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What is a Participating Life Insurance Policy in Canada? Guide in 2025

Participating Life Insurance in Canada: A Unique Blend of Guarantees and Upside Potential
Participating Life Insurance in Canada: A Unique Blend of Guarantees and Upside Potential

Participating life insurance is a unique form of permanent life insurance that provides Canadians with lifelong coverage, tax-advantaged cash value growth, and the potential for dividends.

While not as widely used as a term or universal life, participating policies offer a distinctive blend of rock-solid guarantees and upside potential.

In this guide, we’ll explore everything you need to know about participating life insurance in Canada.

What is Participating Life Insurance?

What is Participating Life Insurance and How Does It Work
What is Participating Life Insurance and How Does It Work

Participating life insurance, often referred to as par life insurance, is a type of whole life insurance that gives policyholders the ability to share in the financial success of the life insurance company through annual dividends.

It combines guaranteed lifelong coverage with a savings component that can grow on a tax-deferred basis. Additionally, based on the performance of the participating account, policyholders may receive dividend payments that allow them to recoup part of their premiums or purchase extra coverage.

While not as widely used as term or universal life insurance, participating policies make up a notable segment of the Canadian life insurance marketplace. The largest providers for this type of life insurance policy in Canada include Sun Life, Canada Life, Empire Life, Equitable Life, and Foresters Financial.

At its core, a participating life insurance policy combines guaranteed whole life insurance with dividends that offer policyholders potential upside based on the insurer’s financial performance.

Full review: What is Life Insurance?

How Does Participating Life Insurance Work?

The mechanics of participating life insurance involve guarantees similar to traditional whole life, along with the possibility of dividends. Here’s an overview of how it works:

  • Premium Payments – As with most permanent life insurance, participating policies require regular premium payments to maintain coverage. A portion of each premium is directed to the insurance company’s “participating account.” The remainder covers the cost of insurance and company expenses. Premiums are guaranteed to remain level once the policy is issued.
  • Lifelong Guaranteed Coverage – One of the key benefits of participating life insurance is lifelong guaranteed coverage. This means the death benefit and guarantees associated with the policy will remain in place for the insured’s entire lifetime, provided premiums continue to be paid.
  • Cash Value Accumulation – Participating life insurance policies have a cash value component that resembles permanent coverage like whole life insurance. A portion of the premiums paid are allocated to a cash value account that accumulates on a tax-deferred basis.
  • Possibility of Dividends – What makes participating life insurance unique is the prospect of earning annual dividends based on the performance of the participating account. While dividends provide an “upside” for policyholders, they are NOT guaranteed.
  • Dividend Options – Assuming dividends are paid, policyholders have choices in how they utilize the funds, such as taking them as cash payments or using them to purchase additional coverage.

How Much Does Participating Life Insurance Cost in Canada?

Participating life insurance policies in Canada typically include whole life insurance plans with higher premiums than term life insurance. This accounts for the lifelong coverage and cash value accumulation of participating policies. On average, participating whole life insurance costs more than other permanent insurance options like universal life.

According to data from Sun Life Financial’s 2021 report, here are some average monthly costs for a $250,000 participating whole life policy for healthy 30-year-old and 40-year-old males and females:

Age and GenderMonthly Premium
Male age 30$262
Female age 30$230
Male age 40$375
Female age 40$343

The dividends from participating policies can help offset premium costs over time as the cash value grows. However, premiums are generally higher than non-participating whole life insurance initially.

Why Buy Participating Life Insurance?

Participating life insurance policies offer a suite of attractive benefits that make them worth considering:

  • Lifelong Death Benefit Protection – Guaranteed coverage for your entire life ensures your loved ones will be taken care of.
  • Tax-Deferred Cash Value Growth – The cash value portion can grow on a tax-sheltered basis and be accessed tax-free through policy loans.
  • No Medical Underwriting After Issue – Your premiums and coverage are locked in regardless of future health changes.
  • Dividends Can Reduce Costs – If dividends are paid, you can use them to lower your out-of-pocket premium payments.
  • Increase Your Death Benefit – Dividends enable you to purchase additional paid-up life insurance and raise your total death benefit amount.
  • Offset Inflation – Rising death benefits due to dividends provide protection against inflation, diminishing the policy’s real value.
  • Customizable Options – Ability to take dividends as cash, apply them to premiums, or utilize them to increase coverage.

Who is Participating Life Insurance Best Suited For?

