The best of these products will also grow in the face amount of the coverage and accumulate cash value. With very few exceptions, cash values which build up inside an insurance contract do so sheltered from tax. Upon death, these tax-sheltered cash values(lets call them retained earnings or dividends), as well as the insurance coverage, are paid tax free to your beneficiary(s). These same cash values can be the source of emergency funds. The increase in value that can accumulate inside the insurance policy is governed by limitations in the Income Tax Act.

These accumulating values can have tremendous benefits for your financial well–being. It isn’t just the death benefits. Many strategies using Life Insurance can provide strategic Living Benefits. Tax and Estate Planning, Deferred Compensation, Corporate Tax Sheltering of Retained Earnings, Asset Diversification, Unlocking other Assets in Your Financial Plan for Your greater use and enjoyment, De-risking Your Retirement Income Planning are all strategies and concepts which have “living” benefits for you.

Using the above terms Whole, Universal and Term to 100 we can distinguish these products into their basic features. Below are very general descriptors that are for reference only. Each Insurance Company will provide their variations on each of these products. Whole Life has escalating cash and coverage values in which the insurance company manages all aspects of these escalating values. They will provide estimates of these future values. Insurance companies come under regulatory scrutiny for integrity and responsible asset management.

Whole Life is most frequently used to provide long term stability and value to business owners and individuals. It is the product most frequently used in sophisticated strategies involving both living and estate benefits. In many ways these products can be viewed similar to pension plans. Modern pension plans are increasingly sophisticated and global in their construction and investment management. While insurance company portfolios are generally more conservative in their investment mandate and management, like pension plans they have consistent and stable track records of declared income and asset accumulation.

Universal Life
This is a self-directed asset management product with guarantees for the insurance coverage. This shared feature typically allows for greater flexibility in premium payment by the policy holder. The insurance company will typically give you a minimum premium amount to pay for the insurance protection and give you a range of “extra” cash you can deposit into the insurance investment account. The deposited “extra” cash can be allocated across a range of investment options, provided to you by the insurance company. You can change these investments with a reasonable amount of frequency. Over time the accumulated values can earn you the ability to cease making payments and the earnings within the policy will be sufficient to pay the continuing premium required to pay for the insurance coverage.

Term to 100
Is not term insurance, but in fact permanent. You pay continuously for this coverage till your age 100. While it does not increase in value nor does it accumulate cash, it does build up value. The longer you pay the less the insurance company is funding the risk of you dyeing prematurely. Consequently, the policy will build up actuarial value. At age 100 the value of this cash and the face value of the policy will be equal.

These policies at this point are frequently cashed out. The proceeds are tax free.These policies are most frequently used in estate reconciliation strategies for either individuals or corporations where the tax bill is known a known value.