It’s not just lifelong protection. It’s a versatile way to help support your business and create new opportunities.
It’s lifelong coverage that provides a tax-free payment to your company if you, your business partner or key employees die.
But it’s more than just insurance protection. Your policy is guaranteed to grow in cash value as long as you pay your premiums. Cash value is the value of the insurance policy that your business can access as cash. Your insurance payout is reduced when you access your cash value.
Your payments are pooled in a separate account called the participating account with other policyowners. We professionally manage those funds and you may get a dividend.
- Pay your premiums and your policy’s cash value grows tax-free, within limits.
- Your payments go into the participating account that is professionally managed.
- That money is used to pay for expenses, taxes, insurance claims and other items.
- Your business may receive dividends based on the participating account’s performance.
- Your business can take your dividend as cash, buy more insurance or pay for your existing coverage.
- Your business receives a tax-free payment when you die.
Withdraw cash value
- Your business can withdraw some or all the cash value of your policy, adjusted for any loans or fees.
- Withdrawals reduce your coverage and may be taxable.
- If the corporation withdraws all the cash value, the policy ends.
Borrow from the policy
- Borrow from your cash value and pay it back, with interest, over time.
- This option is available if the cash value is large enough and isn’t securing another loan.
- Potentially tax-free loan, which doesn’t reduce your coverage.
- If the loan isn’t repaid, the balance, including interest, is deducted from the amount paid out at death.
Use it as collateral for a loan
- The corporation may borrow from banks or other third-party lenders (movable hypothec in Quebec) against the policy’s cash value.
- The corporation doesn’t pay taxes, but a shareholder might.
- The corporation pays interest to the lender.
- A collateral loan doesn’t reduce your coverage and capital dividend account credit.
- If the loan isn’t repaid, the balance, including interest, is deducted from the amount paid out at death.
If the participating account performs better than expected, we may distribute dividends from these earnings. You can use dividends in one of several ways:
- Increase your coverage, which may increase the policy’s cash value
- Decrease or stop your payments
- Take your dividends as cash
Participating life insurance can be more expensive than term and universal life insurance because of the policy’s guarantees.
There are several variables that determine the cost of your policy. Here are a few of the main factors:
Universal and participating life insurance are the 2 forms of permanent protection for your business. Here’s how they compare:
|
Participating life insurance |
Common features |
Universal life insurance |
|---|---|---|
|
Guaranteed money grows inside your business’ policy |
Lifetime insurance coverage |
Manage your risk profile and choose investment options |
|
Conservative asset management |
Guaranteed premium options |
Cost effective |
|
Policyowner dividends
|
Guaranteed payout |
Payment flexibility |