable or not, consult with McIver Insurance – Nova Scotia’s most trusted life insurance broker. 

Give us a call at 1-902-220-3279 to learn more!

What Are 5 Examples Of Employee Benefits (1)

What Are 5 Examples Of Employee Benefits?

Let’s face it, most of the time, people are looking for jobs, either, because they don’t have one, or are searching for one that offers higher pay. 

However, for many Canadian job seekers, higher pay isn’t always the most attractive incentive for choosing one company over another. Employee benefits can in many ways outweigh a bump in salary or rate per hour.

In this article, we will look at five employee benefits that can on many occasions be more appealing than a pay increase.

5 Examples Of Additional Benefits For Employees In Canada

All Canadian employers are legally entitled to offer their employees benefits such as contributing to the Canada Pension Plan (CPP), job-protected and paid legislated and parental leaves, Paid Time Off (PTO), Employment Insurance (EI), and eye exams and vision care. 

However, there are many supplementary benefits that an employer can offer to help sweeten the pot. Benefits such as medical and dental coverage, life insurance, an additional tax-free retirement saving plan, extended health care, child care, educational benefits, and more can all help entice the best candidates possible to fill a job position. 

Offering these employee benefits can also help an employer improve retention rates, and create a happier and more productive working environment for their employees. 

So, let’s take a look at these benefits in more detail and see whether they would be a viable fit for your business.

Medical & Dental Coverage

Offering an extended health coverage plan has become increasingly popular amongst employers. Canada’s government health care program doesn’t cover medical expenses including prescription drugs, hospitalization costs, ambulance services, and dental coverage.

This is the main reason why more than 90% of Canadian employers offer an extended private group health plan to employees. An extended health coverage plan covers medical expenses not included in Canada’s provincial health plan. These plans can also include partial or full dental coverage making them hugely appealing. 

Life Insurance

What’s the most important thing that is common for almost all employees? Their families, of course! This is why many Canadian employers offer a life insurance plan to employees as the continued financial security of their family is always going to be a top priority.

By contributing to a life insurance plan employers help safeguard the future of employee families offering them further peace of mind. 

Apart from life insurance, some Canadian employers also offer disability insurance and other mental health benefits. These added perks can go a long way in attracting the best talent, especially, for dangerous and highly stressful jobs.   

Employee Stipends For Fringe Benefits 

Instead of offering a wide range of benefits that can be overly complicated for employees to understand and seldom used, many employers now prefer to offer employee stipends instead.

This form of benefit offers an employee a monthly allowance that can be used to cover health, wellness, and lifestyle expenses such as gym memberships, spa/massage therapy sessions, and tuition fees for various skill-enhancing courses. 

Stipends are a great way to offer flexibility in your benefits package as employees have free reign over how they want to spend that money. An example of a stipend could be a Health Care Spending Account (HCSA) which allows employees to spend tax-free money on medical expenses. 

For employers that have a diverse workforce demographic, offering a stipend instead of a traditional benefits package can be an excellent way to accommodate the varying needs of all their employees. 

Childcare

If you have a workforce that predominantly consists of parents, adding a childcare plan to your existing benefits package can be hugely appealing to your current and future pool of employees.

Childcare in Canada can be quite expensive, so an employer that offers childcare can be a highly attractive incentive, especially for young parents. 

Registered Retirement Saving Plans (RRSPs)

While Canadian employers and employees are both legally obligated to pay 5.25% of their salary to the Canada Pension Plan (CPP), or the Quebec Pension Plan (QPP), many employers offer additional retirement saving plans to attract highly skilled employees.

The RRSP is the most popular of these employer-sponsored retirement contributions. An RRSP is a tax-free retirement saving account where employees can save up to a maximum of CAD $27,830 annually. 

Any RRSP contribution an employee makes is often matched 100% by the employer. This can make this a hugely attractive and lucrative benefit for highly paid and highly skilled talent.

