On Topic

Life Insurance

Whole Life Insurance

Participating Account Investments

Participating whole life (par) insurance policies also contain a tax-advantaged cash value accumulation. The insurance company manages the investment portion in a diversified portfolio, called the participating account (par account) that's invested primarily in bonds, mortgages, equities and real estate.

Par policies are built on a foundation of guaranteed values based on long-term conservative assumptions for investment returns, mortality, expenses, and other relevant factors. Collectively, these assumptions form the guaranteed premiums, death benefits and guaranteed cash surrender values.

If the actual results in the par account are collectively more favourable than the assumptions supporting the guaranteed values, there will be a surplus in the par account. A portion of this surplus is paid to par policy owners as dividends. Par illustrations contain assumptions around the amount of dividends that will be credited to the policy each year. It's important that, as with universal life illustrations, the assumptions used are reasonable.