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Participating Whole Life Insurance as an Asset Class
Balancing to Reduce Risk
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Jake Jun Qiao, Certified Financial Planner (CFP), Chartered Life Underwriter (CLU), Member of Million Dollar Round Table (MDRT). Please contact me for any financial planning inquires.

 

Position: Home - Life Insurance - Whole Life Insurance - Participating
Balancing to Reduce Risk

Would you consider life insurance and its cash value to be an important contributor to your net worth?

You look for assets with stable growth and risk management components and know how different assets, with their unique characteristics and features, have a place in your financial planning. Understanding how different asset classes can be used to your advantage can be a big benefit when creating your financial plan.

Participating life insurance – a unique asset class
 
Participating life insurance is a unique asset class because of its immediate estate enhancement, cash value growth and life insurance benefit growth. This combination of benefits is a mix that is only offered with permanent life insurance and can help you meet your financial goals.
 
Guaranteed cash value that won’t go down: Unlike assets that may be exposed to market volatility, once credited to the policy, the cash value (including policyowner dividends) is fully vested. Accumulated values are fully protected from down-side market risk.
 

Tax advantages:

While cash value is growing inside your policy, you’re not subject to tax on this growth (within legislative limits). And, your life insurance benefit passes tax free to your named beneficiary.
 

Flexibility:

Whether your goal is estate preservation or having access to your policy’s cash value for retirement or other future needs, you have flexibility to help accomplish your personal financial goals.
 

Professionally managed:

The participating account assets are managed by insurance companies investment division. This is the experienced group of professionals who manages assets.
 
The assets of the participating account are broadly diversified and the account is generally managed as a fixed-income account. There are specific teams of experts responsible for managing each asset class within the account’s portfolio.
 
Asset quality is very important and participating account assets include high-quality investments such as: publicly traded government and corporate bonds, residential and commercial mortgages, corporate lending (private placements), real estate, equity-related investments, short-term investments and policy loans.
 

Low investment expenses

 
Our participating account benefits from the synergies of overall asset management. This scale allows you, as a policyowner, to benefit from professional asset management expertise at a low expense ratio.
 

Strong, stable performance achieved with lower risk

 
Even during times of economic change, the participating account’s dividend scale interest rate has been relatively stable
 
The investment returns associated with the participating account are reflected in the dividend scale through the dividend scale interest rate. The dividend scale interest rate is the rate used to calculate the investment component of participating policyowner dividends that are credited to your participating life insurance policy.
 
• The longer-term focus for participating account investments helps stabilize the dividend scale interest rate.
• The participating account dividend scale interest rate reflects a 30-year average return of 9.7 per cent for the period from 1982 to 2011.
• 30-year average standard deviation (since 1982) of 1.7 per cent for the dividend scale interest rate.
• In this snapshot, you can see the 30-year average return of the participating account dividend scale interest rate provides comparably strong returns to those of other financial instruments and indexes – and it does it with less risk.
 
The dividend scale interest rate is only one factor that contributes to an individual policy’s performance. The actual cash value growth
in any policy varies based on a number of factors such as type of product, product features, premium-paying period, issue age, rating,
dividend option, the policyowner dividend scale and others. See details available on the next page on how you participate as an individual policyowner.
 

Participating account investment strategy

 
• investment strategy helps stabilize the variation in the investment returns used to determine policyowner dividends.
• This dividend scale interest rate is the interest rate used in determining the investment component of the dividend scale. This rate incorporates the smoothed investment experience of assets backing participating account liabilities for the most recent 12-month period.  It also includes smoothed gains and losses from prior periods, and other factors.
 
How you participate
 
Your premiums, along with premiums from all other participating life insurance policyowners, go into the participating account. In
determining guaranteed premiums, cash values and death benefit, The insurance company uses long-term assumptions for investment returns, mortality, expenses, lapses, taxes and other factors.
 
When actual and expected future results in the participating account are collectively more favourable than the assumptions
supporting guaranteed values, retained earnings are generated in the participating account.
 
Each year, insurance companies may distribute a portion of the earnings of the participating account as participating policyowner dividends.
 

Performance

 
• Long-term investment strategy – together with its strategy of smoothing the returns for the purpose of determining the dividend scale interest rate – helps reduce the impact of short-term volatility on the investment component of participating life insurance dividends.
• The 10, 20 and 30-year average annual dividend scale interest rates to the end of 2011 were 7.8, 8.8 and 9.7 per cent respectively. The 30-year standard deviation, since 1982, for the dividend scale interest rate was 1.7 per cent.
 
 Simply dial 416-835-8805 for details.
 
 
 
 
 
 
 
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