Who is Participating Life Insurance Best Suited For . What Are the Main Participating Life Insurance Products in Canada
life buzz quote in canada new 8 1
What Are the Main Participating Life Insurance Products in Canada

While not right for everyone, participating life insurance can be an excellent fit for certain individuals and situations:

  • Long-term Savers – The tax-deferred cash value growth and potential for dividends can allow participating policies to accumulate substantial savings over decades.
  • Young, Healthy Buyers – Purchasing at a younger age results in lower premiums compared to waiting until later in life. It also provides the maximum timeframe to accumulate dividends and cash value.
  • Business Owners – The death benefit, dividends, and cash value of a participating life insurance policy can assist with business succession planning while also providing living benefits if accessed.
  • Estate Planning – The guaranteed death benefit, along with the upside of dividends, can facilitate wealth transfer goals by providing income tax-free funds to beneficiaries.
  • Parents/Grandparents – Participating policies allow access to dividends and cash value in the future to help with major expenses like weddings, education, real estate, etc.
  • Inflation Protection – Rising death benefit amounts due to dividends help shield beneficiaries against inflation eroding the real value of the payout over decades.
  • Charitable Giving – By utilizing dividends to increase the death benefit, larger charitable donations funded by the death benefit proceeds can be facilitated.

What Are the Main Participating Life Insurance Products in Canada?

While not as diverse as universal life contracts, insurers do offer a range of participating life insurance products to choose from. Here is an overview of some of the notable par life policies in Canada:

Sun Life Par Products

  • Sun Par Protector II – Strong long-term cash value growth and dividends make this affordable whole life par policy ideal for young families.
  • Sun Par Accumulator II – Faster initial cash value build-up compared to the Protector II makes this a fit for business owners and older individuals.
  • Sun Par Accelerator – Unique 8-year pay participating policy with rapid cash value accumulation upfront before shifting to dividends and growth in later years.

Full review: Sun Life Insurance Canada

Canada Life Par Products

  • Canada Life Par Whole Life – Traditional par whole life with level premiums for life and dividend potential.
  • Canada Life Par 20 Pay – Pay premiums for 20 years with the potential for dividends thereafter.
  • Canada Life Par 15 Pay – Similar to 20 Pay but with a shorter premium payment period.

Full review: Canada Life Insurance Company

Empire Life Participating Products

Empire Life offers two main par life products which are Optimax Wealth® and EstateMax®.

Optimax Wealth provides early cash values, cost-effective life insurance protection, and tax-deferred savings accumulation, while EstateMax is designed for estate planning needs with a focus on long-term cash values.

Key features of Empire Life’s participating products:

  • Multiple guaranteed premium payment options – 8-Pay, 10-Pay, 20-Pay or Life Pay
  • Five dividend options, including cash, reduced premiums, paid-up additions, loan repayment, and deposit for savings
  • Lifetime insurance coverage with guaranteed minimum amounts
  • Add-on critical illness and disability riders available
  • Dividends and cash value growth over time
  • Tax-advantaged savings and income

Empire Life has a long history and a strong reputation for paying dividends to participating policyholders. Their participating products offer guaranteed coverage plus the potential for dividends and growth over time.

Full review: Empire Life Insurance

Foresters Advantage Plus Participating Whole Life

Foresters Advantage Plus is a flexible par whole life insurance policy offered by Foresters Financial in Canada. It provides lifetime protection along with the opportunity for tax-advantaged cash value growth through annual dividends. Policyowners can choose premium payment periods of 10 years, 20 years, or for the lifetime of the insured. The death benefit, cash values, and premiums are guaranteed for the life of the policy.

Advantage Plus is eligible for annual dividends based on Foresters’ financial performance. Dividends can be taken as cash, used to purchase paid-up additional insurance, left on deposit to earn interest, or used to reduce premiums.

The policy also includes standard features like the Charity Benefit to donate to a charity when the death benefit is paid, the Children’s Insurance Benefit for term coverage on kids, and the Quit Smoking Incentive for discounted premiums. Additional customization is available through optional riders like Waiver of Premium, Accidental Death, and Guaranteed Insurability.

Overall, Foresters Advantage Plus aims to meet long-term protection needs while offering dividends, cash value growth, and flexibility.

Full review: Foresters Financial Life Insurance Canada Review

Equitable Equimax Participating Whole Life

  • Offers lifetime protection with potential earnings through dividends
  • Two plans – Equimax Estate Builder® and Equimax Wealth Accumulator®
  • Premium payment periods of 10 years, 20 years, or lifetime
  • Guaranteed cash values, premiums, and death benefit
  • Eligible for non-guaranteed dividends based on company performance
  • Dividends can be taken as cash, used to buy paid-up additions, or reduce premiums
  • Customize with riders like Critical Illness, Waiver of Premium, etc.
  • Can be used for estate planning, final expenses, income supplement
  • Tax-advantaged way to build cash value that can be accessed through loans
  • Equimax aims to provide lifetime protection plus potential growth through dividends
  • From one of Canada’s oldest and most established mutual life insurance companies

In summary, Equimax is Equitable Life’s flexible participating whole life insurance product that offers both guaranteed values and dividend potential for cash growth over time. It can meet various needs like final expenses, estate planning, and supplemental retirement income.

