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What if life insurance wasn’t just about providing for loved ones after death? What if getting coverage came with associated benefits a policyowner could access throughout their lifetime? That’s the aim of participating life insurance from Canada Life™.
Participating life insurance, also called “par”, is a type of whole life insurance policy that offers a guaranteed payout and cash value, as well as the opportunity to participate in the experience of the par account through dividends. It’s another way clients can help build their wealth through tax-advantaged policy growth and potential dividends. On top of that, accumulated cash value within the policy can be withdrawn and used for anything from business opportunities to an emergency fund.
With par’s features and flexibility, advisors find that it helps meet the needs of a variety of different client segments, including business owners.
“This is a great product for business owners because it can provide a sense of security on a few different fronts,” says Andrea Frossard, senior vice-president of Par Insurance Solutions for Canada Life.
A key person protection strategy works well with Canada Life’s par products. The insurance payout, or death benefit, is guaranteed, meaning it will never decrease as long as premiums are paid. The payout can be used to help buy a partner’s shares or vice versa when someone dies.
“Participating life insurance for business owners provides lifelong coverage, which includes a tax-free payout to your company if you or your business partner dies,” Ms. Frossard says. “The money can help keep the business going, help a business partner pay off debts or can be used to reinvest in the business.”
But par goes beyond the death benefit side of the insurance policy. In business, as in life, there are often unforeseen financial surprises. If the funds aren’t there to handle those kinds of hiccups, it could mean financial trouble for any business. That’s where the cash value that builds over time in a par policy can come in and help a business owner.
“Par has guaranteed cash value built into the policy, as long as the premiums are paid,” Ms. Frossard says. “This accumulated cash value can be used while alive. And for business owners, this kind of emergency fund could be invaluable.”
How can business owners take advantage of accumulated cash value that builds in their policy?
“One option is to withdraw accumulated cash value in their par policy. They may be able to do this as early as the policy’s first anniversary, for whatever reason they want,” says Ms. Frossard.
That’s a welcome cushion to pay for life’s little – and big – surprises. Clients should be aware, though, that withdrawals may reduce the overall coverage within the policy and could be subject to taxes.
“Policyholders can also borrow with interest against the accumulated cash value of their policy to use on anything from an emergency fund or an unforeseen opportunity,” Ms. Frossard says. “In contrast to cash value withdrawals, the benefit of this option is that it lets the cash value in the policy keep growing, as if it were untouched. If the loan isn’t repaid, the payout is reduced by the amount of the loan with interest.”
As another alternative, the accumulated cash value can be used as collateral for a third-party loan from a bank or other financial lender. “Interest charges may apply to any loan taken, but, depending on the lender, a collateral loan might come with a lower interest rate and interest may be tax deductible,” Ms. Frossard says.
One feature of par that business owners may also find appealing is the ability to make additional premium payments. That helps build up the policy’s death benefit and cash value faster than with standard par policy payments. “Again, business owners can think of this as accessible cash they can use in case of an emergency,” says Ms. Frossard.
If business owners find they don’t need to tap into the accumulated cash value during the life of their policy, they still have the assurance of knowing that the life insurance protection is there in the event of their death.
Whatever a business owner’s personal and business goals, participating life insurance is a powerful product in an advisor’s toolbox – one that’s built for the future, but also here for today.
Canada Life is a trademark of The Canada Life Assurance Company.
Advertising feature produced by Globe Content Studio. The Globe’s editorial department was not involved.