Different Ways To Structure A Benefits Plan

Now that you have a fair idea of the additional benefits that could prove attractive for your workforce, it is time to choose a structure that compiles these benefits into a comprehensive benefits package that will help attract and retain top talent. 

There are essentially two types of structures that can be used; an organization-oriented benefits structure, and/or a consumer-oriented benefits structure. 

In an organizational-oriented benefits plan, employees are offered a select list of employer-defined benefits. The employee then has a choice of whether to opt for the plan or not. Examples of such a structure include traditional group health insurance plans, retirement plans such as 401(k), and employer-chosen wellness programs. 

In a consumer-oriented benefits structure, the employees have free reign over what benefits they would like to spend on. Employers offer a stipend or monthly allowance and employees are free to use that money on whatever benefits they see fit. Examples of consumer-oriented benefits include HSAs as discussed earlier, as well as medical reimbursement plans such as a Health Reimbursement Arrangement (HRA).    

Choosing A Group Benefits Plan That Works For Your Firm!

Whether you are a large business or a startup, having the right benefits plan in place can make all the difference when it comes to attracting the best talent. 

This is why it is highly recommended that you speak to a reputed employee benefits brokerage company, such as McIver Insurance, that specializes in creating group benefit plans that meet the demands and needs of your employees without burdening business finances. 

To learn more, give us a call at 1-902-220-3279.

The Top 7 Factors That Create Happy Employees (1)

The Top 7 Factors That Create Happy Employees

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Why do happy employees matter for a business? Well, studies have shown that happier employees are a lot more engaged, productive, and dedicated than unhappy employees.

If you are looking around your office and are seeing sad unhappy faces this is bad for business. Employees who are depressed, stressed, worried, and/or unhappy are much more likely to be less productive and less focused. 

But how do you make employees happy? Many employers think offering higher pay will help solve the problem, but this is seldom the case.

In this article, we will look at the top 7 factors that help create happy employees that are a lot more likely to stick around, be more innovative, and be more involved with day-to-day business activities.

Top 7 Factors That Create Happy Employees

Money can’t buy happiness. As a result, if your business has unhappy employees, simply throwing money at the problem isn’t going to solve anything. Creating a happy and positive work environment requires a much more hands-on approach and a deeper understanding of employee mindset and needs.

As many factors can impact workforce happiness we have narrowed the list down to the top seven that have proven to be the most impactful.

Offering The Right Employee Benefits

Long gone are the days when salary was the only thing an employee looked for when it came to a job. Today, especially in Canada, employee benefits have become the number one means of attracting and retaining top talent.

Apart from the mandatory benefits that Canadian employers are entitled to provide their workforce, many Canadian businesses also offer a range of supplementary benefits that include various types of insurance, retirement plans, childcare, health care allowances, and much more.

Employees that are offered long-term benefits such as Registered Retirement Saving Account (RRSP) contributions, extended health care plans, life and disability insurance, childcare, and stipends on wellness, lifestyle, and tuition expenses are likely to be a lot happier. This is because not only are they being looked after, but also their families and loved ones.  

Encouraging A Healthier Work-Life Balance

Employers that encourage a healthy work-life balance usually find their employees to be a lot happier than those that don’t. Let’s be real, no one wants to live their lives just working every day. Spending time with family, going on vacations, and socializing with friends is what  brings about true happiness and that can only be achieved through a better work-life balance.

Companies that adopt flexible schedules, allow for work-from-home days and encourage vacation time generally have a much happier workforce as employees don’t get burnt out or mentally drained. 

Acknowledging & Recognizing Top Talent

This is an extremely important factor when it comes to keeping employees happy that is still highly underrated in many organizations. 

If an employee has done exceptional work or gone above and beyond to help the business grow, acknowledging and recognizing these efforts can go a long way in making them feel wanted and happy. 

The recognition or acknowledgment doesn’t necessarily have to be a monetary reward, it can be as simple as sending out a company-wide email that thanks a certain employee for their exceptional work. 

If employees feel that a company notices and rewards good work, they are a lot more likely to strive to achieve higher levels of work performance, which can be essential to attracting and retaining top talent.

