Almost 90% of Canadians are underinsured, which risks their financial stability. Studies suggest people are underinsured because they don’t know the type of insurance they require and how to buy the right product.
However, buying life insurance is pretty simple; if you’re a Canadian with a high income needing lifelong coverage and guaranteed cash value, Whole life insurance is an option.
What is Whole Life Insurance?
It is a permanent life insurance plan with fixed premiums and death benefits. A portion of your premium is added to your investment account, known as cash value, against which you can take a loan when something goes wrong.
Cash value acts as an emergency fund in times of need and grows over time as long as you pay the premiums.
How Much Does a Whole Life Insurance Cost?
According to LIMRA 2022 report, the growth of Whole Life Insurance has slowed down; its premiums still contribute the most to the total market. Although more expensive, this traditional permanent policy offers long-term financial security in events like funding a trust for future generations, estate planning and running a co-partnered business by financing a buy-sell agreement.
Therefore, the price of whole life insurance varies per your age and health profile. Typically a whole life insurance policy in 2023 will cost:
- For a $ 150,000 death benefit, a non-smoker 40-year-old woman will pay ~$102/month or $1224 annually.
- For a $ 300,000 death benefit, a non-smoker 50-year-old male will pay $368/month or $4416 annually.
- For a $ 500,000 death benefit, a non-smoker 35-year-old male will pay $298/month or $3576 annually.
6 Factors Affecting the Cost of Whole Life Insurance In Canada
Above, we have discussed the standard pricing plan of a typical whole life insurance plan; the cost is subject to several factors, such as:
When it comes to permanent coverage, life insurance companies tend to sell their policies to low-risk individuals. Policy buyers with pre-existing health conditions are less likely to score a whole life insurance; even if they do, the rates and premiums are higher.
The older you get, the higher the life expectancy risks. This is why life insurance premiums are costlier as you age. However, if you buy a policy at a young age, you may pay more installments during your lifetime.
Surprisingly, males tend to pay higher rates compared to females. Although they have better income ratios, the life expectancy rate among men is low, which makes them high-risk policyholders. Therefore, insurance policies are generally expensive for them.
4. Payment Plans
The cost of monthly installments also depends on the number of payments you want to make to buy your policy. For instance, if you want to complete your premiums within 10 years instead of 20, your payment rate will be generally higher than the standard plans.
5. Death Benefit
The guaranteed cash value and death benefits are fixed for the whole life insurance, but the premiums are expensive for those with more coverage. For instance, the premiums of an insurance plan having a $1 million death benefit will be much lesser than that of $ 5 million coverage.
A participating policy that invests your premiums is subjected to pay you dividends. That is why such policies have a higher premium rate than those with non-participating whole-life insurance. Since you can use your dividends to pay your premiums, these can lower your out-of-pocket cost.
Top 3 Whole Life Insurance Companies In Canada
Sun Life is the oldest insurance company with $ 20 billion in assets worldwide. The company offers the best cash value on each of its whole-life policies. If you’re looking for a traditional experience, the Sun Life Insurance agent will meet you face-to-face for pen-and-paper documentation. The company offers three participating whole life insurance policies:
SunPar Protector II is the best whole-life insurance with high cash value and long-term death benefits. Its premiums also vary depending on the selected dividend options. However, it also offers multiple payment plans such as 10-pay, 20-pay and lifelong.
SunPar Accumulator II is an ideal whole-life insurance plan with high cash value and short-term death benefits.
SunPar Accelerator has an ideal short payment period policy with eight years of installments, cash value and death benefit growth. It offers $250 thousand-$15 million coverage. However, the premiums fluctuate with multiple dividend options.
|Highly experienced whole life insurance company
|Premiums are expensive
|Multiple add-on options
|Excellent choice for people with high income
Manulife is considered one of the best whole life insurance companies for couple policies. Its insurance plans offer exciting cash value and the best death benefit growth for both participating and non-participating options. In participating whole-life insurance, you can withdraw dividends yearly and change payment options during the policy’s life. The company offers two different products:
Manulife Par is a participating policy with higher premiums that guarantees substantial dividends, cash value, and the best death benefit.
Performax Gold is a flagship whole-life non-participating insurance plan with a minimum coverage of $25,000. While it only has a 15-pay option, the cash value and death benefits grow exponentially. Besides, the access to ash value is unchartered.
|Best performance participating policy
|Weak online customer support
|Largest Canadian Insurance Company
|Long waiting times
Equitable Life has one of the most affordable whole life insurance policies with guaranteed premiums and high cash value. However, its non-guaranteed policies also offer attractive benefits such as optimum cash value tailored for those seeking long-term financial security. The company offers two different participating policies with lucrative dividends:
Equimax Estate Builder is ideal for estate planning. You can pass your death benefit to your beneficiaries that they can use to build estates or support charitable work.
Equimax Wealth Accelerator is ideal for building your cash value at an accelerated speed. The policy is best suited for small business owners who need financial protection or require access to cash value in the early years of retirement.
|Provides competitive cash value
|Weak customer support
|Comes with add-ons, such as critical illness insurance
|Offers online access
Why Should You Buy Whole Life Insurance
Whole life insurance offers several financial benefits, such as:
- Supports a Trust to look after your minor children
- Helps in paying estate taxes
- Funds a buy-sell agreement for the seamless purchase of shares
How Does Whole Life Insurance Work
Whole life insurance is a traditional permanent coverage plan that offers lifelong coverage and cash value. However, your cash value doesn’t go to your beneficiary but is sent to the insurance company. You can use this money during your lifetime to pay off the premiums, surrender the policy, borrow money, or take a loan. A loan reduces your death benefit if you do not repay it.
For example, if you buy a policy with a death benefit of $500,000 and a monthly premium of $750, your cash value will be $172,000 after 20 years. Your beneficiary will receive a $500,000 death benefit at your demise, while a $172,000 cash value will be given to the insurance company.
If you took a loan of $50,000 against your cash value and did not pay it back, your beneficiary will receive $450,000 as the death benefit. Besides, it will also reduce the amount of cash value, which means $122,000 will be absorbed by the insurance company.
Whole life Insurance offers long-term financial security and is ideal for those looking for predictable results, including seniors. Since the premiums are fixed while cash value and death benefits are guaranteed, policyholders have set expectations of financial gains.
If you plan to buy a whole life insurance plan but yet not sure of the right policy, the best is to consult an agent. They can help you navigate different options to make an informed choice. This means your chosen policy will have premiums that match your budget and offers coverage that meets your financial planning. Thus you will get the policy that works best for you and your family!