Whole Life Insurance can come across as a very complex product to some but if broken down in an easy to understand way from a good educator it can be made very simple to understand. Whole Life Insurance is a life insurance protection that will cover you for your whole life guaranteed. What most love about whole life insurance is that it takes the guessing out of the product and minimizes or better yet eliminates any risk or speculation? You have a guaranteed monthly premium, a guaranteed paid up value, a guaranteed cash value, and in many cases a guaranteed pay period.

Types of Whole Life Insurance

Non Participating Whole Life Insurance
Is a permanent insurance where the premiums remain level for a designated pay period guaranteed. The cash value is guaranteed, and the paid up value is also guaranteed. But the death benefit does not change it always stays the same. This type of insurance can be set up as a limited pay option, which means you can pay for 10, 15 or 20 years and stop paying but continue to keep your coverage for life. There is a cash value which serves as kind of a safety net, so in the event you run into a dire or straight situation you can recoup some or all of the cash you put into the policy depending on which year you cancel. In most cases the cash value usually starts at year 10. As an insurance broker I would dissuade you from cancelling as you would lose your coverage for a small cash value versus the death benefit that is significantly larger. You also have a paid up value which serves as a safety net in the event you needed to stop paying, so you could stop paying your premiums in year 10 and keep half of your coverage for life without paying anything further.

Case Study on Non Participating Whole Life
Spencer Cooper purchased a 20 Pay Whole Life Insurance Policy that is non-participating in August of 2000 from BMO Insurance. He is paying 250 dollars for $250,000 of coverage. In 2010 he called me up saying that his health had taken a turn for the worse and he was not able to hold a job. He expressed concern that he would not be able to continue to make payments on the policy but did not want to lose his coverage. Luckily with his BMO policy he has an option to stop paying after year 10 and keep 50 per cent of his coverage. So in 2010 he stopped making payments of $250 dollars and managed to keep $125,000 of coverage on his life.

Participating Whole Life Insurance
Right out of the gates when you hear the word participating you will understand that it stipulates a dividend that may or may not be paid out alongside the policy. This extra dividend can increase your death benefit and cash value as the years go on, but it’s important to understand that there is no guarantee that a dividend will be paid each and every year. In all instances it has so far, but the dividends can vary, from rate of return from one year to the next. So in this respect although the insurance is fully guaranteed, and the premiums are level cost the forecasted returns can be greater or less depending on the dividend payout.  The great thing about it you will know after the year passes where you stand. The death benefit can never be lower then what was initially agreed upon but it can be higher based on the rate of return as year’s pass. It can also be constructed as a limited pay and in many cases people opt for a 20 Pay I

 

Jack Bendahan, Toronto's honest life insurance broker. Making life insurance simple and protecting your family like I do my own.