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Participating Life Insurance
Lifetime protection for your family, grow your wealth tax-free, and even borrow from your policy to reach important goals.
What is participating life insurance?
It is lifetime coverage that provides a one-time, tax-free, cash benefit to your chosen beneficiaries when you die.
Participating life insurance (also referred to as Participating Whole life) offers insurance protection with the potential to grow equity tax-free (within legislative limits) inside your policy over time called 'cash value'. The insurance is in effect for your entire life, as long as you pay the premiums. The amount of coverage, annual costs, and cash values are guaranteed for life.
Participating policyholders are eligible to receive policy dividends, resulting in tax-advantaged growth within the policy.
Lifetime Coverage
Ensure the people you love are financially protected for life. Your protection does not end after a certain period.
Tax-Advantaged Investing
A portion of your premium purchases your insurance, while the rest is invested.
Access to Funds
Access funds in your policy during your lifetime to fund, an education, a home, a business, or supplement your income in retirement or during a time of illness.
Estate Planning
The unique features of participating life insurance make it an ideal tool for protecting your assets and passing them on to your chosen beneficiary(ies).
How does participating life work?
Participating Whole Life Insurance is a unique form of life insurance that offers both coverage and investment opportunities. Here's a breakdown of how it functions:
Premium Payments - Ensuring Continuous Coverage: Your policy remains active and in force as long as you continue to pay the premiums. Timely premium payments are crucial to maintaining the policy's benefits and coverage.
Cash Value Accumulation - The Role of the Par Fund: A portion of your premium payments contributes to the participating fund (commonly known as the 'Par Fund'), which is managed by the insurance company. The funds in this account grow tax-free within certain limits, increasing the cash value of your policy over time.
Dividend Distribution - Your Policy's Performance Rewards: Depending on the performance of the participating fund, you may receive dividends. You have the flexibility to use these dividends in several ways: receiving them as cash, purchasing additional insurance (paid-up additions), or applying them towards your premium payments.
- Death Benefit - Providing for Your Beneficiaries: In the event of your passing while the policy is active, your designated beneficiaries – whether individuals or charities – will receive a tax-free cash benefit. This death benefit is a key aspect of your policy, offering financial security and support to your beneficiaries.
Participating fund & cash value
Participating Whole Life Insurance policies allocate a portion of your premiums to a professionally managed participating fund. The performance of this fund determines the potential dividends you might receive. As a policy owner, you have the flexibility to use these dividends in several beneficial ways, depending on your personal financial strategy.
Enhance Your Coverage - The Power of Paid-Up Additions: Use dividends to buy 'paid-up additions', increasing your policy's death benefit and cash value. This option boosts your coverage without additional underwriting, enhancing your policy’s long-term value.
Flexible Premium Options - Reducing or Halting Your Payments: Apply dividends towards premium payments, reducing or even temporarily stopping them. This flexibility helps manage finances effectively, maintaining coverage while adjusting to your budget.
Cashing in on Dividends - Your Financial Reward: Opt to receive dividends as cash for immediate financial benefits. This provides a source of funds for personal use, investment, or savings, adding a layer of financial flexibility to your policy.
Get help with your life insurance planning.
Speak with a professional advisor who can help.
Access your money
As the cash value accumulates in your Participating Whole Life Insurance policy, you have options to access it, each with its own benefits. Here's how you can make use of your policy's growing cash value:
Borrow Against Your Policy: You have the option to borrow directly from your policy’s cash value. This can be a convenient way to access funds without a traditional loan application process.
Leverage as Collateral for Loans: Your policy's cash value can also serve as collateral for a loan from a third-party lender. This can provide a quick and convenient source of funds when needed.
Withdraw Cash Value Directly: For immediate financial needs, withdrawing a portion of the cash value is possible. This option provides direct access to your funds for any purpose.
Considerations and Tax Implications
The way you choose to access or use the cash value of your policy can have different tax implications. It’s essential to understand these nuances to make an informed decision. Consulting with a professional financial advisor is highly recommended to navigate these choices effectively and to understand how they align with your overall financial plan.
How much does permanent life insurance cost?
There are a number of factors that can affect policy pricing, including:
Age
Generally, insurance cost less for younger age groups, and more for older age groups
Gender
Women live longer than men on average, so insurance may cost less than for males.
Health
Your unique health history, family history, chronic diseases and lifestyle can impact costs.
Occupation
High-risk occupations can increase cost. Conversely, low-risk occupations can reduce cost.
Is Participating Whole Life Insurance Right for You?
Participating Whole Life Insurance can be an ideal solution for certain financial needs and goals. It may be particularly suitable for individuals who:
Seek Permanent Life Insurance Coverage: Ideal for those who want lifelong insurance protection to secure their family's future or their own peace of mind.
Desire Tax-Advantaged Growth for Non-Registered Assets: Perfect for financially secure individuals looking for efficient ways to grow their wealth with favorable tax treatment.
Looking Beyond RRSPs and TFSAs: A strategic choice for those who have already maximized their Registered Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA) contributions and seek additional avenues for tax-efficient investment.
Estate Enhancement for Future Generations: Suitable for individuals wishing to increase the value of their estate for the benefit of their children and grandchildren.
Business Owners Seeking Tax-Efficient Protection: An excellent option for entrepreneurs who need a cost-effective method to safeguard the financial value of their business.
Strategies for Mitigating Transfer Taxes: Useful for those planning ahead to cover potential income or capital gains taxes in a more financially efficient manner.
Get in touch
Talk to an advisor who can understand your situation, answer your questions and help you build an insurance plan appropriate for you and your family.
Frequently asked questions
Answers to key questions about Participating Life Insurance
Participating Life Insurance is a type of permanent life insurance that includes an investment component. Policyholders are entitled to dividends, which can vary based on the insurer's performance. These dividends can be used to reduce premiums, accumulate, or purchase additional coverage.
Dividends in Participating Life Insurance are determined by the insurance company's financial performance, including investment earnings, mortality rates, and expenses. They are not guaranteed and can fluctuate yearly, reflecting the insurer's profitability and operational efficiency.
Yes, you can access the cash value in your Participating Life Insurance policy through loans or withdrawals. However, this may reduce the death benefit and policy value, and could have tax implications. It's important to consult with a professional advisor before accessing these funds.
If dividends are not used, they typically accumulate within the policy, earning interest. This can increase the cash value and death benefit of the policy over time. Policyholders can choose different options for dividend use, like reinvestment or premium reduction.
Participating Life Insurance can be a good investment for those seeking a combination of life insurance coverage and potential for cash value growth. It's particularly beneficial for individuals looking for long-term financial planning tools, but it's important to evaluate individual financial goals and risk tolerance. A professional advisor can help you determine if Participating Life Insurance is appropriate for your unique personal circumstances.
Still have questions?
Please contact our office and we'll be happy to address any questions you may have.
