Whole Life Insurance

Add long term value for you and your family.

Whole life insurance is considered by many as the ideal plan when coverage is required for your lifetime. It offers a premium that will never change for your lifetime, can be paid for over a shortened period, e.g. 20 years being the most popular, and most plans build up a cash value that can never be reduced once allocated to the policy.

What is the purpose of Whole Life Insurance?

Whole life insurance is designed to provide coverage when the insured dies to help with ongoing expenses and provide income for loved ones. It is also used for paying estate taxes, and tax advantaged charitable giving, estates for children and grandchildren. Business owners also use it for a number of tax saving and wealth preserving strategies. It provides a guaranteed amount of insurance at a guaranteed price. Depending on the type of whole life insurance it can also provide an increasing amount of life insurance and safe returns on the savings portion of the monthly or annual deposits.

How It All Works

  • Mortality cost – This is the cost that the actuaries calculate will provide funds to pay the claims based on mortality tables.
  • Administration cost – The company assigns a cost for the administration plus the premium tax which is about 2% in most provinces.
  • Savings or investment – This is what is left over after the first two expenses are taken out of your premium.
  • Return on the savings – This is the interest rate that is credited to the cash value portion of your account each year. For whole life policies, it is called dividend for participating policies, or a performance credit with Manulife whole life, which works similarly to the participating policy’s dividend.

It’s worth noting that some policies guarantee that the above costs will not change and a minimum savings or investment return can be speculated by policy holders.

The Two Types of Whole Life Insurance Policies

Participating Whole Life Insurance

These policies include a dividend (sometimes called dividend credit) each year based on the financial performance of the investments that the money paid by these policy holders achieves. Consequently, the face value of the policy will increase over the years if the policy holder chooses not to take the dividend as a cash payout which is one of the options but is seldom done.

If the fund does very well, some of the profits will be set aside to make up the difference in years when the fund may under-performs which tends to result in fairly stable dividend payouts. In the past few years due to low bond yields, the dividend scale for some insurance companies has been decreasing.

There is also a difference in how insurance companies pay dividends. Most insurance companies are stock companies or publicly traded companies whose shares are listed on stock markets. In this case, the profits flow to the benefit of the shareholders. For example, Manulife refers to their dividends as a performance credit and the amount of the credit is determined by the board of Manulife based on the returns of the pool and other factors.

Because there are a number of variables that are not fully guaranteed, we are unable to provide accurate instant quotes for this type of whole life insurance. We would welcome an opportunity to speak to you and provide examples of its many benefits and affordable premium options.

Non-Participating Whole Life Insurance

Non-participating whole life insurance policies guarantee the premium, cash values and amount of insurance your beneficiary will receive. All insurance companies provide an illustration that includes this information and the illustrated values are fully guaranteed. Usually it is for a set amount of life insurance and the face value does not increase as it does with participating policies. It will contain a cash value and this is a guaranteed cash value that can be accessed as a policy loan or if you collapse the policy (tax implications).

We have more Canadians accepting far more of this type of whole life as people want to be guaranteed they will get the amount of insurance they signed up for. The premium is often significantly less money than a comparable participating policy. We can provide instant quotes for this type of whole life insurance as it is fully guaranteed.

Non-participating whole life policies are frequently used to provide for final expenses and they tend to be of smaller face values which make them more affordable for growing families, retirees and seniors.

These policies also have quick pay options and you can get instant quotes for these options as well. They can be paid off in 10, 15, 20 years or paid up at age 65 years depending on the age of the person buying them. Obviously the quicker it is paid off, the higher the premium but the return on the higher premium can be significant as the cash values increase at a much faster pace. We have successfully developed many affordable plans for our clients where the premiums end at about retirement age.

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