Disclaimer
This article is intended as a general guide. Licensing and regulatory requirements vary across provinces, and specific guidelines may change. Financial advisors should consult their provincial regulator or MGA to ensure they meet all necessary requirements and stay updated on provincial policies.
Participating whole-life insurance is more than just a safety net for loved ones—it’s a versatile financial tool that policyholders can use to build long-term wealth, access funds, and meet various financial needs throughout life. Commonly referred to as the “personal bank account” strategy, participating whole-life insurance allows policyholders to build cash value over time, which can then be borrowed against for multiple purposes. Here, we’ll explore how participating whole-life insurance can be used as a financial asset, the advantages of the strategy, and real-life examples of how individuals use it as a flexible source of funds.
Understanding Participating Whole-Life Insurance
A participating whole-life insurance policy is a permanent life insurance product that not only provides a death benefit but also builds cash value through premiums paid by the policyholder. The “participating” aspect means that the policyholder may receive dividends, usually based on the insurance company’s performance. These dividends can be reinvested into the policy, enhancing its cash value, or taken as cash payments, giving the policyholder financial flexibility.
The cash value within a participating whole-life insurance policy grows on a tax-deferred basis, and policyholders have the option to access these funds during their lifetime. This is what makes the “personal bank account” concept so appealing—policyholders can borrow against the cash value of their policy without incurring taxes on the borrowed amount.
» Part 2
