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How can clients balance inflation vs. the cost of life insurance?

How can clients balance inflation vs. the cost of life insurance?
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For Canadians of all ages, the decision to purchase life insurance is often seen as a necessary evil—and rising inflation only accelerates the problem.

With prices jumping by 5.7% in February, 2022 to a 30-year high, the pressure to curb expenses is only growing stronger.2 In these scenarios, clients may question the benefit of spending money on something they hope to never use, even if they recognize the importance of protecting their loved ones. This bias for the present can create obstacles for Advisors looking to discuss insurance with their clients.

This topic can become especially contentious for young families just starting out. On the other end of the spectrum, it can also be a difficult conversation with older clients who are approaching, or already in, retirement. In both cases, clients may struggle with inflation given they live on a fixed income.

When speaking to your clients, it’s important to educate them on the reality that life insurance can do more than protect against a “worse case scenario”; there are additional cash flow benefits they can derive from this offering—at any stage of their lives.

A Young Family

During the early years of starting a family, people want to focus on building wealth. Yet, at the same time, they recognize that beneficiaries need to be taken care of if the worst occurs. For these client types, an Equitable Bank Immediate Financing Arrangement (IFA) can come in handy—particularly one that requires no excess collateral, since a young couple would not want to tie up other assets as part of a loan. They can simply buy a whole life policy and use the policy as a basis to borrow back the annual premiums. This can be a significant benefit to young families with tight cash flow concerns, giving them the dual benefit of insurance coverage while helping to maintain income.

Aging Canadians

As policy holders age, their financial circumstances and insurance policies mature as well. Eventually the CSV of their whole life plan outgrows the cumulative premium amounts, enabling them to take out an Equitable Bank CSV MAX Line of Credit. The CSV MAX is structured as a revolving line of credit, enabling clients to access how much they need, whenever they want.3 Instead of tapping into other taxable assets, your clients can use the CSV MAX as a liquidity backstop during inflationary periods, for big ticket items or to finance unexpected purchases.

Retirement/Estate Planning

Finally, Canadian seniors can take out an Equitable Bank CSV FLEX Line of Credit to supplement their retirement income. Using the whole life policy as collateral, the loan provides tax-efficient funds without the need to make ongoing payments. Of course, these arrangements don’t happen overnight. They need to be planned out well in advance to ensure the policies will mature before your clients need to access the funds. So, remember to start the process as early as possible. Also, setting up a new life insurance policy in advance can help individuals with complex estates—especially business owners—manage the wealth transfer from one generation to the next.

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Matching Circumstances to the Right Solution

Financial decisions are rarely simple or straightforward, regardless of whether your client is living in retirement, just starting out, or somewhere in between. Inflation can make ordinary expenses feel overwhelming, but rather than allow it to change their budgets and priorities, you can offer an innovative solution that balances their insurance and cash flow needs.

Now is a great time to speak to your clients about a whole life policy—and insurance lending solution—that can put them on stronger financial footing for the future.

Equitable Bank’s Suite of CSV Lending Solutions

  • CSV FLEX Line of Credit: Provides Canadian residents 50 years of age and older access to a maximum of 90% of the CSV of their whole life policy. No payments are required as long as the account remains in good standing, thus creating a great retirement income solution.4
  • CSV MAX Line of Credit: This offering has many of the same benefits as the CSV FLEX. Monthly interest payments are required with this line of credit, which is available to whole life holders who are Canadian residents and have reached the age of majority.
  • Immediate Financing Arrangement (IFA): Canadian residents who have reached the age of majority can access a maximum of 100% of the CSV without having to provide any additional collateral.
Ready to refer? Provide your contact details and an expert will reach out soon. Contact our team at wealthsolutions@eqbank.ca.

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1 Equitable Bank is in no way providing tax or financial advice. Advisors should consult with their clients to discuss their unique tax situation and the tax-free benefits of an IFA.
2 Kevin Carmichael, “Inflation surges to 5.7%, adding pressure on Bank of Canada to accelerate rate hikes,” Financial PostMarch 16, 2022.
3 The Equitable Bank IFA is a demand credit facility and subject to certain conditions.
4 The Equitable Bank CSV Line of Credit Suite offerings are demand credit facilities, meaning Equitable Bank can demand payment of all or part of the outstanding balance at any time. The outstanding balance on Equitable Bank CSV FLEX/MAX Lines of Credit must remain below 95% of the cash surrender value of the policy.



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How can clients balance inflation vs. the cost of life insurance?