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Using policy value

Using policy value

This stage covers what happens when a policyowner wants to use the value that has built up inside a participating contract. The recurring questions are where the money comes from, who is paid the interest, whether tax arises, and what an unpaid balance does to the amount a beneficiary eventually receives.

What this stage decides

what a rider actually buys

The paid-up additions rider

  1. 01A small block of fully paid whole life coverage
  2. 02Bought with a declared dividend or an extra deposit
  3. 03It needs no further premium once it is purchased
  4. 04It adds to both cash value and death benefit
  5. 05The rider carries a maximum set by the exempt test
Dividends used to buy additions are declared annually at the insurer's discretion and are not guaranteed.

The decision at this stage is not whether to own a contract. It is how to take money out of one that is already working, and the three routes are frequently confused with one another. An advance leaves the contract intact and creates an obligation. A withdrawal removes value permanently. A surrender ends the contract altogether. Each carries a different cost and a different tax result, so the first useful step is to name the route before calling anything a plan. The second step is to find out how long the insurer takes and whether it applies a minimum, because neither figure is set by anything on this site. Naming the right route is also one of the things a periodic check catches, and how often should I review a policy I already own sets out how frequently that check is worth doing.

Why these questions recur

a pooled account, managed by the insurer

What stands behind a participating contract

  1. 01A participating contractOne account stands behind every contract of this class.
  2. 02Premiums are pooledInto one account, not one of your own.
  3. 03The insurer manages itInvestment, claims and expenses run through it.
  4. 04Policyholders may share in the resultWhat the account earns after claims and expenses.
  5. 05The share is declared annuallyAt the board's discretion, and never guaranteed.
The guarantees and the share come from two different places, and only one of them is in the contract.

They recur because the popular description of the mechanism and the contractual description of it do not match. The popular version says the money is yours and the interest comes back to you. The contract says the insurer advances its own funds, takes the cash value as security, charges interest to itself, and deducts anything unpaid from the amount a beneficiary receives. Both accounts describe the same transaction, and only one of them is enforceable. Every one of the questions above is now answered on a page of its own, including who receives the interest and whether an advance is taxable, and the method behind every answer in the section is set out on the IBC Answers hub.

The diagram below sets the three movements out in the order they happen: the insurer advances from its own account, the contract is assigned to it as security for that advance, and the value inside the contract goes on being credited because nothing was taken out of it.

Where the money for an advance comes from A diagram in three stages. At the top, the insurer advances money from its own account. In the middle, the contract is assigned to the insurer as security for that advance. At the foot, the accumulated value stays inside the contract and continues to be credited, because nothing was withdrawn. Where the money for an advance comes from The insurer advancesfrom its own account The money reaching you is theinsurer's, not your own value. The advance Your contract is assignedas security The contract secures the advance.It is not sold and not cashed in. The security The value inside the contractkeeps its own credited growth Nothing was withdrawn, so nothingstopped being credited. Interest is owed to the insurer, and an unpaid balancereduces what a beneficiary receives.
Where the money for an advance comes from The insurer advances from its own account. The contract is assigned as security, and the value inside the contract keeps its own credited growth.

Where this answer may not apply

  • A collateral loan from an outside lender that takes an assignment of the policy is a different arrangement with different terms, and none of the answers in this stage describe it.
  • A corporately owned contract adds tax and accounting consequences that belong to a CPA rather than to a general answer.
  • Contracts issued many years ago can carry loan provisions that differ materially from the ones sold today.
  • A partial withdrawal is not a loan. It removes value permanently and cannot be reversed by paying money back.

What to verify in your own contract

  • The cash surrender value available today, taken from the insurer rather than from an old illustration.
  • The current adjusted cost basis of the contract.
  • How the loan rate is set: fixed, tied to a published benchmark, or set by the insurer within stated limits.
  • Whether the contract uses direct or non-direct recognition, which is fixed at issue and cannot be changed later.
  • Any balance already outstanding, and the interest accrued on it.
  • Whether an irrevocable beneficiary designation is in place, since consent may be required.

Continue to the full explanation

Review the options before changing the policy.

Sources

  • Income Tax Act s.148, Justice Laws Canada, verified 2026-08-30
  • Assuris, published protection limits, verified 2026-08-30

About the author

Jose Salloum, Financial Security Advisor

Jose Salloum is a Financial Security Advisor (conseiller en sécurité financière) certified by the Autorité des marchés financiers in Quebec, a Life and Accident & Sickness Insurance Agent licensed by the Financial Services Regulatory Authority of Ontario, and a Life Insurance Agent licensed by the Insurance Council of British Columbia. Licensed since 2001.

He has practised The Infinite Banking Concept® since 2015 and founded Canadian Wealth Creation Centre Inc., which operates as IBC Financial, in 2016. He holds the Infinite Banking Concepts® Authorized Practitioner certification from the Nelson Nash Institute. That is a private certification rather than a regulatory licence.

IBC Financial is the education platform of Canadian Wealth Creation Centre Inc. This page is general education and not advice on any individual file.

