If you’ve been following our content, you must know that we focus on strategies involving leveraged whole life insurance, like infinite banking or becoming your own banker in Canada. These approaches are designed especially for Canadian business owners and high-earning professionals.

These strategies work by growing cash value within a whole life insurance policy, turning it into a valuable asset. This cash value can then be leveraged to fund other investments.

People often view whole life insurance as just another expense or something that takes away from their income.

In this article, we’ll explore how life insurance can be a powerful investment tool.

We’ll focus mostly on participating in whole life insurance, though some ideas can also apply to a universal life policy.

What is participating in whole life insurance?

Whole life insurance is a kind of permanent coverage that provides a death benefit along with a cash value feature. The “participating” aspect means it grows through dividends from the insurer’s participating account. As the insurance company invests the premiums it receives, it shares the returns with participating whole-life policyholders.

These cash accounts provide a safe and reliable way to grow your savings over the long term. The funds are managed by an insurance company, which typically follows a long-term and conservative approach to investing.

The companies we partner with have consistently paid out dividends to their participating accounts for over 100 years, even through tough times like the world wars, the Great Depression, the 2008 financial crisis, and more recently during COVID.

A Fully Secure Investment

Another major advantage of these accounts is that all the money you contribute—and any growth from dividends—is instantly vested. What does that mean? Simply put, any funds added to this account are guaranteed and will never decrease in value.

Can you think of any other investment in your portfolio that guarantees your money will never lose value from the moment you invest it?

Here we have an account that’s safe, reliable, guaranteed, and backed by over 100 years of steady growth. Who wouldn’t love that?

Banks and insurance companies find this option highly appealing. In fact, they’re often willing to accept your participating whole life insurance policy as collateral for loans, sometimes covering 80%, 90%, or even up to 100% when structured properly.

Tax benefits on growth

One advantage we haven’t covered yet is the tax benefit that comes with life insurance.

In Canada, life insurance enjoys tax-exempt status, and any growth in cash value is tax-deferred. This means that when the policy pays out, the death benefit goes to your corporation or your personal beneficiaries tax-free, depending on how the policy is arranged.

The tax deferral on the cash value growth allows your money inside the policy to keep compounding without interruption. This helps it grow faster, bigger, and for a longer period compared to traditional investments that are taxed annually.

Tax deferral doesn’t mean tax-free. It just means you don’t pay taxes until you take money out. However, as mentioned earlier, banks and insurance companies are willing to lend 80%, 90%, or even 100% against these policies. So, if you ever want to access the cash value in your policy, you can take a loan against it and let the cash continue to grow tax-deferred. Then, when you pass away, the full death benefit is paid out tax-free.

By using this strategy, your money grows tax-free inside the policy, and when it’s time for the payout, the entire amount—including the growth—is passed on tax-free to your company or beneficiaries. There’s truly nothing else like it in Canada’s financial system.

You get the security of guarantees, endless compound growth, tax benefits, easy access to cash, and a lasting legacy, all in one straightforward package.

We often discuss with clients the idea of replacing the fixed-income part of their portfolio with a participating policy that has a high cash value. This way, you get the same low-risk growth and guarantees, plus all the extra benefits we’ve covered.

Adding a whole life insurance policy to your portfolio can help lower your overall risk and improve your chances of reaching your financial goals.

A retirement investment

Whole life insurance can also be a valuable tool for generating income during retirement.

The idea is to grow the cash value of your policy as much as possible, then take loans during retirement to help boost your income.

Final Word

The key thing to remember is that using a whole-life policy is a long-term strategy. This isn’t something you set up for just a year, two years, or even ten years. As the name suggests, it’s meant to last a lifetime—you’re in it for the long haul.

This isn’t an investment that will give you fast returns like stocks, bonds, or real estate. Comparing it to those types of investments misses the whole idea.

In conclusion, whole life insurance can be a great option for Canadians who want to invest with a long-term focus.

It offers guaranteed growth in cash value, tax benefits, and diversification, and can help create an income stream during retirement. Plus, it’s a powerful way to leave a legacy for your loved ones.