Full review: Equitable Life Insurance of Canada

There are some similarities across products, like lifetime coverage and dividend potential. However, nuances like premium payment terms, cash value accumulation, and dividend cycles should be reviewed with an advisor when selecting a policy.

Full review: 20 Largest Life Insurance Companies in Canada

What are the Pros and Cons of Participating Life Insurance?

Like all insurance products, participating life insurance has both advantages and potential limitations to weigh:

Pros of Participating life insurance

  • Lifelong guaranteed death benefit
  • Potential for dividends
  • Tax-deferred cash value growth
  • Dividends can reduce out-of-pocket premiums
  • Dividends can increase total coverage
  • Death benefit and cash value not impacted by health changes
  • Premiums will never increase
  • Conservative assets backing contracts

Cons of Participating life insurance

  • Dividends are not guaranteed
  • Premiums higher than term life insurance
  • Less payment flexibility than universal life insurance
  • Require lifelong premium commitment
  • Less control over investments than universal life
  • Less customization than universal life

For many, the trade-off of higher premiums for ironclad guarantees on both coverage and cost can be very appealing.

Participating life insurance occupies an intriguing middle ground between very affordable term insurance and adjustable universal life insurance.

How Can I Buy Participating Life Insurance in Canada?

How To Buy Participating Life Insurance in Canada . Should I Consider Participating Life Insurance
How To Buy Participating Life Insurance in Canada

If you determine participating life insurance aligns with your financial plans and needs, here are some tips as you evaluate policies:

  • Compare Quotes – Work with an experienced independent broker to shop rates from a wide range of insurers. Even small premium differences can really add up in the long term.
  • Look for Discounts – Ask your broker what discounts might be available through employer or association relationships to reduce your costs.
  • Review Annually – Conduct annual reviews with your advisor to see if dividends or cash value strategies can optimize the policy as your needs shift.
  • Select a Stable Mutual Insurer – Opt for large, financially sound mutual life companies with a long track record of participating policy dividend payments.
  • Prioritize Early Purchase – Buying earlier means lower premiums and maximizing the growth and dividend earning horizon.
  • Discuss Risks – Review risks related to dividends not being guaranteed and tax implications of loans/withdrawals.
  • Customize Design – Work with an advisor to structure the right product, premium term length, face amount, riders, etc. tailored to your goals.

Full review: Life Insurance Rates By Age Chart in Canada

Should I Consider Participating Life Insurance?

Determining if participating life insurance is the right product depends on your specific situation and priorities. While not a fit for everyone, par life insurance can provide compelling benefits like:

  • Lifetime guarantees
  • Conservative long-term savings potential through the cash value
  • Possible upside from dividends

If you prioritize being able to customize your investments, universal life insurance may be preferable. Those focused solely on guaranteed lifetime protection at the lowest cost may opt for guaranteed level term insurance.

But for many Canadians who highly value the stability and safety of whole life insurance yet also want the possibility of enhancing their policy’s benefits through dividends, participating life insurance can warrant strong consideration.

Participating vs Non-Participating Life Insurance Policies

Participating and non-participating life insurance policies differ in key ways regarding dividends, premium costs, benefits, and ownership.

Participating PoliciesNon-Participating Policies
Dividends: Policyholders receive dividends, which are a share of the insurer’s profits. The dividend amount varies annually based on the insurer’s financial performance. No Dividends: There is no profit-sharing, so no dividends are paid out.
Policyholder Benefits: Dividends can be used to reduce premiums, purchase additional coverage, take cash payouts, or accumulate interest. Fixed Benefits: The death benefit and cash value (if applicable) are fixed at policy outset, making coverage details clear.
Cost: Premiums are higher to account for potential dividends. Guaranteed Payout: The death benefit and cash value are guaranteed without dividend uncertainty.
Ownership: Policyholders become partial insurers through profit-sharing. Cost: Premiums are typically lower than participating policies since there are no dividends.
Long-Term Growth: Dividend accumulation over time may offer better long-term growth potential. Simplicity: These policies are straightforward to manage without dividends.