Read the full biography and the licence numbers

Accountability and disclosure

Written by
Jose Salloum
Professional capacity
Financial Security Advisor. Canadian Wealth Creation Centre Inc., operating as IBC Financial, places business in six provinces: Quebec, Ontario, Alberta, British Columbia, Manitoba and New Brunswick
Reviewed by
Insurance and contract education tier, reviewed under a licensed insurance professional's own authority
Jurisdiction
Canada wide
Last reviewed
2026-08-31
Version
2.1
Compensation disclosure
Canadian Wealth Creation Centre Inc., operating as IBC Financial, may receive insurer paid compensation if a policy is purchased. It takes the form of first year compensation followed by renewal compensation, and the amount varies by insurer, product, age, premium, contract design, riders and the arrangement with the managing general agency. No single figure would describe every contract honestly, and none is published here.
Report a correction
Info@ibcfinancial.com. Write without a policy number, medical information or account details.

Last reviewed 2026-08-31. By Jose Salloum, Financial Security Advisor.

Important disclosures

Who you are dealing with. IBC Financial is the education platform and trade name of Canadian Wealth Creation Centre Inc. (cwcc.ca), the firm registered with the Autorité des marchés financiers. IBC Financial holds no licence, distributes no product or service, gives no individualised advice, and concludes no transaction. Every client relationship, every piece of advice and every insurance product comes only through Canadian Wealth Creation Centre Inc. and its duly certified representatives.

Licensing. Jose Salloum is a Financial Security Advisor (conseiller en sécurité financière) certified by the Autorité des marchés financiers in Quebec, a Life and Accident & Sickness Insurance Agent licensed by the Financial Services Regulatory Authority of Ontario, and a Life Insurance Agent licensed by the Insurance Council of British Columbia. Licensed since 2001. His personal licensing covers Quebec, Ontario and British Columbia only. He holds the Infinite Banking Concepts® Authorized Practitioner certification from the Nelson Nash Institute and the Certified Cash Flow Specialist designation. These are private certifications, not regulatory licences, and confer no government authority. All credentials may be verified in the regulators' public registers.

Protected titles. Quebec and Ontario each reserve certain planning and advisory titles by statute, and only a person holding the matching designation may use them. Jose Salloum holds none of them and uses none of them. The title he holds is Financial Security Advisor (conseiller en sécurité financière), certified by the Autorité des marchés financiers, and that is the only title used on this website.

Compensation and conflict of interest. As a licensed insurance professional, Jose Salloum receives commissions from insurers when a client purchases a policy. The practice therefore has a commercial interest in the outcome, and states it here so you can weigh what you read. This website is the educational and marketing arm of Canadian Wealth Creation Centre Inc.

Nature of this website. This website is for general informational and educational purposes only. Nothing on it constitutes personalized financial, insurance, tax or legal advice, and reading it creates no professional-client relationship. Jose Salloum is a licensed insurance professional. He is not a Chartered Professional Accountant, he is not a lawyer, and he is not registered with the Canadian Investment Regulatory Organization. He does not provide securities, tax or legal advice. Consult your own accountant and legal counsel before acting on anything described here.

About the products discussed. Participating whole life insurance is an insurance product, not an investment. Its primary purpose is the death benefit. Dividends are not guaranteed. They are declared annually at the discretion of the insurer's board of directors based on the performance of the participating account, and past dividend performance does not indicate future results. Contractual guarantees depend on the continued solvency of the issuing insurer and are not backed by any government. Policyholder protection in Canada is provided by Assuris, within its published limits. The Canada Deposit Insurance Corporation covers bank deposits and does not apply to insurance products. These strategies are not suitable for everyone and depend on individual circumstances, cash flow, time horizon and objectives.

Not a bank. Canadian Wealth Creation Centre Inc. and IBC Financial are not banks, are not deposit-taking institutions, and do not carry on banking business. Premiums paid into a policy are not deposits. Policy values are not deposits, are not held on deposit, and are not insured by the Canada Deposit Insurance Corporation.

Tax note. Tax treatment depends on the policy remaining exempt under Regulation 306 of the Income Tax Regulations and on your own circumstances. A policy loan is a disposition under ITA s.148(9). Amounts above the adjusted cost basis may be taxable, and if the policy lapses or is surrendered while a loan is outstanding, the gain becomes taxable in that year. Consult a qualified tax professional before acting.

Trademarks and affiliation. "The Infinite Banking Concept®" and "Becoming Your Own Banker®" are marks of Infinite Banking Concepts, LLC. Neither Canadian Wealth Creation Centre Inc. nor Jose Salloum is affiliated with, sponsored by, or endorsed by Infinite Banking Concepts, LLC or the Nelson Nash Institute. "Infinite Financial Sovereignty®" is a registered trademark of Jose Salloum, Canadian Intellectual Property Office registration TMA1420283, registered 12 June 2026. "IFS™" is used as an unregistered abbreviation of that mark.

Provincial variation. Insurance licensing titles and requirements vary by province and territory. Verify your own advisor's licensing with the regulator in your province.

Privacy Policy. Person responsible for the protection of personal information: Mona Haddad, compliance@cwcc.ca, Canadian Wealth Creation Centre Inc., 203-3899 Autoroute des Laurentides, Laval, QC H7L 3H7, 514-875-9444.