Whole Life Insurance
A Whole Life policy is designed to be kept for your entire life.
Premiums are fixed for the duration of the policy's existence (your lifetime or as otherwise indicated in your contract).
Cash values grow over the length of the policy and can be withdrawn if you give up (surrender) the policy, or can be borrowed if you take out a policy loan. Cash withdrawals may be subject to taxation.
There is two type of Whole Life Insurance: : Non-Participating (Non-Par) and Participating (Par).
Participating Whole Life Insurance
Par policies are very low-maintenance for the consumer - they allow you to have an investment component and whole life insurance without requiring investment expertise. With a Participating policy, you can leave the investing up to the professionals.
Par products are the best solution for consumers looking for insurance with a tax-deferred investment without the need to manage those investments, and who are looking for a balanced investment portfolio without the annual fluctuations caused by market value changes
Non-Participating Whole Life Insurance
Non-Participating Whole Life Insurance is permanent Life insurance or "no-frills" permanent insurance.
A term to 100 policy insures the policyowner for life. Premiums are payable until age 100. The difference between Term 100 and participating whole life insurance is that the T100 policy has no cash value and does not pay dividends.
Like a regular term policy, term to 100 premiums are set for the life of the policy, but because it covers the whole of your life, the premiums are higher than regular term insurance, at least at first.
Universal Life Insurance
Universal Life policies are one type of Permanent Insurance: a policy that covers you for your entire lifetime rather that a pre-determined portion of your lifetime as in Term Life policies.
A Universal Life policy keeps the savings and insurance components completely separate. Within policy limits, you can decide how much or how little you want to pay into the policy, or even pay a single premium to fund the entire policy. You decide how your premium is invested, and can withdraw cash from your policy or borrow against it. You can adjust the premium and the face value.
Like an RRSP, a Universal Life policy allows you to accumulate interest while tax is deferred, enabling you to realize returns that may be significantly higher than those offered by traditional savings vehicles.
A Universal Life policy is both flexible and complex.
Universal life allows the purchaser to set the premium and the death benefit. As such, it lets people establish a permanent policy with a lower premium than they would have to pay under a whole life policy. Under whole life, premiums are set by the insurance company based on long-term interest rates and actuarial tables predicting the period of time over which the premiums will be paid.