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  • Craig Dougan

Whole Life Insurance - Explained

Whole life insurance is a type of permanent life insurance that provides coverage for the entire lifetime of the insured, as long as the premiums are paid. In Canada, whole life insurance offers several benefits, making it a popular choice for individuals seeking long-term financial protection and investment opportunities. Here are some of the key advantages of whole life insurance in Canada:

  1. Lifetime Coverage: As mentioned, whole life insurance provides coverage for the insured's entire life, regardless of when death occurs. This means that as long as premiums are paid, the beneficiaries will receive a death benefit upon the policyholder's passing.

  2. Guaranteed Death Benefit: Whole life insurance offers a guaranteed death benefit, which means the payout to the beneficiaries is predetermined and will be paid out whenever the policyholder passes away. This certainty can provide peace of mind to the insured and their loved ones.

  3. Cash Value Accumulation: One of the main advantages of whole life insurance is that it builds cash value over time. Part of the premiums paid goes toward the policy's cash value, which grows on a tax-deferred basis. The policyholder can access this cash value through policy loans or withdrawals, providing a source of funds for emergencies or other financial needs.

  4. Tax Advantages: In Canada, the growth of cash value in a whole life insurance policy is tax-deferred, meaning the policyholder won't be taxed on the investment gains as long as they remain in the policy. Additionally, the death benefit paid to beneficiaries is generally tax-free.

  5. Dividends and Participating Policies: Some whole life insurance policies in Canada are classified as participating policies. This means policyholders may receive dividends from the insurance company based on the company's financial performance. These dividends can be taken in cash, used to reduce premiums, or reinvested to increase the policy's cash value and death benefit.

  6. Estate Planning: Whole life insurance can be an essential tool for estate planning. The death benefit can help cover estate taxes or provide a source of inheritance for beneficiaries. Additionally, the tax-deferred growth of cash value can help preserve wealth and pass it on to the next generation.

  7. Financial Protection for Loved Ones: The primary purpose of life insurance is to provide financial security for loved ones in the event of the policyholder's death. Whole life insurance offers a guaranteed payout, ensuring that beneficiaries will receive financial support when it is needed the most.

  8. Policyholder's Health Benefits: Some whole life insurance policies offer riders or options that allow policyholders to access a portion of the death benefit while they are still alive in case of a terminal illness or other medical emergencies.

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