Female, 51 years old, non-smoker, no serious health pre-conditions, whole life insurance policy for $200,000 coverage
Male, 44 years old, non-smoker, no serious health pre-conditions, whole life insurance policy for $200,000
Female, 35 years old, non-smoker, no serious health pre-conditions, whole life insurance policy for $500,000
Lorne Marr from LSM Insurance shares his experience:
“Whole life Insurance is a permanent type of policy. Now, permanent insurance differs from the other type of main coverage which is term insurance in that the premiums are generally level for life and provide life-time protection. When you think of a term policy that has a lower initial cost but then the cost is going up as you get older and usually expires after a period of time. Permanent whole life policies can come in participating or non-participating. Participating policies are a bit higher in cost but then you are participating in the profits of an insurance company and those types of policies pay dividend. Another advantage of a whole life policy is that there is a cash value building up on a tax shelter basis and the death benefit is tax-free. Whole life policies can also be set up where they are payable for life or where they can be paid up in a limited number of years.”
Whole life insurance is a life insurance policy that covers a policyholder as long as he/she lives. In addition to being a life insurance product, it is also a saving product – a whole life insurance policy accumulates value that you can get, either when you terminate (surrender) the policy or if you decide to borrow against the policy value.
Historically, this type of insurance was created to combine a lifelong insurance product with a savings component.
There are numerous cases in which whole life insurance is your best option:
Here is a brief comparison on how whole life insurance compares to term life insurance and universal life insurance.
| Term Life Insurance | Whole Life Insurance | Universal Life Insurance | |
|---|---|---|---|
| Coverage length | Limited (e.g. Term 10 – coverage for 10 years) | Life long | Life long |
| Insurance coverage | Yes | Yes | Yes |
| Cash accumulation | No | Yes | Yes |
| Can choose amounts going into insurance and cash accumulation | No | No | Yes |
Whole life insurance rates are fixed for life. In the beginning, premiums are higher than term life insurance, but in the later stages of your life, term life insurance rates will be very high because they increase as you age. Whole life insurance rates will stay the same. That is why whole life insurance is a good option if you want to have predictable insurance rates that don’t skyrocket as you age.
CAs mentioned earlier, whole life insurance is insurance which provides coverage for the policyholder’s entire lifetime. Whole life policies can be divided into two categories: participating and non-participating. Both policies provide level premiums, lifetime protection and a guaranteed cash value — but participating whole life plans pay an annual dividend. The annual dividend is NOT guaranteed, and in most instances is linked to long-term interest rates as well as the insurance company’s performance. If you have an existing participating whole life policy which was purchased in a high interest environment, it is a good idea to request an updated policy illustration—the projected values may have changed dramatically.
Participating policies: Most participating whole life policies have multiple dividend options. The following is a brief look at four various dividend options:
Non-participating policies: By contrast, non-participating whole life policies have no dividends, and the value of these plans are guaranteed. The shorter the policy payment period, the higher the premium. The guaranteed cash surrender value of whole life policies varies by the amount of coverage, length of time paid, and the company issuing the coverage.
Below is an example (the rates and values are as of July 2018) comparing a participating and non-participating whole life policy, using a 30-year-old male non-smoker with $250,000 of whole life coverage paid up in 20 years:
| Non-participating Foresters Whole Life Policy | Participating Manulife Life Policy | |
|---|---|---|
| Annual premium | $2,522 | $8,028 |
| 20-year contribution | $50,450 | $160,553 |
| Death benefit at year 20 | $250,000 | $502,107 |
| Death benefit at age 65 | $250,000 | $783,488 |
| Cash value at age 65 | $411,943 | $783,488 |