Keeping The Work Interesting & Challenging

Doing the same mundane work in a 9-5 job can quickly become boring and unsatisfying. This is why employers need to try and keep the work as interesting and challenging as possible to keep employees on their toes and always engaged.

There are many ways to do this. Some companies have policies whereby worker roles are shifted every few months so that they can gain new skills and knowledge about the business. Another way of making mundane work fun is by creating a fun working atmosphere where work and play go hand-in-hand.

Investing In Employee Growth & Professional Development

It is natural for employees to want to grow and be successful. If employees don’t see growth potential they will likely be unhappy with the job and look to move somewhere else. 

This is why businesses need to provide their employees with promotion opportunities and new responsibilities which can add to their skills and value to the business. 

Recognizing talent early and nurturing and training that talent for future leadership roles is instrumental for the continuity and longevity of any business.   

Providing Autonomy & Transparency

When employees feel that their bosses are hiding important business-related information from them this can easily result in a negative and unhappy work environment. 

A lack of transparency in an organization creates mistrust and uncertainty that can lead to the spread of rumors and unwanted gossip which can be detrimental to employee morale. 

It is essential for employers to have as much transparency with all of their employees as possible as well as provide employees with a certain degree of autonomy so they don’t feel micromanaged all the time. 

Creating An Inclusive & Communicative Office Culture

Having an inclusive and communicative office culture, with an open door policy, can do volumes when it comes to boosting trust and engagement levels amongst employees. 

Many companies now look to design open offices instead of traditional cubicles as it encourages better cross-communication and makes employees feel part of the bigger picture. 

Open-door policies and communicative office cultures also make speaking to senior management a lot more approachable which can have distinct advantages for a growing small business.

Ensuring A Happy & Productive Workforce

Small business owners have a lot on their plate and important aspects of the business such as employee happiness can often be quite low on their priority list. However, for a business to remain successful in the long run attracting and retaining a pool of talented employees is crucial. 

To help you with this process it is best to consult with an expert that can guide you in preparing a strategy that helps bolster employee morale and happiness. Whether it is succession planning or building a group benefits plan tailored for your employee demographic, McIver Insurance can help make it happen!

Call now at 1-902-220-3279 and speak to Pat McIver, a trusted insurance broker who has helped hundreds of business owners create a happier, more productive workforce!    


Life Insurance For Cancer Patients

Life Insurance For Cancer Patients

From the point of view of an insurance company, life insurance premiums are evaluated based on the risk an applicant poses based on different demographic factors. Insurance companies specifically question the risk of potential policyholders that suffer from cancer. Thus, insurance underwriters structure policies based on statistical data from the Canadian Cancer Society.

In this article, we will explore different life insurance policies and their advantages with a specific focus on policies that pertain to applications that suffer from cancer.

Key Findings Of Cancer Statistics – Canadian Cancer Society

Cancer is the leading cause of death in Canada. A staggering 2 out of 5 deaths (~ 43% of all deaths) are due to cancer. There will be 229,200 new cancer cases in 2021, in contrast to 225,800 new cancer cases in 2020 in Canada. From the number of new instances, approximately 84,600 Canadians will die due to cancer in 2021 alone. 

Statistical data also shows that there is a higher likelihood of developing cancer for Canadians aged 50 and above. However, that does not mean it can not occur at a younger age. 

Canadian males have a slightly higher chance (556 per 100,000) of being diagnosed with cancer against Canadian females (485 per 100,000). The most common cancer in Canadian men is prostate cancer, while Canadian women are most likely to develop breast cancer. 

The statistics are a cause of concern for insurance providers, especially in instances when someone recently diagnosed with cancer or a cancer survivor is seeking life insurance. Let’s look at some frequently asked questions about life insurance and cancer.

Does Life Insurance Cover Cancer?

Applications for conventional life insurance plans include a detailed questionnaire containing questions related to cancer.

