Whole Life Insurance

Features of a Whole life policy

Some of the major insurance companies offer whole life insurance plans in Canada. It offers some of the best investment opportunities along with the guaranteed death benefits. Here are some details of the whole life policies:

1) Whole life policy premiums:

The main feature of the whole life insurance is its stability of the premiums over the life of the insured. The premiums are guaranteed to stay the same over the life of the insured or payment period of the policy.


2) Participating plan features:

A participating whole life policy has some unique features. The premiums go to cover benefits, expenses and to company surplus account. Rest goes to participating account that is invested. Participating policy owners get a share of the earnings in the participating account. This share is credited once a year to your your policy as a dividend. There are several ways the dividends are used. Some of the dividend options listed below.:

1)      Paid to you directly or use to reduce your premium

2)      Leave the dividends in the policy on deposit.

3)      Use dividends to enhance the policy by adding yearly term insurance.

4)      Use dividends to buy paid up additions to your insurance.

3) Non participating Whole Life insurance plan:

Some companies offer whole life insurance policies that don’t have a participating account. They simply offer a guaranteed coverage to age 100. They also have cash surrender and paid up insurance values starting from a specified time in the policy. 

4) Whole life policy has tax advantages:

 A permanent life insurance offers tax advantaged investment growth opportunities. This allows you to put some of your surplus cash into the policy and it grows tax free inside the policy. That allows you to leave more money for your loved ones than you could with other taxable investments. Death benefit including the extra investment and the growth are paid tax free to your beneficiaries. 

5) Preferred Estate Transfer:

Whole life policy is one of the best ways to build and transfer your estate in a tax efficient manner. Tax free death benefit means an instant inheritance. You may be able to buy a whole life policy with no additional out of pocket cost. Simply use some of the money in your taxable investments to pay for the premiums. The policy will do the rest.

6) Policy Loans:

Whole life policy owners may be able to get a loan against the cash surrender value. The loan can be obtained from the insurance company or from a bank using the guaranteed cash surrender value as a collateral. This can help meet a short term need for cash. 

7) Retirement Income:

Participating whole life policy can be a great tool for supplementing the retirement income. In your younger years you have the opportunity to contribute extra cash into the policy. That contribution along with the dividends build a pile of money that can be used for tax free retirement income.
The plan allows you to borrow tax free against the cash value to enhance your retirement life style. Then upon your death the insurance proceeds pay off the loan and the rest of death benefit is paid to beneficiary. 

8) Quick pay plans:

You may have an option to pay off your policy in 10, 15 or 20 years. Some people prefer to pay a some extra premium to pay off the policy much quicker than paying for rest of the life. It does cost extra to be able to do that, but just like building any other asset, it is well worth the effort. In the long run it can actually work out to be a great investment vehicle.


Other links and resources:

Here is a page with a brief discussion on different types of life insurance including whole life insurance.
Whole life insurance policy is a great way to protect your loved ones for the long term. But some of the people with lower income may not be able to afford the cost of a permanent plan. For those with a smaller budget often times a term insurance policy is the only practical solution for the short term. They may have a need for a large sum of insurance because of young family and other liabilities like having mortgage payments etc.
This page discuses term insurance in more detail. 
Click here to request a quotation for insurance needs. If you have any other questions please feel free to contact me at 604 592 5433 or email at [email protected] .