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Q&A with Sarah and Cyndy: Protection and Diversification –Whole Life Insurance

Where can you find an asset that provides both protection and diversification for your retirement plan? Something that will provide a lifetime of protection? Consider Whole Life Insurance.

Normally, we think of life insurance for our short- and medium-term needs. We use personal life insurance to cover our liabilities and provide income replacement for our family if we pass away unexpectedly. In business, we use key person coverage to protect our revenue generators and share buyout coverage for our business partners. To provide even stronger foundations, we pair life insurance with living benefits such as Disability Insurance and Critical Illness Insurance to protect ourselves in case of serious injury or disease that has major impact on our lives or our ability to work. Remember that term insurance is temporary in nature, and when the policy renews, the premiums can become exorbitant, and many people cancel the policies at renewal.

What is Whole Life Insurance?

Whole Life Insurance provides protection for life and is permanent. It covers the short and medium term needs above, as well as your long-term needs such as tax coverage, estate equalization, funeral costs and more. The insurance company will pay the death benefit regardless of when you pass away. The death benefit can be paid directly to your named beneficiaries which provides you a level of privacy in your wishes and allows the death benefit to by-pass probate.

Whole Life Insurance Policies create asset diversification within your investment portfolio. A policy has an immediate estate enhancement value (death benefit) and grows a cash surrender value over time.

How does the death benefit grow? When premiums are deposited, the insurance companies pool the life insurance premiums into a large investment account. Premiums go in, investment income grows the account and death claims come out over time. Each year, if the investment returns are higher than expected and the mortality is lower than expected, a dividend is distributed to all the policy holders. Most policies are structured so that the dividend is used to purchase additional permanent life insurance – in this way your death benefit and cash values grows over time.

The cash value provides asset diversification for your retirement. The cash value can be leveraged as a tax efficient source of income for retirement. It can pair nicely with the RRSP, pension, TFSA, rental properties, business dividends and other sources of income you have built up for retirement.

Protection and asset diversification are two of the many positive attributes of Whole Life Insurance. So, why doesn’t everyone have Whole Life Insurance? The simple answer is that Whole Life Insurance is typically more expensive, is a long-term investment and premiums are much higher than term insurance. Take the time to review your insurance needs and strategies with a trusted insurance advisor. Often a combination of term and whole life insurance will allow you to achieve both your short-term and long-term goals. Review your plan regularly, as your insurance needs will change over time.

Sarah Chisholm.

Financial Advisor

Assante Capital Management Ltd.

Sarah Chisholm is a Financial Advisor with Assante Capital Management Ltd. Please contact her at (613) 774 - 2456 or visit to discuss your particular circumstances prior to acting on the information above.

The opinions expressed are those of the author and not necessarily those of Assante Capital Management Ltd.

Insurance products and services are provided through Assante Estate and Insurance Services Inc.

Assante Capital Management Ltd. is a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada.

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