Whole Life (Participating Insurance)
This type of insurance is permanent insurance and provides protection for life. Depending on the type of plan, whole life insurance amortizes the cost of insurance over the lifetime of the insured or over a limited period of time, such as 10 or 20 years. This product also has cash values, which are available if the policy is surrendered. In addition, they often offer non-forfeiture options such as automatic premium loan, cash loans, collateral assignment, etc.
Participating Life Insurance policies provide life insurance protection along with a tax advantaged savings component.
Generally this savings component is made up of two parts: A guaranteed cash value and a non-guaranteed cash value of dividends.
Whole Life Insurance
Whole life insurance is the most common type of permanent life insurance. Like other types of permanent life insurance (universal life and Term – 100, for example), whole life insurance provides coverage for as long as you live, as long as you remain up to date on paying your policy premiums.
Whole life insurance policies feature fixed premiums for the life of the policy. With plan premiums that will not increase, you can experience improved transparency and predictability with your long-term life insurance costs.
Whole life insurance policies can also accrue cash value over time. Once your policy has built up enough cash value, you can typically withdraw it or borrow against it like a loan.
Loans or withdrawals may affect your policy’s cash value and the death benefits tied to the policy, so make sure you understand the terms associated with your whole life insurance policy.
Unlike variable life insurance, the cash value of a whole life insurance policy is not dependent upon the market. In fact, most whole life insurance policies grow a cash value at a guaranteed minimum rate.
The return on a participating policy is dependent on many factors such as age, type of coverage, risk exposure and dividend scale and annual premium payments. With the majority of participating policies, extra cash paid into the plan is paid into a broadly diversified fund with a long-term investment strategy. If the fund is performing well the insurance companies will pay out dividends. These dividends can be paid out annually in cash, used to purchase more coverage, or simply lower your out of pocket premiums.
You can think of a participating policy plan as a higher premium cost per month with the extra money being paid in as an investment. There are multiple participating products available that can be tailored to meet your individual needs. The details and used for participating policies can be endless depending on your particular situation, but please call or email us with any questions you may have.
Who Should Purchase Whole Life Insurance?
You might benefit from a whole life insurance policy if you are a high-income earner who has maxed out your Registered Investment Plans. By buying whole life insurance, you can ensure that additional money is set aside for your loved ones to use however they may need when you pass away.
Additionally, if you who wish to leave an inheritance to a beneficiary and you desire the predictability that fixed premiums can offer, you could potentially benefit from purchasing a whole life insurance policy.