The Bottom Line

In summary, participating life insurance occupies a unique middle ground between the affordability of term insurance and the flexibility of universal life insurance. It blends the guarantees of whole life with adjustable benefits.

While not the right fit for all, participating life insurance stands out with its assurance of lifetime protection, potential for upside through dividends, and strong long-term savings capacity through tax-advantaged cash value growth.

Canadians focused on both security for loved ones and saving for the future should take time to explore participating life insurance and whether it aligns with their financial planning needs and risk profile. With both lifelong guarantees and upside potential, participating policies truly offer the best of both worlds.

Looking for the latest news and tips on life insurance in Canada? Visit Lifebuzz.ca, Canada’s #1 life insurance newspaper and knowledge hub. Get informed with our up-to-date articles, guides, and insights from industry experts. Learn which life insurance solutions may be right for you and your family.

Frequently Asked Questions About Participating Life Insurance in Canada

How does participating life insurance work in Canada?

Participating life insurance provides lifelong guaranteed coverage along with a cash value account that grows tax-deferred. It also gives policyholders the chance to earn dividends based on the profits of the insurer's participating account. Dividends can be used to purchase extra coverage, reduce premiums, take as cash, or more.

What are the benefits of participating life insurance policies?

Key benefits include lifelong death benefit protection, tax-deferred cash value growth, the possibility of dividends to enhance the policy, level premiums, no medical underwriting after issue, and the ability to access cash value through loans and withdrawals if needed.

Where can I buy participating life insurance in Canada?

Major providers offering participating life insurance include Sun Life, Canada Life, Empire Life, Equitable Life, and Foresters Financial. Independent insurance brokers like IDC Insurance Direct Canada can also provide quotes for par policies from multiple insurers.

Why are participating life insurance premiums higher?

Premiums are higher than term insurance because par policies provide permanent lifetime coverage along with guarantees like level premiums, cash value growth, and dividends (dividends not guaranteed). The trade-off is higher premiums for more guarantees.

When should I buy participating life insurance?

It's often best to purchase participating life insurance when young and healthy, as premiums will be lower and you'll benefit from dividends and cash value growth over a longer timeframe. However, par policies can make sense at any age.

Do participating life insurance dividends get taxed?

Dividends used to purchase additional coverage (paid-up additions) within the policy are not taxable. However, dividends taken as cash withdrawals may be taxed as investment income.

Can participating policies be purchased for estate planning?

Yes, the lifelong guarantees and potential for dividends can make participating life insurance helpful for estate planning needs like wealth transfer, covering taxes and expenses, and leaving an inheritance.

Is it smart to pay premiums over a shorter term?

Options like 20 Pay or 15 Pay participating life may cost more, but allow stopping premiums sooner while maintaining coverage. This can make sense based on cash flow preferences.

How do I choose the best participating life insurance company?

Look for an established mutual insurer or provider with a long track record of financial strength and paying out dividends on their participating policies. Companies like Sun Life, Canada Life, and Empire Life are examples.

What are the cons of participating life insurance I should know?

Downsides include no investment customization, less payment flexibility, higher cost than term insurance, premiums required for life, dividends aren't guaranteed, and some liquidity constraints on cash value.

Article Sources

Lifebuzz.ca upholds rigorous standards of accuracy, transparency, and independence in all of our reporting, as outlined in our Editorial Policy. We are proud to be Canada’s most trusted source for unbiased life insurance news and insights.

  1. Participating Whole Life Insurance – equitable.ca
  2. What Is a Participating Policy? – investopedia.com
  3. Empire Life participating insurance products – empire.ca
  4. Advantage Plus whole life insurance – foresters.com

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Written by Ben Nguyen

Ben Nguyen is an award-winning insurance expert and industry veteran with over 20 years of experience. He is the chairman and director of IDC Insurance Direct Canada Inc., one of Canada's leading online insurance brokerages.

Ben is renowned for his extensive knowledge of life, health, disability, and travel insurance products. He is the prolific author of over 1,000 educational articles published on LifeBuzz, BestInsuranceOnline, and InsuranceDirectCanada. His articles provide Canadians with advice on making smart insurance decisions.

With a Bachelor's degree in Actuarial Science and a Fellow of the Canadian Institute of Actuaries (FCIA) designation, Ben is frequently interviewed by media as an insurance industry spokesperson.

He has received numerous honors including the Insurance Council of Canada’s Pivotal Leadership Award, the Canadian Insurance Hall of Fame induction, and the President’s Medal from the Canadian Institute of Actuaries.

Ben continues to shape the vision and strategy of IDC Insurance Direct as chairman. He is dedicated to advancing the insurance industry through his insightful leadership.

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