Canadian Participating Whole Life Insurance Options

Participating whole life insurance policies can become a very valuable financial asset. We can help you choose the type, amount of coverage, and options to satisfy your needs, financial goals and budget. We'll show you which companies have histrorically yielded the highest returns on their par-accounts.

 

Be sure to read these other related articles that can help you save money:

 

Should I buy term or permanent insurance?

 

How to avoid the life insurance illustration trap!

 

 

 

Why participating whole life insurance?

 

Participating whole life combines two key financial planning priorities - insurance and savings - in a single tax-advantaged plan. Enjoy benefits such as:

• tax-deferred cash value growth
• high investment return stability
• highest cash value leveraging insurance vehicle for retirment income program
• opportunity to earn dividends which are then vested (once paid to you, they cannot be taken away!)
• ability to pay for your insurance through the tax-deferred growth or dividends
• a 100% tax-free death benefit!

Who needs participating whole life insurance?

 

Do you seek an insurance product built on a foundation of relatively stable investment returns from year to year? If yes, then participating insurance may be the right product for you.

 

Some key uses for participating whole life include:

• cost effective permanent financial protection for your family
• earn dividends to:
  • help pay for the premiums
  • help take advantage of a personal or business opportunity
  • build a cash reserve with accumulating interest
  • increase your insurance without evidence of insurability
• key-person business insurance
• provide funds for a business retirement buy-out
• create an additional source of retirement income
• estate planning (reduce tax impact to your heirs)

Hint: If you desire to have a permanent plan but currently have budget constraints, ask us about a term plan that gradually converts to a permanent plan!

 

Investment options

 

You cannot choose how your funds are invested. That is why it is vital to choose a financially strong company with a good track record. Click here to read an article for further understanding.

 

You may, however, select the type of plan that will determine how your cash-value will build up. For example, in a 30 to 40 year period, a policy with a rapid short-term cash value growth will generally have far less cash-value than a policy with long-term cash value growth objectives.

 

Amount of benefit coverage

 

Depending on the policy you choose,

• minimum coverage can be as low as $10,000.
• maximum coverage is virtually unlimited.
• indexed face amount to help fight the effects of inflation.

Rate banding by amount of insurance

• band 1: $25,000 to $99,999
• band 2: $100,000 to $249,999
• band 3: $250,000 to $499,999
• band 4: $500,000 to $999,999
• more reduced rates for up to $50,000,000

Rates decrease at each higher band. If your insurance need is just below a band break, obtaining more coverage can actually save you more money.

 

Length of terms

 

Length of terms generally available are:

• 5 years
• 10 years
• 20 years
• Term to age 65
• Term-life (to age 100), no-cash value permanent plan.
• Term to permanent, a term plan that automatically converts to paid-up permanent insurance.

Some policies have guaranteed renewal rates, others do not. Make sure to ask, and read your illustration carefully (it should be mentioned there).

 

Underwriting categories

 

A broker/advisor cannot determine if you qualify for preferred rates. Each company has their own criteria for assessing your health risk. The preferred ratings can only be determined once underwriting is completed, that is, once they have completed all medical and/or investigative requirements. Also note that very few people qualify for "super-preferred" or the "absolute best" rates.

 

Until then, be prepared to pay for standard rates. The last thing you need to face is disappointment.

 

Companies use ratings similar to these:

• best-risk non-smokers
• better than standard risk non-smokers
• standard risk non-smokers
• users of tobacco or nicotine products other than cigarettes/marijuana
• cigarette/marijuana smokers
• higher (worst) ratings if your health is sub-standard. These ratings can vary greatly depending on your illness.
• declined or unnaceptable risk

The above is just a guide. Some policies only have standard smoking and non-smoking ratings. Be sure to ask for details if you feel you may qualify for better ratings.

 

Coverage types

 

Some companies will offer the following type of coverage:

• single-life
• combined coverage
• multi-life
• joint first-to-die
• joint last-to-die

Joint coverage is an excellent way to insure your mortgage or other jointly-held debt and is generally offered at a discount.

 

Renewable & Convertible

 

If you are considering keeping your policy in force for the long run, consider a plan with a guaranteed renewable option up to age 80 (that is, you can continue to renew your policy even if your health deteriorates). Also consider a plan that is convertible to age 75. Note that you must convert to a permanent policy that is carried by the company with whom you are insured at that time.

 

Additional options

• Return of all premiums paid upon expiry of policy
• Critical illness bundled coverage
• Total disability waiver
• Child protection
• Guaranteed insurability
• Accidental death & dismemberment

No extra charge options

 

These benefits are offered by some companies. Ask for details.

• Bereavement counselling assistance: reimbursement of counselling fees up to $1,000 after the death of any insured person in the plan.
• Compassionate assistance program - in cases of terminal illness, the policy owner may be able to obtain an advance payment of the death benefit in the form of a collateral loan.

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Universal Life Insurance

 

 

 

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Term Insurance

 

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