Non-Registered Investments. Insurance Company is the Best Bet
Why Non-Registered Money Should Be Held with an Insurance Company Instead of a Bank
When managing non-registered money—funds that are not part of a registered retirement or investment plan—many people automatically think of banks as the go-to option. However, holding non-registered funds with an insurance company can offer several unique benefits that banks might not provide. One of the most significant advantages is the ability to name beneficiaries, a feature that banks typically do not offer for non-registered accounts. This blog explores why insurance companies can be a superior choice for managing non-registered money, particularly focusing on beneficiary designations.
Understanding Non-Registered Money
Non-registered money refers to investments or savings that are not confined within registered accounts such as Registered Retirement Savings Plans (RRSPs) or Tax-Free Savings Accounts (TFSAs). These funds are more flexible, allowing for a broader range of investment options and fewer restrictions on contributions and withdrawals. Given this flexibility, choosing the right institution to manage these funds is crucial.
The Key Advantage: Naming Beneficiaries
Streamlined Estate Planning
One of the most significant benefits of holding non-registered money with an insurance company is the ability to name beneficiaries directly on the account. This feature can streamline the estate planning process significantly. When you name a beneficiary on an insurance product, the proceeds can be paid directly to the beneficiary upon your death, bypassing the probate process. This means that your loved ones can receive the funds more quickly and with fewer legal hurdles, preserving more of your estate's value.
Avoiding Probate Fees
Probate can be a lengthy and costly process, often involving legal fees and administrative expenses that reduce the value of the estate passed on to your heirs. By naming a beneficiary on your non-registered investments held with an insurance company, you can avoid these fees, ensuring that more of your assets go directly to your intended recipients.
Immediate Access to Funds
Another advantage of naming beneficiaries on insurance products is the speed at which funds can be accessed. Banks typically require non-registered accounts to go through probate, which can take several months to over a year. In contrast, insurance companies can often release funds to named beneficiaries within weeks, providing them with the financial support they may need more promptly.
Additional Benefits of Holding Non-Registered Money with an Insurance Company
Enhanced Creditor Protection
Beyond the ability to name beneficiaries, insurance products such as segregated funds and annuities often offer enhanced creditor protection. This means that if you face financial difficulties or bankruptcy, your investments may be safeguarded, providing peace of mind that your assets are secure.
Investment Flexibility and Options
Insurance companies provide a range of investment options tailored to different risk tolerances and financial goals. Segregated funds, for example, are similar to mutual funds but come with additional benefits, such as maturity and death benefit guarantees. These guarantees can offer a level of security that traditional bank investment products may not provide, making them an attractive option for more conservative investors.
Conclusion
Holding non-registered money with an insurance company could be a strategic move for those seeking added security, tax efficiency, and comprehensive estate planning benefits. As with any financial decision, it's essential to consult with a financial advisor to determine the best course of action for your specific situation.
