Understanding Limited-pay Whole Life Insurance Plans

It's important to understand
limited pay before you sign on.

Limited-pay Whole Life insurance plans provide guaranteed level premiums, lifetime protection and the policies are guaranteed paid-up after a limited number of years.

UPDATE: These policies have recently been in the Canadian industry spotlight in Canada. Historically low interest rates have reduced profitability on these plans and forced many Canadian insurance companies to raise rates or remove these plans from their product line-up.

Unlike other permanent life insurance policies, which allow for a quick pay option, limited-pay policies are fully guaranteed i.e. the payment period will not vary depending on the underlying investment performance. A Universal Life policy with an underlying equity investment might project a pay period of 15 years, but if the markets tank, the insured may have to pay for up to 25 years. This element of risk is eliminated by a Limited-pay Whole Life policy.

Limited-pay policies are fully guaranteed i.e.the payment period will not vary depending on the underlying investment performance.

Limited-pay policies can be non-participating or participating. Participating policies pay a dividend. The dividend can be used to increase the death benefit of the policy, which gives the insured a hedge against inflation. Participating Whole Life  policies are generally more expensive than non-participating ones. The payment period on a Limited-pay Whole Life policy can be anywhere from 10, 15 to 20 years, or even until age 65. Unity Life has a unique Limited-pay Whole Life Plan called Life Option Enhanced, which allows the insured to select the pay period for the policy.

The following is a snapshot of the top five non-participating, 15-year-pay Whole Life policies with $250,000 of coverage for a 40-year-old male, non-smoker:

Union of Canada:  $285.79/month

Wawanesa:  $323.10/month

Assumption Life:   $326.48 /month

Unity Life:   $333.45/month

La Capitale: $342.08/month

It should be noted that the guaranteed cash values in Limited-pay policies can also vary dramatically between companies. In the above example, Wawanesa's guaranteed cash value at the end of 15 years is $12,000, whereas Assumption Life's guaranteed cash value following the same length of time is $32,000.

You can get a Limited-pay Whole Life insurance quote at our free Whole Life Instant Quote Page, or you can call us at 1.866.899.4849