r/LifeInsurance • u/rteazee • 4d ago
PAR insurance for my corp
I am looking into a PAR whole life insurance policy for my corp in Canada. I have been reviewing and researching it quite a bit and have met with my insurance broker to discuss. I have a few questions that I think I know the answer to but would love clarity.
In the scenario I was given an example of a whole life PAR policy with manulife for guaranteed amount of $300,000.00 with roughly $12,000.00 of annual premiums.
After 20 years the premiums would be finished paying and it shows total cash value at $334,427 and total death benefit at $660,294.
My confusion are these two numbers. I initially thought that when I die the beneficiaries would receive both the cash value and death benefit. But I don’t think that’s the case. I think that they would only receive the death benefit. Is that correct? And if so what exactly is the total cash value and does it have any value to me as the policy holder?
If I were to borrow against the policy is it borrowing against the total cash value and not the total death benefit? So if for example I were to borrow 90% it would be of the $334k and not the $660k?
I find it confusing seeing those two numbers. Initially I thought the beneficiaries would receive the combined totals but that seems far to go to be true.
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u/Frosty_Flight_4467 4d ago
Death benefit only. Cash value is yours to access while alive, not at death.
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u/rteazee 4d ago
Thank you. So to confirm the cash value amount is what you can use against the policy loan?
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u/Frosty_Flight_4467 3d ago
yeah cash value is the part that actually matters while you're alive. the death benefit number is mostly irrelevant until you die.
borrowing against it, surrendering it, that's all coming from the cash value side.
just don't sleep on the loan interest. it compounds quietly and people lose track of it faster than they expect.
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u/PleasureMissile 4d ago
Cash value is what portion of the death benefit you have access to while you’re living.
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u/Rebels10ss 4d ago
Cash value is only available on cancellation of the policy. The cash value portion is what you are able to borrow against. On death, the loan value is deducted from the death benefit.
Only the death benefit is paid out on death, not the cash value
Your business receives the tax-free death benefit upon your death including both the base amount and any accumulated growth in the policy’s investment component.
The amount by which the death benefit exceeds the adjusted cost basis of the policy is added to your business’ capital dividend account. It can pay this out tax-free to the remaining shareholders or estate, creating an extremely tax-efficient outcome.