Cash Value Life Insurance

Posted on September 30, 2010 and updated December 4, 2018 in Insurance Types, Life Insurance Canada News, Permanent Insurance 3 min read
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Permanent Whole Life Policies
have a cash value.

Cash value life insurance is often a misused and misunderstood term.

Most permanent life insurance policies build a cash value. The reason behind this is traditional Permanent Whole Life policies have a level premium for life and provide lifetime protection. The insured is paying a higher premium in the early policy years and in return, their premiums remain level throughout their lifetime.

This approach differs from a term policy, where the premiums start off lower but increase as the insurer ages. Since permanent policies do have a higher initial premium, should the insurance company cancel the policy in the later policy years most Whole Life policies allow the policy owner to get all or part of this extra premium returned to them.

The cash value within a permanent or Whole Life policy is often broken down into the guaranteed cash value and the dividend cash value. The guaranteed cash value can be taken out as a policy surrender or as a policy loan, whereas the dividend value can be taken out as a withdrawal policy surrender or policy loan. The amount available via loan and loan interest rate formulas vary from company to company and even contract to contract so make sure you understand your policy.

Universal Life Insurance is another form of permanent life insurance offers more flexibility in terms of the investment options. Investment options can range from fixed-rate investments (similar to a GIC) to higher risk investments such as equity based mutual funds.  Universal Life policies also come with a variety of cost of insurance options.  Yearly Renewable Term (YRT) cost of insurance plans start off lower in cost but go up on annual basis.  Whereas a level cost of insurance starts off higher in cost but the rates eremain level.  Theses policies have increased sharply in cost in recent years.  Some companies also offer blended versions of these cost of insurance options.  YRTpolicies are often more suited to cash value build up since the cost is lower in the early years.

For more details, you can contact us at 1-866-899-4849 or visit our Whole Life Insurance Instant Quote Page.

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Yousef
Yousef

How do I know if my policy has a cash value I have nt paid into it for a few years. But I got a statement a little while back.

LSM Insurance
LSM Insurance

Hi Yousef, If you contact the insurance company. They should be able top let you know if your policy is active, the current death benefit and cash value.

LSM Insurance
LSM Insurance

Hi Yannick,

In order to determine which policy is best a complete picture has to be taken if the insured’s insurance and financial needs.

Whole Life policies can be a good fit for people who want lifetime protection and value guaranteed premiums and guaranteed cash value.

Participating Whole Life policies which are not guaranteed have fared very favourably in recent years when compared to other no to low risk investments.

LSM Insurance
LSM Insurance

Hello Floyd,

Thanks for the note. Other types of life insurance policies can also build a cash. Whole Life both participating and non participating build a cash value. Universal Life policies can build a cash value. Some Term 100 have guaranteed cash values however the amounts are much smaller.

Some Term policies have a cash value but this is usually in the form of a return of premium feature and this is very rare.

Yannick
Yannick

Whole Life Insurance is a waste of money? Why would I want a life insurance company investing my money and then make me borrow my OWN money.

Floyd
Floyd

Is Whole Life insurance the only type of life ins to build a cash valie?