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July 29, 2019  •   6 minute read

How To Utilize The Flexible Nature of Whole Life Insurance

Whole Life Insurance

How To Utilize The Flexible Nature of Whole Life Insurance

Whole life insurance is a contractual financial product that policyholders can utilize in creative and flexible ways. It is available in different types of life insurance policies and provides protection without limitations on age and health. It comes with many benefits including tax-deferment, fixed premiums, and accumulated cash value, to name a few. These policies are perfect for Canadians interested in financial products for future retirement, elderly care, borrowing, charitable giving, and much more.

It’s never too early nor too late to plan for the future and make a whole life insurance a part of your investment portfolio and financial planning. One of the most difficult tasks of shopping for policies regardless if it is for life, homeowners, auto, rental, and/or disability is finding a reputable insurance company. Traditionally, consumers would Google search a list of insurance carriers and contact an agent to help with selecting the policy. It is different today because new technology allows internet users to have access online to most policy types in one house.

My Insurance Broker is a company founded in 2008 which uses a high-tech engine to store hundreds of insurance carriers. The company has a reliable and user-friendly website and is one of the first companies that have access to the largest insurance companies in Canada. Throughout the country, including Ontario, and in the cities of Toronto, Markham, Richmond Hill, Ottawa, and Mississauga, you can request for rapid quotes from one of our insurance brokers. We are professionals and provide customers with insurance that combines coverage and service costs to create the policy value.

The Differences Between Whole Life Insurance and Term Life Insurance

Some divergences between the two different types of life insurance, including whole life and term life insurances are in the coverages, cash values, and costs. Whole life insurance is a contract and provides protection for life having no barriers to your age or health conditions. The premium never increases, but you have the option to increase the death benefits which causes premiums to rise in costs with an increase in cash value. Its policies hold an investment or saving component while the cash value accumulates. Policyholders must pay their monthly, quarterly, or yearly premiums timely to receive the full benefits of an insurance policy.

While whole life insurance is expensive, term life is inexpensive and easier to understand. It is a policy type that provides coverage with payments set at a fixed rate for a limited period. Term life insurance offers protection for your dependents if you die immaturely. Upon death, the insurance company pays the beneficiaries as specified in the terms of the policy. It has no other value besides its worth with terms of 10, 20, or 30 years.

Types of Whole Life Insurance Policies

Insurance companies sell participating and non-participating policies which have different benefits. A participating policy allows the policyholder to share in the insurance carrier’s investment, mortality experience, and expenses. The insured receives cash dividends with the option of reinvesting or keeping the dividend payout. You can use the dividend to reduce premium payments or to purchase additional insurance. A type of participating policy is whole life insurance which is the most popular among all the policies sold in the Canadian market.

A non-participating policy whole life insurance policy has an undetermined premium which is adjustable and set yearly. It reflects the insurer's mortality experience, expenses, and investment earnings. The costs are very low and it increases or decreases over time. A disadvantage of the policy is that it doesn’t pay dividends to the policyholder. The insurance company sets the level of death benefits and cash surrender values when you purchase the policy with a fixed amount.

The underwriters of whole life insurance create policies that are ordinary life or straight life. Whole life insurance policies with limited payment can be participating or non-participating. It has similar characteristics to ordinary life insurance with the option of allowing the insured to pay premiums over a shorter time with lifetime protection. Single premium whole life insurance is a limited payment type of policy which permits the policyholder to purchase guaranteed lifetime protection for a single upfront payment.

Whole Life Insurance Benefits

A whole life insurance policy has more benefits compared to any other policy available through insurance carriers. The only time death benefits decreases are when the insured makes a cash withdrawal or premium payments cease. Cash withdrawals have consequences, especially concerning taxes on the amount withdrawn from the policy. But, there are ways around paying taxes when a policyholder needs some extra cash, which there is a later discussion on. Let’s look at some rewarding benefits of the whole life insurance.

  • Tax-deferment
  • Earned Dividends
  • Fixed Premiums
  • Death Benefits
  • No expiration
  • Accumulates Cash Value
  • Borrow Against the Cash Value
  • Dividends Reinvestment

Tax-deferment is probably the best benefit of whole life insurance policies. The policyholder can avoid paying tax penalties by borrowing against the accumulated cash value. The only time an insured pays taxes is by the withdrawal of cash from the policy account. The amount withdrawn is normally taxable by the administrator or the policyholder can pay taxes when submitting a tax return to the Internal Revenue Service. There are no penalties, taxes, or qualification requirements if the withdrawal is below what the holder pays into the policy.

Earned dividends are great ways to receive small cash from whole life insurance. It depends on the amount of cash the policy accumulated over time in the insured’s account. Policyholders can opt to receive the quarter payments or use it to buy paid-up additions.

Fixed premium is another benefit that will remain the same throughout the duration of the whole life insurance policy. Not all the different types of life insurance policies offer a fixed premium to the insureds. For example, a term life policy has a fixed rate of payments for a specified timeline.

Death benefit is one main reason a consumer will purchase a whole life policy. It protects the dependents relying on financial care from the insured. When the policyholder passes, the dependents named as beneficiaries receive full payment of the balance in the holder’s account.

No expiration on whole life insurance if premiums are up-to-date.

Cash value accumulates on whole life insurance as the insured makes payments to the policy account. It is part of the savings component of the policy.

Borrow against the cash value by asking for a loan from the insurance company without the hassle of credit checks and the lengthy approval process. Policyholders can also borrow against the death benefit from a financial institution or a bank and use it as collateral. They also have the option of receiving an accelerated death benefit and a portion of the policy’s face value.

Dividends reinvestment is a way the insured can reinvest in the cash value of the policy. The insured can use the dividends to pay additional insurance with a larger death benefit if chosen.

Ways to Use Whole Life Insurance

  • Withdraw cash for emergencies, vacationing, pay a down payment on an automobile or house, or for college tuition.
  • Sell policy to get cash which forfeits the rights to death benefits. It can work for the elderly and those suffering from health problems.
  • Use a whole life insurance policy as an annuity to receive early payments within 10 years or 20 years of life expectancy or life. During the time frame, policyholders will receive a determined amount of income each month. It includes a certain amount to the beneficiaries, as well.
  • Surrender the policy benefits, although it isn’t a recommendation. If there is no other way to benefit from the policy, the holders may relinquish it to avoid losses and being short-changed.
  • Influential policyholders can use portions of death benefits to set up a charitable remainder trust. The trust sells an appreciated asset, such as stocks, a business, or real estate. The benefits include reduced capital gains taxes and helping charities. Insureds can donate the policy to a charity who in return invest the money in the asset.

Whom to choose

My Insurance Broker, an insurance brokerage company headquartered in Ontario, Canada provides consumers with a large platform. It comprises a large network of insurance companies offering over 12 insurance plans covering automobiles, boats, homes, condos, rented properties, and much more. These plans are for individuals, commercial, and businesses. The brokers provide customers with insurance options which includes the costs, coverage, and service for creating the value of the policy. The insured can select a personalized service for professional advice and claim support.

For over 11 years, My Insurance Broker continues to serve the communities in Ontario, Toronto, Markham, and surrounding areas. It is the first company in Canada to have access to an online website with more than 14 plans from hundreds of insurance policy providers. Contact a My Insurance Broker today to learn more about the different types of life insurance for a whole life policy.

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