PAR Whole Life Insurance – the basics

BY ANDREW STEWART

Knowing your options should be the first plan of action when it’s time to think about and purchase life insurance. You have two basic choices; term life insurance and permanent life insurance. Both protect you and your family but where it can get tricky is understanding the different features and how you can apply them to your individual policy.

Hi, my name is Andrew and in today’s article I will be focusing on permanent life insurance, but more specifically participating whole life and the basics. PAR whole life insurance gives you more security because it’s yours for life. Once in place, you’re the only one who can cancel the contract or lose it by not paying your premiums. Whatever amount you buy it’s guaranteed and your payments won’t go up, no matter your age.  It not only provides lifelong protection, but it’s another way to grow your wealth through tax advantages and potential dividends.

First and foremost it’s life insurance. So you must apply for and be healthy enough to qualify. When you die your family, business or charity receives a tax-free payout also called a death benefit. The real exciting part about PAR whole life is that it allows you to also grow your wealth. Over time, your life insurance policy builds cash value. You can access these funds in five different ways, which you can use while you’re alive to cover any financial need like emergencies, funding children’s education, purchasing a home even paying for a wedding.

How does the policy build cash value? When you purchase participating life insurance, you share in profits of the participating account with everyone else who owns a participating whole life policy within that same insurance company. Each year, you may receive what’s called a policy owner dividend. Dividends aren’t guaranteed, but once they’re paid to your policy, they are vested and you can never lose them. With these dividends, you can buy additional coverage that earns more dividends and cash value, reduce (or even stop) premium payments, take your dividends in cash or put them in a side account that will earn interest for easy access.

Let’s talk about the participating account, it is the main engine of any participating whole life policy and having an understanding of how it works is beneficial.

1. You and other policyholders pay premiums that go into the participating account.
2. The carriers manage those premiums and earn investment returns to meet the guarantees and commitments now and in the future.
3. From the account expenses, taxes, policy owner withdrawals, loans and insurance payouts to beneficiaries are paid.
4. Interest from loans go into the account.
5. When earnings exceed what is needed you may share in these earnings and are distributed a policy owner dividend.

Okay, so you now have an understanding of the engine. How much does it cost and what are the payment options? Typically more expensive than term insurance and you have payment options to fully pay your policy in 8 years, 10 years, 20 years or lifetime.

Embrace today so you are set up for tomorrow.