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Whole Life

As the name suggests, Whole Life Insurance is life insurance that provides protection for your whole life. Premiums are fixed from the application date and generally do not change. With a whole life policy, you often have the option to pay for life or pay up early in 10 or 20 years, or until age 65. This unique feature of Whole Life Insurance gives you more freedom to determine how you cover your plan premiums. You can choose to have them spread out evenly for life, or you can choose to pay off your coverage faster.

Similar to other life insurance products, a policyholder makes periodic premium payments for universal life coverage. The insurance company deducts a portion from the premium to meet the cost of insurance and administrative charges. The balance is deposited into an investment account and earns tax-deferred interest. The amount left in the investment account, also known as account value, earns interest, based on the investment option selected.

 

A policyholder can choose to only make the minimum deposit amount to cover the cost of insurance and have the policy continue to remain in force. However, this would mean not taking advantage of universal life’s unique feature: the investment account value that grows on a tax-deferred basis. You are not required to pay any tax on the investment account returns, provided the account value does not exceed a certain amount (a legal requirement we’ll explain further).

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Whole life insurance plans are also able to build guaranteed cash value. The money can be withdrawn or borrowed against. In addition, if you decide to cancel your plan you will receive the accumulated cash sum, subject to provisions of your policy.


Your cash value accumulates over time as you own the policy and can be used in a number of ways, including:

 

  • To cover premium payments
  • To supplement retirement income
  • For emergencies where you need cash fast
  • For a loan
  • To help make a larger purchase

Two Types of Whole Life Insurance

There are two types of whole life policies you can choose from: participating and non-participating whole life. Let’s take a closer look at the benefits of each.

Benefits of Non-Participating Whole Life:

  • Protects you for life
  • Your premiums are guaranteed never to change
  • A cash value that can serve as emergency money as you need it
  • Affordable life insurance coverage due to its lack of investment options
  • Guaranteed tax-free death benefits.

Benefits of Non-Participating Whole Life:

  • Protects you for life
  • Invest into your policy to lower premiums or build value
  • Tax-deferred investments managed by professional investors and financial advisors
  • An excellent option for those who have topped out RRSP contributions
  • Annual dividends
  • Guaranteed premiums
  • Guaranteed tax-free death benefits
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