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The asset may outperform traditional investments

November 15, 2025•3 min read

Permanent Life Insurance: A Different Way to Save, Grow, and Leverage Wealth

Over the past few weeks, I’ve spent time unpacking the limitations of traditional savings vehicles and investment strategies. This week, I want to shift the conversation toward a financial strategy that’s often misunderstood, frequently dismissed, and rarely explained properly: using permanent life insurance as a long-term savings vehicle.

If you haven’t yet caught up on our earlier discussions around registered accounts and their hidden tax implications, I highly recommend doing so. They lay important groundwork for today’s topic.

Understanding the Landscape

Most people are familiar with registered and non-registered accounts like RRSPs and TFSAs. These tools dominate retirement planning conversations. But today, we’re stepping outside that framework to explore permanent life insurance, not as an “investment,” but as a strategic financial asset designed to protect, store, and grow wealth over a lifetime.

The Life Insurance Advantage

Let’s look at a hypothetical example.

We’ll use a 30-year-old earning $100,000 per year, contributing $20,000 annually until age 65. To keep the comparison clean, we’re not adjusting for inflation, we’re simply examining how this strategy functions as a savings vehicle over time.

Despite what you may have heard, life insurance is not an investment. However, a properly engineered permanent life policy can be compared to traditional investments to highlight its efficiency, predictability, and long-term utility.

Breaking Down the Numbers

From the outset, the policy’s cash value begins at approximately $17,000. Cash value represents the present-day value of the future death benefit, and if the policy were cancelled, this amount must be returned by the insurance company.

That’s an important distinction - this is not market-based value. It’s contractual.

Long-Term Growth Comparison

Fast forward to age 65.

At that point, contributions stop and the policy’s cash value approaches $2 million. More importantly, this capital remains accessible for life without surrendering the policy.

The policyholder can borrow up to 90% of the cash value through guaranteed, private policy loans that:

Do not appear on a credit report
Are not subject to approval
Do not interrupt the growth of the policy

Over time, the cash value continues compounding and ultimately aligns with the full death benefit.

Debunking the “Better Returns” Myth

A common argument is that traditional investments can produce higher returns.

But here’s the math most people miss.

To match the cash value growth of this permanent life policy, an alternative investment would need to earn 5.05% net. Once management fees and taxation are factored in, the actual required return jumps to 10.41%.

Consistently achieving that, after fees and taxes, for decades - without volatility - is far less common than most people assume.

“Buy Term and Invest the Difference”

In the early years, this strategy can look appealing on paper.

But by retirement, term premiums become prohibitively expensive, coverage disappears, and the investment account - once adjusted for fees and taxes - never truly catches up. Meanwhile, the permanent life policy continues growing, providing liquidity, certainty, and leverage.