Written by Ron Cooke, President & Founder of Strategic Wealth Protection Partners in Ontario, CEA®, Member of the Estate Planning Council Canada
Is it possible to borrow against a life insurance policy?
Yes, in Canada you can borrow against certain types of life insurance, but only if the policy has built up cash value.
This typically applies to permanent policies such as whole life and universal life, not term insurance. The cash value grows on a tax-sheltered basis, and lenders may allow you to use that value as collateral for a loan. This creates access to capital without immediately triggering taxes.
When does it make sense to borrow against a life insurance policy?
This strategy makes sense when you need liquidity but want to avoid selling investments or triggering taxable events.
Many individuals use it to supplement retirement income, fund investments, or support business opportunities. It is most effective when the policy has had time to grow and when the borrowing aligns with a broader estate and tax planning strategy.
The key is to ensure the long-term benefits of the policy are not compromised.
What types of life insurance can you borrow against?
Only permanent life insurance policies with accumulated cash value can be used in this way.
This includes participating whole life and universal life policies, both of which allow for tax-sheltered growth inside the policy. Term insurance does not build cash value, so there is nothing to borrow against.
The structure and performance of the policy will determine how much can be accessed.
How does borrowing against life insurance work?
As the policy grows, the cash value can be used as collateral to secure a loan from a financial institution or directly from the insurer.
You receive access to funds while the policy continues to grow on a tax-sheltered basis, and the loan remains outstanding. At death, the tax-free death benefit is used to repay the loan, with the remaining amount passing to your beneficiaries.
For business owners, when structured properly, this can also support tax-efficient wealth transfer through the corporation to shareholders.
Optimize Your Wealth with the Right Life Insurance Strategy
Are you using life insurance as part of your wealth strategy, or just as basic coverage?
For many Ontario families, permanent life insurance can do far more than provide a payout. When structured properly, it can reduce taxes and help transfer wealth more efficiently to the next generation.
At Strategic Wealth Protection Partners, we help you go beyond surface-level advice.
Whether you’re exploring strategies such as insured retirement plans or leveraged life insurance, or simply want to understand how to structure your policy properly, our team will guide you step by step.
Schedule a Life Insurance Clarity Call
For high-income earners, business owners, and real estate investors, the biggest risk isn’t a lack of growth.
It’s taxation.
Without proper planning, a large portion of your estate will be lost to taxes, fees, and forced asset sales. Life insurance can help offset these costs and preserve more of your wealth for your family. But only if it’s used correctly.
But not every strategy is right for every situation.
That’s where SWPP comes in.
We design life insurance strategies as part of a complete estate plan, so every decision supports your long-term goals, not just a product recommendation. And if life insurance isn’t the right move, we’ll tell you.
We’ll show you all the wealth preservation options that apply to your exact situation, including living trusts, estate freezes, and life insurance.
Discover how to reduce and avoid taxes and leave a rock-solid legacy for the ones you love.
Read More
If you’re considering life insurance for estate planning, you may find these articles helpful:
- What Disqualifies You from Life Insurance in Canada?
- What Is Leveraged Life Insurance in Canada?
- Can I Use Life Insurance as an Investment in Canada?
About the Author
RON COOKE, PRESIDENT & FOUNDER OF STRATEGIC WEALTH PROTECTION PARTNERS
With over 30 years in financial services, I’ve seen the challenges families face when a loved one passes—lost assets, unnecessary taxes, and emotional stress. That’s why I created the Living Estate Plan, a comprehensive process to protect assets, eliminate estate and probate fees, and create legacies that are remembered for many years to come.
This plan ensures your family receives not just your wealth, but a meaningful reminder of your care and love. Tools like The Final Word Journal capture your story, wishes, and essential details, offering clarity and comfort during difficult times.
Your final gift should be more than money—it should be peace of mind, cherished memories, and an organized estate.
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