Participating Policy

Participating Policy

A life insurance policy under which the company agrees to distribute to policyowners the part of its surplus that its Board of Directors determines is not needed at the end of the business year. How do you profit of your life insurance policy depends the use you make of your parts.
The most common options are the following:

Increased Insured Capital You can use the annual shareholdings as dividend to increase your capital at no costs. This option, the most common, is called released insurance subsidy. It also increases the value of future redemption. Shareholdings can also be used to purchase a Life Insurance for one year. Additional Protection: You can get an additional protection by combining predetermined paid-up insurance amount option to purchase an insurance for one year. Your shares, which increase over time can be used to replace term life insurance by released insurance so the extra protection becomes permanent. It is a good way to get whole life insurance at reduced cost. Reduced premiums Your shares of participating life insurance can be use to reduce your annual premiums payment. Payment in cash You can, of course, cash out your participating shares. Left in File You can also leave your shares in filing. The insurer will pay interest or placed in a growth fund, as separate shares. In the second event, the return is not guaranteed. The shares left in file may be withdrawn at any time. When you die, unlike the surrender value, the share value is part of the payable insured sum to your beneficiary or succession. Notice that the interest earned on investments left in deposit is subject to income tax. Self Financing Contract This formula uses both concepts of premiums reduction and bonus paid-up insurance. Typically, after bonuses were paid for a number of years (between 10 and 15 years, for example), the futures stakes are used to pay portion of the premium. Remember shares of participating life insurance are not guaranteed. The beginning of self-financing contract depend on the level of your shares. This formula could require that the policy owner declare the accumulated holdings income that exceeded the paid premiums. Contact your agent for more information.

How to gey a loan on your Life Insurance.

Advance Payment Contract

The value of your permanent life insurance policy may be very high if you keep your policy for a long time. It's a funds that can be used as we have just seen, to maintain your police force if you fail to pay a premium or you can also use it to get a loan.
You can borrow an amount equivalent to the redemption value of your policy, or near this value, according to the provisions included in your contract.
Then you can pay it back on one shot or more. At your death, the unpaid balance, increased by the interest is deducted from the insured capital. You must pay interest because, when calculating the premium, the insurer considered that it would invest the funds that you borrow and loosing the interest on his side.
Advance payment contract is even more practical: because there is no creditworthiness investigation and the usual disadvantages of it. Simply contact your agent or your life insurance company closest branch. (If you have designated an irrevocable beneficiary, you will need to get his signature.) The advance may be completely or partially taxable. Learn about the tax implications from your insurer.

Life Insurance Premiums

Premiums: when and How to pay?

Generally, Canadians and Americans pay their life insurance premiums monthly by direct debits into their bank account. The premiums payment may also be paid annually, semi-annually or quarterly.
You can also concentrate premium payments over a certain number of years. Your premiums will be then a little higher, but your policy will then be free of any charge. This is the case for example, if you want your permanent life insurance policy to be fully paid at age 65 so you will no longer have to pay any premiums after retirement.

WHAT IF I CAN NOT PAY THE PREMIUMS ANYMORE?

You have a 30 days grace period after the due payment date. If the premium is not paid at the expiration of this period, your life insurance is broken with complete revocation of all the benefit. If death occurs during the 30 days grace period, the principal sum is paid after deduction of the suffering premiums.
But if you choose, a redemption value life insurance police then it can help you keep your life insurance valid even after your police fell for revocation. You may re-enacted your life insurance within two following years, if you pays the suffering premiums, increased interest, and submit medical evidence to justify the non payment period.

WHAT HAPPEN IF MY BENEFICIARY DIES BEFORE ME

The beneficiary is the person indicated in the life insurance police to receive with your death the amount of the insurance. You can designated a beneficiary (your spouse for example), or you can leave the money to a trust? If you choose to leave the money to your having right, the money will be fixed with expenses of homologation at the time of the payment of succession. If you choose a trust, you must take care to inform a tax adviser.
If you indicate a beneficiary, the money does not enter in your succession, but is directly versed to the person or the organization that you indicated. The beneficiary does not have homologation expenses to pay.

PROTECTION AGAINST CREDITORS

Depending of who is the designated beneficiary, the assured capital can be or not under the shelter of the creditors. Provincial and States insurances laws stipulate that if the beneficiary is a spouse, a child, a small-child, the father or the mother, the assured capital can be seized by creditor. Within Quebec, the beneficiary must be related to the police holder. In the other provinces, it must be related with the policy-holder. In US it depend on wich states. This provision applies to the adoptive children in the majority of provinces, but not with an ex-conjoint, except if this one were indicated profit irrevocable.

