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Explained: Whole life insurance

Every year, thousands of Canadians purchase a permanent life insurance product.


Because they want the best of both worlds:

  1. To protect their estate.

  2. To increase their wealth.

In the life insurance industry, there are three main types of permanent life insurance:

  1. Whole Life Insurance

  2. Universal Life Insurance

  3. Term 100 (T-100)

The most popular are the first two - whole life and universal life.

We'll focus on whole life right now.

In the next few minutes, I'll explain exactly what whole life insurance is, the advantages of whole life, its' disadvantages, and who it's for!

A piece of advice:

**if you plan on purchasing a whole life insurance policy, please do so with the primary purpose of protecting your estate. The wealth building component of a whole life insurance product should be considered as a "bonus" feature...**

Let's begin.

Whole Life Insurance

What it is:

A whole life insurance policy is a form of permanent insurance. This means that the moment it's been purchased, you will have coverage for your entire life, regardless of what happens to your health.

In a whole life insurance policy, a policyholder (PH) will pay a fixed premium (usually monthly or annually).

With each year that passes, a portion of that premium will be contributed towards a "Cash Surrender Value" account (CSV) - think of it as a savings account, but for your insurance policy.

The funds inside this CSV accumulate each year, as long as you continue to pay your premium. The funds in this CSV can be used at your disposal, however you may have to pay taxes the moment you make your withdrawal.

Many Canadians use Whole Life insurance as a tool to pay for their child's post-secondary education.

There are two main types of whole life insurance products:

1. Participating

2. Non-participating.

A participating whole life insurance product gives a PH the opportunity to receive dividends from their insurance company. If the insurance company achieves a profit at the end of the fiscal year, a dividend will be provided to all policy holders. This dividend will be deposited into your CSV. A participating whole life policy typically has a higher premium, and dividends are not guaranteed.

I have a whole life par policy myself.

A non-participating whole life policy does not include the dividend component.

Advantages of Whole Life Insurance:

- premiums are cheaper than term insurance later on in life (refer to term insurance vs. permanent insurance blog for information on term insurance)

- opportunity to build a CSV

- ability to receive dividends in participating policies

Disadvantages of Whole Life Insurance:

- premiums can be costly in the early years of the policy

- CSV's in a participating policies don't earn interest

- dividends in a participating policy are not guaranteed

If you fall into one or more of the following categories, you should consider speaking to a professional about whole life insurance:

- you're young and healthy

- you have a steady income

- you're looking for an additional investment vehicle beyond your TFSA and RRSP

- you have, or plan to have, people in your life who you would like to leave a lump sum of cash to

Like I mentioned earlier, I have a whole life par policy myself. I purchased it when I was 28. I fall into all 4 of the categories above.

At age 50, here's what Ill be expecting in my CSV from my policy:


After 20 years, my policy will be completely paid off, however I will continue to receive annual cash deposits and any potential dividends for the rest of my life.

Is whole life right for you?

If so, all you need to do is complete the 1-minute intake form below, and I will give you a call within 24 hours to chat!

Thanks for reading!





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