Whole Life Insurance
What is Whole Life Insurance?
Whole life insurance is a type of permanent life insurance that provides coverage for the insured’s entire lifetime, as long as premiums are paid. Whole life insurance includes a savings component, allowing you to build and access cash value as a policy loan or on withdrawal.
Why should I buy it?
Financial Security
Whole life insurance can help provide financial security to your loved ones, knowing they will be supported and receive payment in the event you pass away.
Tax Advantages
The investment growth of the cash value is tax-free. The death benefit paid out to beneficiaries is also tax-free.
Cash Value Growth
The premiums you pay for whole life insurance are invested, creating cash value. These funds will grow can be used as a loan and be used in emergencies.
How does Term Life Insurance work?
An RRSP is a retirement savings and investing vehicle for employees and the self-employed in Canada. It offers tax benefits to encourage retirement savings, such as tax deductions for contributions made.
Your RRSP contribution limit for 2024 is 18% of your 2023 earned income or $31,560 (whichever is lower), plus any unused contribution room from previous years. An RRSP can include a variety of investments like stocks, bonds, GICs, and
Lifetime Coverage
hole life insurance ensures that you are covered for your entire life time as long as premiums are paid.
Premiums
To keep your policy active, you must pay “premiums”, or regular
payments, monthly, quarterly, or annually, depending on the policy
terms and your preference.
The amount you pay in premiums are fixed and do not increase
over time.
Death Benefit
The death benefit is the amount of money that will be paid to the
beneficiaries if the insured person dies during the policy term.
The policyholder chooses the death benefit amount when
purchasing the policy, and it remains fixed for the duration of the
term. The beneficiaries receive this payout tax-free, providing them
with financial support.
Cash Value Growth
Whole life insurance has cash value built in. Meaning, the
premiums you pay to the policy is invested and grows over time on
a tax-deferred basis.
These funds can be accessed through policy loans or withdrawals,
or it can be used to pay premiums.
Policy Loan
Whole life insurance allows you to borrow against the cash value you’ve accumulated in your policy. Policy loans accrue interest and can be paid out-of-pocket or added to the loan balance. However, unpaid loans reduce the death benefit paid to beneficiaries.
Let's Compare
Feature | Term Life Insurance | Whole Life Insurance | Universal Life Insurance |
|---|---|---|---|
Duration | Specified Term (e.g.: 10, 20, 30 years) | Lifetime | Lifetime |
Premiums | Fixed for the term | Fixed for life | Flexible |
Cash Values | None | Yes, grows at a
guaranteed rate | Yes, grows
based on
interest rates |
Investment Component | None | None | Yes, tied to
interest rates |
Death Benefit | Fixed, payable if
death occurs
during term | Fixed,
guaranteed | Adjustable |
Cost | Lower cost
premiums | Higher cost
premiums | Can be lower or
higher Depending on options |
Policy Loans | Not Available | Available | Available |
Flexibility | No flexibility | Limited (Cannot change premiums/death benefit) | High (Can adjust premiums and death benefit) |
Coverage Purpose | Temporary needs (e.g., mortgage, income replacement) | Lifetime
protection,
estate planning | Lifetime
protection,
flexible for
changing needs |
Coversion Options | Often convertible to permanent policy | Not applicable | Not applicable |
When should I buy it?
When you are
young and healthy
Buying whole life insurance early on when you are a younger and healthier you can enable you to lock in lower premiums as you are in good health
Having Dependents
If you have dependants, you can provide financial security for your family in the case of your death.
Look for Permanent Life Insurance
If you want permanent life insurance that lasts throughout your lifetime, this option is for you.
Note: Failure to pay for your premiums and inability to cover your insurance with cash value will terminate your policy. Surrender charges (fees) will be incurred upon early termination of your policy or when you decide to withdraw money from the account.
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