These investment vehicles are permanent life insurance products, which provide life-long insurance coverage and include a savings component. The investment opportunity stems from tax rules found in section 148(3) of the federal Income Tax Act. That’s where it specifies that assets in a life insurance product accumulate free of annual taxation.

 This tax-free growth is much the same as tax-deferred investment growth within a Registered Retirement Savings Plan (RRSP). In fact, tax-exempt life insurance is often used by individuals who are maximizing their RRSPs and looking for an additional way to continue tax-deferred investing. In addition to tax-sheltered investing, rules in the Income Tax Act provide for a second tax advantage: Proceeds from the policy, including any accumulated assets, are ultimately distributed to the estate or directly to beneficiaries tax-free.