Everyone may want permanent life insurance but who actually wants to pay for it? It’s way more exciting to invest and create explosive year over year growth than to pay premiums on a permanent life insurance policy. What if I said you could do both with the same dollar? Yes, you can use every dollar twice.
Think of a permanent life insurance policy like a house. Though you can’t live in your permanent life insurance policy, in the eyes of the Canada Revenue Agency (CRA) and under Canadian law, they are treated the same — although one is a piece of paper and the other is made of bricks and mortar.
When you buy a house or a condo, the bank will typically offer 80% financing. The reason for this is simple — there is always a risk that houses will drop in value. This may feel like a foreign concept to Canadians, especially Torontonians in this hot, hot housing market. But, it has been known to happen — just look at how quickly house prices plummeted in Florida in 2008 and you’ll understand why banks generally won’t dole out more than 80% for a mortgage.
If you understand how the mortgage on that house works, you understand how EquityEngine works. By leveraging a permanent life insurance policy instead of a house, that same bank will offer you 100% financing. That bank does so because there’s no risk on a leveraged life insurance policy because you are leveraging yourself. You can get one hundred cents on every dollar for that piece of paper but only 80 cents on every dollar for that brick and mortar building.
Your permanent life insurance contract is considered 20% safer than your home
This is not to say that you shouldn’t buy real estate. Property is a fantastic investment and banks love giving
out mortgages. Banks also love the EquityEngine because the only certainty in life is that you will one day die, meaning the bank is guaranteed to get its money back. And unlike a house, permanent life insurance vests annually. Your house may appreciate in value but if there are no buyers when you go to sell, the appreciated value means nothing and you and the bank have a problem.
The EquityEngine is a yield enhancer and works beautifully with property investments. They are two sides of the same coin, maple syrup and bacon, biscotti and espresso… I think you get my point.
Interest rate drops by 50% with a tax deduction
Now, let’s make this a little more interesting. Say you borrow against your leveraged line of credit to re-invest in your business ventures. You get your money, pay the interest and invest in your business. In the eyes of the CRA, that interest expense is a business expense, which means it is tax deductible. So a 50% tax deduction on a 3% loan interest rate means that you’re only paying 1.5% interest on your loan.
Look at it another way. Your house and your permanent life insurance policy are growing at roughly the same rate per year — about 6%. Your house (with a mortgage) is costing you 3% in interest payments per year, but your permanent life insurance (with EquityEngine) is costing you half that. Which means you’re making more money on your life insurance policy than you are on your house.
If you love property — and who doesn’t love property — you should double love EquityEngine!
33seven offers this unique opportunity so that you don’t have to choose between protecting your family and growing your wealth. You can do both.
Let’s chat today.
DERRYN SHROSBREE, MSC B.SC