A simplified life insurance application will have a few questions related to cancer risks. A guaranteed issue life insurance application, however, in most cases does not have a questionnaire because it comes with a two-year waiting period. 

Therefore, a guaranteed life insurance policy is often the best option for individuals who are diagnosed with cancer but have a positive prognosis and a good chance of beating cancer. 

These individuals are denied a traditional or simplified life insurance policy, but they can avail of a guaranteed issue life insurance policy regardless of their state of health.

Instead of compensation for a life insurance claim, premiums are reimbursed to beneficiaries if the policyholder becomes seriously ill in the first two years and passes away. 

Do not hesitate to ask your life insurance provider to give answers in writing about your life insurance policy and the cancer treatments covered including post-recovery.

Can You Get Life Insurance With Cancer?

Yes, you have the potential to get approved for life insurance when diagnosed with cancer. Several customized life insurance policies are available for cancer patients both in the early or later stages of diagnosis. 

Some life insurance policies are convenient for less critical cancer patients who have been diagnosed at earlier stages and demonstrate a relatively stable condition. However, cancer patients with more severe symptoms can also get a life insurance policy. 

Each life insurance application assessment is unique, and the following are guidelines for life insurance policies for individuals with cancer.

Less Than 2 Years Since A Cancer Diagnosis:

Apply for a simplified or guaranteed life insurance policy. There are no medical exams or medical questionnaires for a guaranteed life insurance policy, but it is the most expensive policy with the least coverage. 

There is a two-year waiting period for the insurance policy to become fully active so the beneficiaries can process a life insurance claim. If the policyholder dies within two years, beneficiaries only get the cash amount of premiums paid for the policy.

2 To 5 Years From A Cancer Diagnosis:

People with a stable health condition and prevalent cancer for the last 2 to 5 years can potentially opt for a rated traditional or simplified life insurance plan based on the entire medical evidence provided. Simplified insurance comes at a higher cost with lower coverage limits, but the applicant needs to answer a short questionnaire. 

5 To 10 Years From A Cancer Diagnosis

There is a possibility of getting a traditional life insurance plan if you currently have a stable condition since the cancer diagnosis and all medical evidence disclosed. The traditional life insurance policy will be a rated policy which means that you will pay a higher insurance rate, but you can still take advantage of other factors. 

For example, you might be able to get high coverage limits without any waiting period.

More Than 10 Years From A Cancer Diagnosis

People who survive more than ten years after a cancer diagnosis have the potential to get a traditional life insurance policy with standard rates based on all medical evidence disclosed. The rates will be competitive with applicants who do not have any significant health concerns.

Applying For Life Insurance With Cancer

Applying for life insurance with cancer is not very different from getting life insurance without cancer. Consider cancer as a health pre-condition that limits your insurance options. In most cases, insurance providers will ask you the following questions: 

  • Do you have a family history of cancer?
  • When was your cancer diagnosis?
  • How is your health since the diagnosis?
  • What stage is your cancer, and what type is it?
  • Do you have other health concerns (diabetes, blood pressure, obesity, and so on)?
  • Are you getting chemotherapy or any medical cancer treatment?

Insurance providers ask these questions to provide you with up-to-date market competitive rates. Insurance providers are also concerned with the mortality rates associated with some types of cancer. For example, applicants with skin cancer might pose a higher risk of insurance in comparison to someone with breast cancer or colon cancer. 

Getting An Expert Opinion

The professionals at McIver Insurance, in Nova Scotia, Canada, can help you select the right policy based on your current medical condition. Their experienced specialists can provide you with guidance based on your particular case and assist in helping you find life insurance that not only makes financial sense but also safeguards your family and loved ones in case of an untimely death. 

One can request a free life insurance quote to comprehend the costs and exclusions based on your specific conditions. Simply pick up the phone and talk to one of our expert customer service representatives about your health conditions. They will help you get the best-personalized assistance based on your life insurance requirements.

** All traditional insurance providers underwrite differently and each specific case is unique based on the applicant’s entire medical history ***