When it comes to immediate financing arrangements (IFAs), whole life overshadows universal life because of its fixed-income investment account.
Participating whole life is the vehicle of choice. "It currently offers a sizable return,” says Claude Ménard. Senior Vice-President, Marketing, Canada, at PPI Advisory. Optimal products include rising death benefits and guaranteed cash surrender values.
Manulife spokesperson Steven La Barbera notes that although the insurer offers the immediate financing plan for both whole life and universal life, “the vast majority of IFAs are with whole life policies.”
Christian Hubert, senior tax advisor at National Bank Insurance agrees that the bias toward whole life insurance stems from the guarantees and rates it offers. “Even if the participating account in whole life is not guaranteed, the product offers a better outlook for long-term rates than universal life insurance.”
The whole life product generally costs more than universal life, Hubert adds. “The participation rate is not a rate of return. It results from a complex formula based on an investment portfolio and lapses and mortality assumptions. For the same death benefit, the insured pays double the premium of universal life. The excess creates guaranteed cash surrender value”, he says.