Whole life insurance: cover for life with guaranteed cash value
Whole life is permanent insurance. As long as premiums are paid, it pays a tax free benefit whenever you pass away, and it builds a cash value you can borrow against. It is built for certainty, legacy and long term planning.
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Everything to know about whole life insurance
Who it is for
- People who want cover for life, not only for a period
- Families planning to leave an inheritance or cover final expenses
- Business owners funding estate or succession plans
- Parents who want to start a plan for a child
How it works
- You pay a guaranteed premium for permanent cover
- Part of the premium builds a guaranteed cash value inside the policy
- Participating plans may also earn dividends, which are not guaranteed
- You can often borrow against the cash value or withdraw it, which may reduce the death benefit and have tax effects
What affects the cost
- Your age and health when you apply
- The cover amount
- How long you pay premiums, for life or over a limited period
- Dividend options on participating plans
Common mistakes to avoid
- Treating it as a short term investment, since the early years build less cash value
- Buying more cover than the budget can sustain
- Not asking how borrowing affects the death benefit
- Skipping a comparison with term and universal life
A 40 year old who wants a guaranteed legacy for their children may choose a plan with guaranteed premiums and a cash value they can access later if needed. Illustration only, not a quote.
Questions people ask
Is whole life better than term?
Neither is better for everyone. Term costs less for a set period. Whole life costs more but lasts for life and builds cash value. The right choice depends on your goals and budget.
Are the dividends guaranteed?
No. Dividends on participating policies depend on the results of the insurance company and can change. The guaranteed values are the ones set out in the contract.
Can I stop paying premiums?
Some plans can become paid up or use cash value to keep the cover going, but the details vary by contract, so ask before you buy.
How whole life works
Guarantees are the point. You know the cost, the cover and the cash value from day one.
Lifelong protection
The death benefit does not expire. It is paid to your beneficiary whenever you pass away, so your family is never left uncovered.
Guaranteed premiums
Your premium is fixed when you buy. You can often choose to pay over 10 or 20 years, or for life, and the policy stays in force.
Cash value that grows
A portion of each premium builds cash value inside the policy. It grows on a tax deferred basis and can be accessed through policy loans or withdrawals.
Possible dividends
Participating policies may pay dividends. They are not guaranteed, but can be used to buy more cover or reduce premiums over time.
Collateral for a loan
Cash value can be pledged to a lender, which some business owners use to finance growth without cashing out the policy.
Estate planning tool
A known, tax free payout can cover final taxes and costs, or leave a legacy to children, grandchildren or a charity.
Who whole life suits
It costs more than term, so it works best when you want what it gives you.
- People who want a guaranteed, lifelong benefit that never expires
- Families planning to leave an inheritance or legacy
- Business owners funding a buy-sell agreement or succession plan
- Parents who want to lock in cover for a child at a young age
- Those who like a conservative, predictable way to build cash value
Term, whole and universal life compared
The three main types of life insurance, side by side.
| Term life | Whole life | Universal life | |
|---|---|---|---|
| Coverage period | Fixed term: 10, 20, 30 or 40 years | Your whole life | Your whole life (if the policy stays funded) |
| Premium cost | Lowest to start | Highest, but fixed | Flexible, between term and whole |
| Premiums | Level for the term, then rise on renewal | Guaranteed, can be limited to 10 or 20 years | Can be raised or lowered within limits |
| Cash value | None | Guaranteed, builds every year | Grows with the investments you choose, not guaranteed |
| Best for | Mortgage, children, income replacement | Estate planning, legacy, lifelong cover | Tax sheltered growth, business and estate planning |
| Main trade off | Cover ends if you outlive the term | Costs more and grows slowly | Needs monitoring, underfunding can lapse the policy |
General guide only. Features, guarantees and pricing differ by insurer and policy. Ask me for a side by side quote from several companies.
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Questions people ask
Is whole life better than term?
Neither is better for everyone. Term gives the most cover for the least money for a set period. Whole life costs more but lasts for life and builds cash value. Many families use term for the big needs and whole life for the lifelong ones.
Why is whole life more expensive?
You are paying for cover that will almost certainly pay out one day, plus the cash value. Term usually expires before you pass away, so it costs far less.
Can I access the cash value?
Yes, through policy loans, withdrawals or by surrendering the policy. Taking money out can reduce the death benefit and may have tax consequences, so plan it with me first.
What is a participating policy?
It shares in the insurer’s profits through dividends. Dividends are not guaranteed, but a strong track record can add value over the years.
What if I stop paying?
You may have options such as reduced paid up insurance or taking the cash value. Missing payments early in the policy can cost you money, which is why a realistic budget matters.
See if whole life fits your plan
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Book a free consultationCall 306-472-2020This page is general information, not personal advice. Product features, eligibility, guarantees and pricing vary by insurer and policy, and are set out in the policy contract. MS Insurance Inc. is licensed to sell life and health insurance in AB, SK, BC, NB, NS, QC, MB, ON and PEI.