Jayson Lowe explains how participating whole life insurance in Canada generates uninterrupted compounding growth by keeping cash value inside the policy and using paid-up additions (PUAs) and dividends to increase death benefit and force corresponding cash-value growth (cash value must equal death benefit at age 100). He illustrates with a simple numeric example: a $100,000 base death benefit funded by a $10,000 annual premium split into a $4,000 base premium and $6,000 PUA top-up; the PUA increases death benefit (example: $6,000 buys $25,000 additional death benefit) and dividends (example: $1,000) are used to buy further PUAs, repeating year over year and compounding cash value. The video emphasizes liquidity (policy loans from the insurer you co-own), tax-advantaged growth, and continuous accumulation.
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Your money continues to grow uninterrupted because it never leaves this wonderful system. It stays there the whole time and is always working to your benefit. You get to have the policy and the death benefit and the tax free advantages, constant growth and accumulation, access to capital with the insurance company that you co own and you get to share in the profits. Sounds pretty good. So how exactly does participating whole life insurance grow so that you can create uninterrupted compounding growth with the use and liquidity over your own money? Well let's look at an example of the foundation of the whole life insurance contract in Canada. By age 100, the cash value must equal the death benefit. Very important to understand. So at age 100, as we age and we grow, regardless of where we start, the cash value must equal the death benefit. The insurance company who we're a co owner of is contractually obligated to make that happen. That means every single day that you age and you, you go to bed and you wake up the next day, there's more cash value than the day that you before it. It's a very, very smooth, simple and easy way to have constant growth on your money. So let's take a look at one of these contracts here. You'll see we have a very basic horizontal and vertical axis. We're going to start with a foundation on our policy. We'll call this the base policy. And just to keep our example simple, let's assume that we have a $100,000 whole life insurance contract. That's the starting death benefit. The next thing that happens is of course we need to have a premium that goes with this. So for the purpose of our example, we're going to assume that the owner of this contract said hey, I want to contribute $10,000 a year into my personal banking system using a whole life insurance policy. So that is the premium that the owner decided they wanted to contribute and based on their age, they get $100,000 a whole life for that amount. Just to keep our numbers very simple. Now the key thing is that that premium is broken down with two components. The first component is what's called the base premium or the minimum that's required to keep that policy in force. The second component is what we refer to as the paid up additions rider or the PUA for short. This part is flexible. It's an optional top up payment that allows you to turbocharge the accumulation of your whole life insurance values. So for the sake of our little example, let's assume that the minimum premium in our example is $4,000 and the flexible premium is $6,000. Now, everyone's circumstance will be different. Every policy design will have unique features to it. We're just trying to keep it very simple for the purpose of our example. Now, when the policy owner pays that very First Premium, the $4,000 is the required amount to service that very first foundational level of insurance. The flexible part does something really cool. It comes all the way up here. And what it does is it purchases what's referred to as a paid up additional block of insurance. So let's assume our $6,000. To keep our math simple, it buys us $25,000 worth of new paid up additional death benefit on our contract. So it's increased the total death benefit. We started with 100,000. Now, right after that policy is issued, and we funded that full premium that we wanted to put in, we've accumulated new death benefit of 25,000. The new total death benefit is 125,000. Here's the wonderful thing. Because we've increased the death benefit, we've also increased the requirement for the insurance company to increase our cash value. Because the cash value must equal the death benefit by age 100. So they are required to continually growing the cash value, which is our asset each and every day that we age closer to age 100. Now, another really cool thing happens after this. At the end of the first year, the insurance company get together and they gather around and they find out, hey, how did we do on all of our policies this year? And then they distribute their divisible surplus or their profits with all the owners. That's what's called a dividend. Now that dividend that you receive, and for the sake of our example, we'll keep it nice and simple, let's just say it was a thousand dollars. Well, it goes in and it also buys one of these paid up addition blocks and that adds to the contract as well. So let's say that it was 10,000. So now in the very first year, partly because of what we did, and a little bit because of what the insurance company did, we have now accumulated death benefit of an extra $35,000. So we have a new death benefit of 135,000. And the cash must grow to equal that new number. Now this process repeats and repeats and repeats year after year, and the dividends begin to increase and the paid up addition blocks increase and the cash value has to follow along with it. It's literally chasing after it. It's like the game, follow the leader. The death benefit is a leader and the cash value is chasing after it. Now as this process begins to continue over time, these events continue to stack on top of one another. And the end result is we have a wonderful growth line that is a constantly accumulating curve of cash value. So everything that's underneath this cash value line is equity. Now this is equity you own and control. It's an asset. Just like asset or value, you would have equity in a home that you you own. The difference is you don't have to go and ask permission to to get access to the equity. In this contract. It's as simple as filling in one piece of paper and that money can be direct deposited into your bank account. That is total and absolute control over the use and liquidity of your money. The beautiful thing is you're not actually using your capital. You're using the insurance company's capital that you co own. So they're lending you the money and you co own the lender. Meanwhile, your money continues to grow uninterrupted because it never leaves this wonderful system. It stays there the whole time and is always working to your benefit. You get to have the policy and the death benefit and the tax free advantages. Constant growth and accumulation, access to capital with the insurance company that you co own and you get to share in the profits. Sounds pretty good.
