How to Stack Investments with a Whole Life Policy in Canada

One of the most valuable parts of a participating whole life insurance policy is the ability to store a large amount of cash surrender value inside of it. With good, Canadian insurance companies they generally pay a dividend every year which compounds the cash value over time.

Because the cash values inside the policy are so stable, you can use the policy as collateral for loans at the bank – often delivered as a line of credit.

One of the most valuable parts of this form of leverage is the ability to “stack investments” on top of each other ie. use the line of credit and invest it into another asset.

Using this strategy you can invest one dollar in two places at once – inside the insurance policy and inside another investment.

Growth of Insurance Policy Value

The first thing you need to know is that the cash value inside your life insurance contract is growing.

This growth comes from the dividend paid into it every year.

The Canadian companies we work with each have paid a dividend every year for 100+ years.

In 2022, for these Canadian insurance companies, the dividend scale interest rate is between 5% – 6%.

These funds are invested conservatively, like an insurance company would invest them, so you can expect a consistent rate, not many ups and downs.

A big additional benefit is that this growth inside the policy is tax-deferred. Not paying taxes on the growth inside the policy accelerates your compounding over time.

Once you have your policy, there are two steps:

Leverage your Policy at a Bank:

It’s possible to leverage the cash values that are growing inside your policy from the dividend.

The banks we work with will loan against your policy for a high loan-to-value 70 to 80 to 100% LTV.

You pay interest on this like any loan – in 2022 the interest can be Prime or Prime +1%.

Invest the Leveraged Money:

Once the bank has given you the loan, you take the money from the bank and invest it in something else.

We can help you make suitable investments to grow your money in a safe way.

We work with various private wealth managers, banks and funds with great portfolio managers and can introduce you.

Our clients also invest real estate, their own business, another business, lending, MICs, REITs or whatever fits their plan.

Because you are investing with leverage we recommend not investing in very high risk vehicles.

Stacking Investments

So now you are earning twice on the same dollar. Once inside the insurance policy with the dividend, and once with whatever investment you make outside the policy.

In 2022, the insurance dividend is around 6%, and the later is whatever you can make. Care should be taken to offset any interest paid.

We call this stacking investments, and it’s like adding rocket fuel to your wealth growth.

Investing this way allows you to take less risk in your own investments because of the stable base growth of the insurance policy underneath.

Comparison to Real Estate and Market Investments

Growing you the cash values inside your life insurance policy and leveraging it is similar to building equity in a property and leveraging it through a HELOC.

It’s also similar to leveraging a market portfolio.

The HELOC generally doesn’t have as high LTV.

The market portfolio generally needs to be invested very conservatively for the bank to lend against. And even then, the LTV is generally not as high as against life insurance cash values.

Who is it for?

This is ideal for:

Incorporated business owner

Incorporated professional (lawyer, accountant, engineer, consultant, tech, online etc)

Owns their home

Has a family

You need the life insurance anyway – this allows you to build the investment portfolio and leverage it to grow your money and keep your liquidity.

After age 50 – 55 this type of policy can be used to supplement retirement income.

Contact & More Info

If you would like to set up a strategy like this for yourself please contact us via this form and we will get back to you within 24hrs on business days.

"*" indicates required fields

This field is for validation purposes and should be left unchanged.

Looking to start protecting what matters most?

We're here to help. Start building your future and protecting your greatest assets.