Have You Been IRP’d (Insured Retirement Plan)By Your Financial / Insurance Advisor?

Simon Huften

Simon Huften is the President of Life Insurance Canada.com Inc.

Insured Retirement Plan

We have many clients who reach out to us because they have been approached by their financial advisor, friend, colleague or even attended a seminar where a financial advisor or life insurance sales person is pushing an investment strategy (concept) called the Insured Retirement Plan (IRP) onto them.

Before we dig deeper into what the IRP strategy is, please be aware that the majority of people who have been told to buy into this strategy or who have bought into this strategy should have never done so in the first place.

What is the IRP (Insured Retirement Plan)?

The Insured Retirement Plan is a strategy where you purchase a permanent life insurance policy (either a whole life insurance policy or a universal life insurance policy) to take advantage of different tax advantaged benefits. A permanent life insurance policy provides life insurance coverage that lasts a life time as well as builds cash inside of the policy on a tax deferred basis which can be accessed later in life in the form of withdrawals. These withdrawals later in life can be made tax free with the use of a loan.

We recommend reading our ‘how IRP works‘ blog post that goes into more detail on how the strategy works.

Why Proceed With Caution?

Many advisors push the Insured Retirement Plan strategy onto people who should never even consider purchasing it. This strategy is designed for specific individuals in certain financial situations and the average Canadian is not one of these individuals (unfortunately).

You might be wondering why financial advisors and/or life insurance agents push this strategy onto unsuspecting individuals. The main reason is commission. As mentioned above, you are required to purchase a permanent life insurance policy to use the strategy. Permanent life insurance policy premiums pay commissions which are higher than other investment strategies. This is why advisors will talk about all of the benefits and none of the drawbacks when selling these to their clients. The client then suffers both in the short term and long term.
You typically should not buy into the Insured Retirement Plan strategy if…

• You have debt (mortgage, line of credit, student loans, credit cards, etc.)
• You have not fully funded your retirement accounts (RRSP, pension, etc.)
• You have not fully funded other investment accounts such as a TFSA (Tax Free Savings Account)
• You do not have a lot of excess cash in investments
• You have a family with children who are financially dependent on you and you should be purchasing a term life insurance policy instead
• You are a business owner and are still in the early stages of building and growing your business

When Should You Consider The Insured Retirement Plan Concept?

You should be in a very strong financial situation with no debt and a surplus of investments (high net worth) to consider buying into the Insured Retirement Plan Concept.

If you feel you might be a candidate and want to learn more about how this concept works, please contact us by phone at 1-877-344-4011 or contact us.