Guaranteed Whole Life Insurance Canada

Guaranteed Whole life insurance is the most traditional type of permanent insurance.

It is ideal for consumers wanting life insurance for a lifetime with no risk. The insurance company takes all of the risk while the insured takes none.

As long as the premiums are paid as specified in the policy, the policy will remain in force for the insured’s entire lifetime. Over time the policy will gain cash value. In most policies there will be a guaranteed cash value.

The face amount of the policy and the premium are established at time of purchase and remain fixed for the time that the policy is in force.

Participating whole life policies pay dividends. Dividends are paid at by the insurance company when the company’s claims experience or investment returns are better than originally projected.

There are five options for a policy holder to receive their dividends:

Cash receipt – dividend paid direct to the insured
Automatic premium reduction – dividend is applied to the premium, the insured pays the balance
Paid up additions – the dividend buys additional insurance and grows the death benefit of the policy
Accumulation – the dividend is deposited into an interest bearing side account within the policy. The accumulated funds are accessible by the insured without penalty
Term insurance – the dividend buys term insurance to increase the overall death benefit

The overall security of Guaranteed Whole Life Insurance also comes from the “non-forfeiture” options. This means there are options within the policy to keep it in force – even if money is tight.

The non-forfeiture options include:

Cash Surrender Value – there is a cash value if the policy is cancelled (unlike term insurance)
Automatic Premium Loan – if a premium is not paid a loan is taken against the cash value to keep the policy in force
Extended term insurance – a policy holder could choose to convert the policy to term insurance. The amount of coverage depends on the face value of the policy. The length of the term depends on the cash value
Reduced paid up insurance – the policy holder can ask the insurer to reduce the death benefit to a level where no more payments would be required. A substantial cash value would need to be built up before this option would be feasible.

Consult with your insurance policy for your specific options

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