See the year a par whole life policy's dividends can cover its own premiums, and how a small drop in the dividend scale delays or breaks that "vanishing premium."
The policy
This is what the client pays out of pocket until offset kicks in.
The dividend scale
The rate the sales illustration assumes. Dividends are not guaranteed.
Interest rates fell in the '80s–'90s and insurers cut their scales. Drag this to see what that does.
Offset year · as illustrated
—
premiums vanish
Offset year · if scale drops
—
reduced scale
Extra years paying
—
beyond the illustration
Extra out of pocket
—
unplanned premiums
How this works. A participating whole life policy pays non-guaranteed dividends that grow with its cash value.
Under the premium offset (premium-reduction) option, each dividend is applied against the premium; once the dividend grows large
enough to cover the premium in full, the client can stop paying out of pocket: the premium appears to "vanish." But the whole schedule rides on
the dividend scale, which the insurer can change. Drag the drop slider: even a 1% cut pushes the offset year out by years, or means
the premium never fully vanishes at all. This is exactly why offset must be disclosed as an illustration, never a guarantee.
Educational illustration of standard Canadian insurance concepts. Figures are illustrative, not an insurer’s rates.
Illustration only, not a quote or advice. Figures are simplified for education and do not
reflect any specific insurer's rates. Consult a licensed advisor.