Participating in whole life insurance: a good choice for you?
Participating in whole life insurance is a tax shelter for your investments during your lifetime and generates a tax-free benefit upon your death.
What is participating whole life insurance?
Participating in whole life insurance is a form of permanent life insurance that provides guaranteed lifetime protection for as long as you pay the policy premiums. The premiums remain the same over the years without your age or any health problems increasing the cost of your policy.
In addition to insurance coverage, the whole life policy includes a tax-efficient investment component that allows you to grow your wealth more than you could with a taxable account. This is because the cash value of your policy grows tax-free.
Participating in whole life insurance allows the policy owner to “participate” in the benefit of the insurance company. Every year, the latter evaluates the benefit of the investment fund by calculating the value of the actual compensation paid and the expenses. This profit is then redistributed to the policyholders.
Payments are not guaranteed, but it is rare for a year to end without a distribution.
These dividends can be withdrawn, accumulated, or, most commonly, used to purchase additional paid-up insurance.
Benefits at a glance
Participating in whole life insurance offers the following benefits:
Death benefit. Your named beneficiaries pay no tax on the death benefit and paid-up additional insurance, which increases the value of your estate.
Annual vesting. If you use your dividends to purchase additional paid-up insurance, you increase the accumulated “minimum” cash value. This floor is guaranteed and cannot be reduced except by you as the policy owner.
Account growth. During your lifetime and as long as they remain in your policy, guaranteed dividends and cash value grow tax-free and help you achieve your long-term financial goals and efficiently transfer your assets to your beneficiaries.
Access to cash. You have access to the cash value accumulated in the policy at any time, whether in the form of a policy loan, the withdrawal of an amount corresponding to the cash value, or by assigning the cash value as security. accumulated to obtain a tax-free line of credit, so many options that give you access to cash and provide you with more flexibility.
Take advantage of professional management
MD Financial Management works with some of the most established and reputable life insurance companies in Canada. The participating account assets are managed by teams of seasoned investment professionals who work for these companies to maintain asset quality, effective diversification, and sound risk management.
The use of a reserve fund by the insurer can protect you against high volatility. When the performance of the participating account is particularly strong, a portion of the policy dividend amount is placed in the reserve fund. This fund is used to restore balance when the yield is weaker and to increase the predictability of the dividends that will be credited to your policy.
To learn more, we invite you to speak with your MD advisor * about the possible integration into your wealth management plan of a participating whole life insurance policy, a product offered by several of the largest insurance companies. from Canada.
*“MD Advisor” means an MD Management Limited Financial Advisor (in Quebec, an Investment Advisor) or an MD Private Investment Counsel Portfolio Manager.
All insurance products are sold by Scotia Wealth Management Insurance Services Inc., an insurance agency and subsidiary of Scotia Capital Inc., a member of the Scotiabank group of companies. When discussing life insurance products, advisors are acting as insurance advisors (Financial Security Advisors in Quebec) representing Scotia Wealth Management Insurance Services Inc.
The above information should not be construed as professional investment, financial, tax, legal, accounting, or similar advice applicable in a Canadian or foreign context, and it does not in any way replace the advice of an independent tax specialist, accountant, or legal adviser.
