FAQ

We have been receiving questions about rumours circulating on social media regarding life insurance, disability insurance and the Covid vaccine. Rest assured, getting a Covid-19 vaccine will NOT affect payment of your life insurance or disability benefits, or your ability to qualify for future coverage. The Canadian Life and Health Insurance Associate has issued the following statement: “No one should be afraid and choose to not protect themselves from Covid-19 because they are worried about it affecting their benefits. All of Canada’s life and health insurers are supportive of Canadians receiving government approved vaccinations to protect themselves from serious illness and death.” You can read the full post here: https://www.advisor.ca/insurance/life/clhia-shoots-down-online-rumours-about-covid-19-vaccines-and-insurance/

Term life insurance is coverage purchased for a specific term (10 or 20 years), after which the coverage can be renewed or converted to permanent insurance coverage without having to answer further health questions. Term life insurance is generally less expensive than permanent life insurance, although the renewal premiums can be significantly higher. Permanent life insurance coverage lasts for your whole life, so long as premiums continue to be paid. It is typically more expensive than term insurance, at the beginning, but the premiums remain the same for the life of the policy. Permanent participating policies generate dividends and accumulate cash value that can increase the death benefit or be accessed while you’re still living, while Universal Life policies can accept additional deposits, adding a savings component to the policy.

Mortgage Insurance is issued by your lender and is designed to pay off your mortgage in the event of your death. The amount to be paid out decreases as your mortgage balance decreases, but the monthly premium does not, and once your mortgage is paid off, the insurance coverage ends. If you move your mortgage to another institution, the coverage will terminate, and you will have to re-qualify for insurance with your new institution. Any death benefit payout is only paid to the lender. Individual Life Insurance is issued by an insurance company, and owned and controlled by you, the owner. Your coverage amount never decreases, and your premiums remain level for whatever term elected by you. Because the coverage isn’t linked to your mortgage, the coverage stays intact even once your mortgage is paid off, and any death benefit is paid out to the beneficiaries that you specified in your contract. Insurance is about more than just your home: it’s about protecting what’s important in your life. That’s why individual insurance may better suit your needs.

RESPs are a tax-deferred savings vehicle designed to save for post-secondary education. With an RESP, deposits of up to $2500 per child per year are eligible for the 20% Canada Education Savings Grant – this works out to $500 per year in grant contributions. The maximum grant-eligible contribution amount is $36,000 per child which works out to $7200 of grant money. You can catch up on past contributions and grant money as well. The CESG grants stop after your child turns 17.

As of 2021, the lifetime contribution limit to a Tax-Free Savings Account (TFSA) is $75,500. The 2021 contribution limit is $6000. If you did not maximize your contributions, the contribution room carries over to the next year. Also, if you make a withdrawal from your TFSA, that amount is added back on to your contribution limit the following year. Example – as of 2020, you had contributed $69,500 to your TFSA, and took a withdrawal of $10,000. In 2021, you would be eligible to contribute the annual limit of $6000 plus $10,000 to make up for the withdrawal, for a total of $16,000. Any increase in the value of your TFSA is tax free, and you won’t pay any taxes on money you withdraw later.

You can contribute up to $27,830 or 18% of your earned income for 2021, whichever is less. The RRSP contribution deadline for the 2021 tax year is March 1st, 2022. Contributions made between January 1st and March 1st, 2022 will generate a tax receipt that can be used in either the 2021 or 2022 tax year. Contributions made after March 1st, 2022, will generate a tax receipt for the 2022 tax year. Unused RRSP contribution room can be carried forward until you’re 71. The year you turn 71, you will be required to convert any RRSPs to Registered Income Plans. Any increase in the value of your RRSP is tax free, but you are required to pay withholding tax on any withdrawals, unless you qualify for the Home-Buyers’ Plan or the Lifelong Learning Plan.

First-time homebuyers can withdraw up to $23,000 tax free from their RRSP to put towards the purchase of an eligible property. To qualify as a first-time homebuyer, you cannot have lived in a home that you or your spouse/common-law partner owned in the past 4 years. 
Any amount withdrawn under the HBP must be re-contributed to your RRSP. You have up to 15 years, starting the second year after your withdrawal, to re-contribute. If you do not re-contribute in the 15-year period, you will have to pay income tax on the outstanding amount.

The Lifelong Learning Plan allows you to withdraw money, interest-free, from your RRSPs to finance full-time training or education for yourself or your spouse/common-law partner. You can withdraw up to $10,000 per year, for a maximum of $20,000. Any amount withdrawn over the maximum will be included in your income that year and will be subject to income tax. 
You have up to 10 years to re-contribute the money to your RRSP, at a rate of 10% per year until it has been repaid in full. You can repay the full amount at any time. If you re-pay less than 10% in any given year, you must include the difference in your income for that year.