Whole Life Insurance - A whole 'new' Investment Class

The recent (and not so recent) developments in investment markets, and the volatile performance that has resulted, have brought about a new appeal to an old workhorse. For investors looking for a diversification in their investment portfolio and a more tax efficient fixed income investment alternative, a compelling argument can be made for the use of Participating Whole Life Insurance.

Why is whole life insurance a good "investment"?

Firstly, it really isn't an "investment" vehicle. It is a "Savings" vehicle. Savings means that the money will be there when needed and it is not subject to the risk of loss - the capital is preserved and is guaranteed to grow.
This tax-advantaged steady growth, combined with significant estate benefits, are the primary reasons why participating whole life is now being thought of as a "new" investment class. The fact is: whole life insurance has been in Canada since 1847 and has paid dividends to policyholders since 1848 - never missing a year!
Unlike other accumulation policies such as most Universal Life policies, mutual funds and other equity investments, the cash and dividend value of a Whole Life policy cannot decrease as long as premium payments are made.

Who should consider whole life insurance as an investment Alternative?

Anyone looking for safe, stable, predictable, guaranteed and liquid returns on their investment portfolio.
The liquidity cannot be overstated. Most investments must be held and maintained for the growth to materialize over time. They are locked up in prison - hoping for the day they will pay off. Par Whole Life Insurance offers complete liquidity, without penalty, AND your cash value continues to grow as though it wasn't touched. That's because it was not withdrawn, but used as collateral - leveraged using the Insurance Companies pool of cash.
For those that have corporations and are accumulating surplus, the use of Whole Life in the corporation not only provides the same stable, tax deferred returns, but also provides opportunities for Capital Dividend Account planning.

What is whole life insurance? - A Short Review

It is permanent life insurance protection - meaning it won't expire before you do!
It has level guaranteed premiums for the life of the policy.
It has tax advantaged, guaranteed, cash value growth that cannot go down.
It can pay annual dividends (not guaranteed, but have never been missed).
Dividends can be taken in a number of different ways, but the option most often selected to provide the maximum tax advantaged growth is "paid-up additions". Paid-up additions allow the death benefit, and in turn, the cash value to compound - as they also earn dividends. This provides tax-free growth.
The assets of the participating pool are professionally managed and largely in fixed income investments. Management fees are extremely low (some as low as 0.07% management fee) and the funds have very little volatility.
This combination of guaranteed cash value and the non-guaranteed portion from the dividend account, grows tax deferred - potentially tax-free. At death it is paid to the beneficiary 100% tax-free.
Since the death benefit of a life insurance policy is received tax-free by the beneficiary this strategy results in a permanent tax shelter.
In other words, there is an increase in the funds available to heirs and beneficiaries after death and a decrease in the taxes payable before death - a win-win!

Can I access the cash value of the policy?

During the lifetime of the insured, the cash values can be accessed by way of partial or total surrender, or policy loan.
Income tax may be payable on withdrawals. However, one alternative to avoid paying income tax is to use the policy as collateral and borrow from a third party lender. And if structured properly, the interest on the loan may be tax deductible.

Favorably compares to a long term, high yield bond.

Today most portfolio managers recommend that a prudent investor have a diversified portfolio with a significant portion in fixed income investments, such as bonds, term deposits, etc.
Many investment managers suggest one third to 40% of an investment portfolio be in these types of investments for balanced growth.
My question... Why is this the standard advice if the equity markets are so great? Why are we exposing so much of our hard earned money to such risk?
Nevertheless, if you want safe, stable, secure, guaranteed growth, combined with tax efficiency - have a close look at Par Whole Life Insurance.

Including participating whole life in your portfolio can produce some significant results, and reduce overall volatility.

Whether investing as an individual or via a corporation, the significant results that can be achieved by using
Participating Dividend Paying Whole Life Insurance are well worth investigating.

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