The Ultimate Guide to Whole Life Insurance in Quebec

By Maude Gauthier | Published on 05 Sep 2023

Share with FacebookShare with FacebookShare with TwitterShare with TwitterShare with Twitter
Table of Contents

    There are several types of life insurance available. When shopping for life insurance, you have the choice between a whole life policy, with or without participation, term life insurance, and universal life insurance, among others. Whole life insurance is particularly interesting for individuals who want a policy that will not expire. It also includes an investment or cash value component. Here is everything you need to know about whole life insurance.

    The basics of whole life insurance

    Also known as permanent insurance, whole life insurance provides coverage for your entire life. The premiums associated with this insurance are usually guaranteed and remain constant. No surprise increase in sight! Depending on your contract, you may have to pay premiums for a fixed period or for your entire life.

    Cash value and participation

    This form of insurance includes a cash value, which means that you will receive a portion of the invested money if you terminate your contract. The cash value is an amount that the insured can receive from the insurer if they voluntarily terminate their contract before its expiration. The guaranteed values are specified in the policy. They generally increase until you reach the venerable age of 100.

    It is possible to take advantage of the cash value of a life insurance policy without actually terminating the contract. First, you could request a policy loan. This involves borrowing against the cash value as collateral. It is a loan with interest that you will have to repay. Then, you could choose to surrender the cash value to your insurer. You will then receive a reduced paid-up life insurance and will never have to pay premiums again. This is a lower amount of insurance than specified in the initial contract. You will be covered without having to pay premiums until your death, but for a lesser amount.

    Whole life insurance with participation

    There are two variations of whole life insurance: with or without participation. Participating whole life insurance includes an investment component, which is managed by the insurer. Because of its investment component, it is generally more expensive than traditional whole life insurance. It is primarily aimed at affluent clients. Investment decisions are made by the insurer and applied to the pooled account. This is ideal for policyholders who do not want to manage their own investments. This type of insurance offers the opportunity to take advantage of many benefits associated with the growth of the cash value.


    The “with participation” aspect means that the insurer may pay you something called “participations” or “dividends” (even though they are not actual dividends). These participations can take the form of cash back, accumulation of amounts added to the death benefit, or reduction of the insurance premium you pay, for example. They can also be given as a paid-up additions (PUA) which increases your current insurance amount and can in turn offer you further participations.

    However, there is no guarantee that the insurer will pay these participations. The insurer generally pools the premiums it receives from several participating life insurance policyholders into a fund. It manages the fund, including investments and expenses related to the pooled insurance. When a surplus appears in the fund over time, the insurer may keep a portion, pay a portion to policyholders as participations, and let the rest accumulate in the fund.

    Let’s say you have taken out participating whole life insurance. Instead of investing $5,000 in an investment account each year, you use that amount to pay for your whole life insurance. Your goal? To build a substantial legacy for your children. Your estate is guaranteed to receive at least the amount specified in the contract, for example, $200,000, and possibly more through participations. You choose to receive your participations as paid-up life insurance (PUA). You will then not have to pay additional premiums to add an additional amount to your life insurance. The total amount of the benefit could double in about thirty years.

    Whole life insurance without participation

    In this variant, the premiums are lower, but the insurer cannot pay participations. It is less expensive. Note also that premiums must be paid for a certain number of years to accumulate a cash value.

    Do you need Whole life insurance?

    For those looking to minimize the cost of their insurance, other options may be more affordable. Whether whole life insurance is more advantageous than term life insurance is specific to each individual. It depends on your needs. If you want to maximize the value of your estate and cover taxes on illiquid assets, such as a family business or real estate, whole life insurance is interesting. On the other hand, if your goal is to allow your spouse or children to maintain their standard of living or to repay your debts, term life insurance may be more appropriate.

    Compare before choosing

    Before opting for a whole life policy, compare life insurance offers. During this process, inquire about the insurer’s history of participation payments. Do they have a good track record of paying participations? Also, ask insurance company representatives to provide you with scenarios that compare each product: premiums, benefits, cash value, etc. They will help you determine how many years participating life insurance could become more advantageous than another type of insurance.

    Why add life insurance for children?

    By taking out a life insurance policy, your insurer may offer you a life insurance amount for your child. Sometimes, it is free with your policy. If not, you can still take out insurance for your children. You will then pay premiums for several years. What can it be used for? Some parents use the cash value of this policy to secure a loan. For example, they can use it to buy a car for their child or pay for their tuition fees.

    Premiums for whole life insurance are higher than those for term life insurance, at least in the early years. Premiums for term life insurance generally increase at renewal. Thus, the amount of current premiums should not be the only criterion guiding your choice of life insurance. In addition, there is another option for individuals interested in the investment component of whole life insurance, without the hassle of participations.

    Universal life insurance, between protection and investment

    Universal life insurance is permanent (for life) and allows you to decide the amount and payment period of premiums, depending on the contracted policy. You have the power to choose investments for the amounts accumulated in your cash value account.

    A fraction of your premiums are used to cover the cost of insurance, while the rest is invested to build capital. Thus, when taking out insurance, premiums exceed the cost of insurance. For example, if the cost of insurance is $400 per year, the insurer may require payments of up to $1,200. The excess is invested. However, it should be noted that the cost of insurance may increase over time. On the $1,200 you pay annually, the portion dedicated to investment will become smaller.


    One essential difference between universal life insurance and whole life insurance is your control over investments. Here, you have the choice to invest funds in various types of investments. The accumulated amount can be used to cover the cost of insurance or for withdrawals. Thus, the cash value of your universal life insurance policy increases based on the return of the investments you have chosen.

    Let’s go back to the example of universal life insurance that costs $400 per year, but for which you can contribute a maximum of $1,200. You decide to pay $1,000 per year. The surplus of $600 accumulates in your account and generates an average return of 5% per year. After 25 years, you have accumulated enough money in your account to have the freedom to stop paying premiums for the rest of your life while remaining insured (covered by this amount) or to withdraw the funds for personal projects.

    Whole Life InsuranceUniversal Life InsuranceUniversal Life Insurance
    InvestmentYes, chosen by the policyholderYes, chosen by the policyholderNo
    DurationLifetimeLifetimeLimited coverage duration (10 to 30 years)
    PremiumsFixedFlexible, you can decrease or increase your premiumsOften fixed
    Tax ImpactDeath benefit is non-taxable + investment account grows tax-free until withdrawalsDeath benefit is non-taxable + investment account grows tax-free until withdrawalsDeath benefit is non-taxable
    Surrender ValueSurrender value with a guaranteed amountSurrender value without a guaranteed amountNo surrender value
    Share with FacebookShare with FacebookShare with TwitterShare with TwitterShare with Twitter
    Maude Gauthier is a journalist for Hardbacon. Since completing her Ph.D. in communications at University of Montreal, she has been writing about finance, insurance and credit cards for companies like Fonds FMOQ and Code F. As a responsible user of credit cards, she can spend hours reading the fine print to fully understand their benefits. Because of their simplicity, she developed a preference for cash back cards. After suffering steep increases with her former insurer, she can now proudly say that she saved hundreds of dollars by shopping around for her auto and home insurance. In her free time, she reads novels and enjoys streaming popular shows (and possibly less popular shows, like animal documentaries).