Using insurance product for long-term income

Updated: Aug 19, 2018

annuity; financial planning; segregated fund; insurance; investment; pension

As noted before, prescribed annuities have a tax advantage in that interest and the original capital is spread equally over all payments for tax purposes. This can be very beneficial when combined with life insurance for someone who wants both incomes for the long-term and to leave an estate.

Seg. Fund

The reasons many investors buy segregated funds rather than mutual funds include maturity guarantees and death benefit guarantees. These provide that the investor is entitled to receive at maturity or death the higher of market value or, depending on the specific contract, 75% or 100% of the initial investment made.


Many people, especially seniors, have a need for income but are sometimes unwilling to risk their capital. Often their first choices are guaranteed investment certificates (GIC) issued by chartered banks and trust companies.

An alternative to a GIC is a life annuity and a life insurance policy. Taken together they are called the insured annuity. The prescribed annuity offers tax advantaged income while the life insurance will pay a benefit on the annuitant’s death. Taken together the individual gets higher after-tax income than from a GIC and his beneficiary gets insurance benefit at the insured’s death.