IRREVOCABLE BENEFICIARY RECIPIENT

You can designate a beneficiary recipient or a trust on a purely irrevocable basis. That means that as the holder of the police, you can't change or revoke the beneficiary recipient without consentment. The assured capital is protected from your creditors and it do not enter into your succession. In Quebec, the spouse is considered like an irrevocable recipient but, in the event of divorce, it loses automatically this statute.

CHARITABLE ORGANIZATIONS DONATION

You can use life insurance for making charitable organizations donations. At your death, the sum you dedicated to is paid to the organization that you designate. In that case premiums may be income taxable deductive if the charity organization is approved by the Customs Agency and Revenue Agency Canada or other state or federal government agency.

Last Wills, Testament and Life Insurance

Last Wills and Testament

It should be noticed that a new recipient designation will not cancel one insurance policy designation made before, except if the will mentions specifically the insurance policy (even in this case, the irrevocable beneficiary recipient keeps all its rights).
Jurisprudence bring back the case of a man who indicated on testament his new wife sole legatee of his succession. But he had not modified life insurance policy designation in favor of his new wife. The preceding life insurance policy beneficiary, in this case his ex-wife, claimed against the last wills and testament. The court has decided that assured capital will return to the preceding wife.

Divorce and Life Insurance

In the event of divorce if you receive an alimony make sure that the payments are assured.
There are two ways of proceeding:

You can specify in the due form agreement that your ex-spouse must take a life insurance on its head and designate you as beneficiary recipient. To ensure that the recipient designation will not change without your assent, require that your ex-spouse names you irrevocable beneficiary. You can take a life insurance on the head of your ex-conjoint. You name yourself as the beneficiary and pay the premiums. Nobody can then organizing the cancellation of the policy and you control completely the situation.

Life Insurance Beneficiary

The beneficiary is the person indicated in the life insurance police to receive with your death the amount of the insurance. You can designated a beneficiary (your spouse for example), or you can leave the money to a trust? If you choose to leave the money to your having right, the money will be fixed with expenses of homologation at the time of the payment of succession. If you choose a trust, you must take care to inform a tax adviser.
If you indicate a beneficiary, the money does not enter in your succession, but is directly versed to the person or the organization that you indicated. The beneficiary does not have homologation expenses to pay.

PROTECTION AGAINST CREDITORS

Depending of who is the designated beneficiary, the assured capital can be or not under the shelter of the creditors. Provincial and States insurances laws stipulate that if the beneficiary is a spouse, a child, a small-child, the father or the mother, the assured capital can be seized by creditor. Within Quebec, the beneficiary must be related to the police holder. In the other provinces, it must be related with the policy-holder. In US it depend on wich states. This provision applies to the adoptive children in the majority of provinces, but not with an ex-conjoint, except if this one were indicated profit irrevocable.

IRREVOCABLE BENEFICIARY RECIPIENT

You can designate a beneficiary recipient or a trust on a purely irrevocable basis. That means that as the holder of the police, you can't change or revoke the beneficiary recipient without consentment. The assured capital is protected from your creditors and it do not enter into your succession. In Quebec, the spouse is considered like an irrevocable recipient but, in the event of divorce, it loses automatically this statute.

Collective Life Insurance

If you are paid, this life insurance form can be offered to you by your employer or your trade union.
In General, it is about one temporary insurance (in theory up to 65 years) covering a group people under a contract collective term. A certificate is given to you attesting your coverage. When it is an important group, it often arrive that no justification of assurability, medical or other, is required.
The insurance group is one of the capital element of your total coverage. But the protection of which you profit can end as soon as you do not being part of the group anymore. Check if the mode allows you to transform your insurance in individual insurance if you leave the group, or if the collective cover ends for any other reason.

Group Insurance Price and Cost

If it's easy to fix the price of one manufactured good according to materials cost and production expenses, it's different for a life insurance policy, which differs even from dwelling or car insurance policy since it can remain in strength during 50 years or more. Insurance companies can in any way of knowing their costs exactly, theirs incomes of placement or theirs future technical results. In consequence, they make long-term projections which rest on statistics or actuarial data, with the mortality tables assistance, the death rates with the various groups of population age. They also melting their estimates with expenditure regards, interest rate and futures death rate. These calculations are carried out by actuaries who receive actuarial mathematics training applied to the life insurance. Equitable Tarrifing Before approving your proposal, the insurance company must evaluate the degree of risk you represent. It is obvious that the risk grows with age and deterioration of your health. The pooling of similar risks makes it possible to obtain an equitable tariffing. The statistics data are joined together in order to divide the individuals by “categories of risk”. The insurance price - the premium - translated the risk evaluation. More the risk is weak for a category data, plus the premium is weak. To evaluate the risk, the insurer takes many factors into account: the age, the sex, the medical antecedents and the state of health. Thus, in average woman pay lower premiums than men. Indeed, the statistics clearly show than men. Same for nonsmokers who pay lower premium rates.