How to read a whole life illustration.
A whole-life illustration can look like a wall of numbers. You do not need to understand every page or every column.
You need to understand five things:
- How much you are required to pay.
- How much of the funding is optional.
- How the projected cash value grows.
- How the projected death benefit grows.
- When you may be able to stop paying out of pocket.
The examples on this page come directly from Manulife illustrations for a hypothetical 43-year-old male non-smoker with an initial guaranteed death benefit of $8 million. They show several ways the same policy can be funded. The right structure depends on corporate cash flow, objectives and desired flexibility.
The base premium is the commitment. The Additional Deposit Option is the flexibility.
Reviewed August 2026 by Goald & Co Financial Inc.
Start with the insurance summary.
The first page tells you almost everything you need to size the decision: the guaranteed insurance amount, the required annual premium, the optional deposit, and the total the illustration assumes you will fund each year.
| Line on the illustration | Amount | What it means |
|---|---|---|
| Guaranteed amount of insurance | $8,000,000 | The contractual death benefit floor at issue. |
| Base premium (first annual) | $157,092.60 | The contractual annual premium. |
| Deposit option payment (ADO) | $150,000.00 | Optional additional funding illustrated each year. |
| Total first annual premium | $307,092.60 | Base premium plus illustrated ADO. |
| Lifetime deposit option limit | $8,550,000 | The illustrated cap on total ADO over the life of this design. |
Figures taken directly from the Manulife illustration in Exhibit 01. Deposit option payments are illustrated for 57 years in this design.
Base premium
The base premium is the contractual annual premium. It should be an amount the owner can support. It remains payable unless an available policy option such as premium offset is elected.
Additional Deposit Option (ADO)
The ADO is flexible additional funding that purchases paid-up insurance and can accelerate cash value and death benefit growth. Depending on policy limits and carrier rules, the owner may contribute the illustrated amount, contribute less, stop the ADO, or increase it later up to available room. That flexibility is valuable for a corporation whose cash flow changes from year to year.
How to read the policy-values table.
The policy-values page is split in two. The left side shows guaranteed values — the contractual floor if the base premium is paid. The right side shows the non-guaranteed values under the current dividend scale, which is where the plan you are actually being shown lives. Read the three right-hand columns first: total annual premium, total cash value and total death benefit.
| Policy year | Age | Projected total cash value | Projected total death benefit |
|---|---|---|---|
| Year 1 | 44 | $282,033 | $8,593,620 |
| Year 5 | 48 | $1,521,984 | $11,256,502 |
| Year 10 | 53 | $3,543,717 | $14,803,672 |
| Year 20 | 63 | $9,859,806 | $23,403,948 |
Non-guaranteed values under the current dividend scale, assuming the illustrated $307,093 annual funding continues.
The guaranteed columns are worth a glance: the guaranteed annual premium of $157,093 and the guaranteed death benefit of $8,000,000 hold across every year shown, with guaranteed cash value building steadily to $2,502,916 by year 20. That is the contractual floor. The non-guaranteed columns show what the same policy is projected to do with participating dividends and the ADO included.
Once you can read these three columns, the next question is what your own numbers would look like.
Get a custom illustrationCash value: value available during life.
Cash value is what gives a permanent policy meaningful financial value while the insured is alive. It is a real asset on the corporate balance sheet, and it can be reached in several ways depending on the objective:
- Collateral loan from a bank, with the policy assigned as security.
- Policy loan from the insurer.
- Withdrawal or partial surrender.
- Full surrender.
- Policy values supporting premium offset or a premium-loan provision.
Collateral borrowing is the route most corporations look at first, because it allows access to capital while keeping the insurance and the long-term policy value in place. Borrowed capital may be redeployed into the operating business, real estate or other income-producing uses. Where the tax requirements are satisfied, interest may be deductible. Approval, advance rate and tax treatment depend on the lender, the use of funds and the corporation’s circumstances.
| Policy year | Total contributed | Projected cash value | Potential access at a 90% advance rate |
|---|---|---|---|
| Year 1 | $307,093 | $282,033 | $253,830 |
| Year 5 | $1,535,463 | $1,521,984 | $1,369,786 |
| Year 6 | $1,842,556 | $1,862,673 | $1,676,406 |
| Year 9 | $2,763,833 | $3,095,415 | $2,785,874 |
| Year 10 | $3,070,926 | $3,543,717 | $3,189,345 |
| Year 20 | $6,141,852 | $9,859,806 | $8,873,825 |
The 90% column is potential access at a 90% advance rate, not guaranteed borrowing. Lending is subject to approval and the advance rate is set by the lender.
Three things stand out. Under the illustrated current dividend scale, projected cash value exceeds cumulative funding during year six. By year nine, 90% of projected cash value exceeds everything contributed to that point. And this remains a life insurance policy throughout, with projected death benefit of approximately $14.8 million in year 10 and $23.4 million in year 20.
Death benefit and the Capital Dividend Account.
Where a corporation owns the policy and is named beneficiary, the proceeds are generally received tax-free by the corporate beneficiary. The amount exceeding the policy’s adjusted cost basis may be credited to the corporation’s Capital Dividend Account. Subject to a proper s.83(2) election and the applicable tax rules, capital dividends can then be paid to Canadian-resident shareholders without personal tax.
If a collateral loan is still outstanding at death, it is generally repaid from the insurance proceeds. The remaining proceeds, and the applicable net insurance proceeds, can still create significant corporate liquidity and a CDA credit — which is the reason many owners treat the policy as both a living asset and an estate asset.
Detail on how the account is tracked and elected: Capital Dividend Account.
Guaranteed versus non-guaranteed.
The guaranteed columns are contractual, assuming the base premiums are paid. The non-guaranteed columns include projected participating dividends and the effect of the ADO. Both belong in the same conversation: the guaranteed side tells you the floor, the non-guaranteed side tells you the plan.
The illustration is produced on the current dividend scale and also on a reduced scale — here, current less 1.0% — so you can see how the projection moves if experience changes. Participating whole life is designed for long-term stability rather than stock-market-style volatility; the dividend scale is smoothed over long periods rather than reset with markets.
For dividend-scale history, smoothing, par account assets, the Dividend Scale Interest Rate and carrier strength: the participating account guide.
Maximum ADO and funding comparison.
The same $8 million policy can be illustrated at its maximum deposit option. This is useful to see even if you never fund at that level, because it shows the room the contract has.
| Line | Amount |
|---|---|
| Base premium | $157,092.60 |
| Maximum illustrated ADO | $248,987.94 |
| Maximum annual funding | $406,080.54 |
| Illustrated lifetime ADO limit | $14,192,313 |
Maximum ADO is a ceiling, not a commitment. It creates room to contribute more in stronger corporate cash-flow years, subject to policy limits, exempt-policy testing and carrier administration. A design funded below the maximum keeps that headroom available.
| Funding approach | Illustrated external funding | Year-20 cash value | Year-20 death benefit |
|---|---|---|---|
| Continue funding | $307,093 through year 20 and beyond | $9,859,806 | $23,403,948 |
| Earliest offset | $307,093 for five years, then $0 | $2,726,599 | $8,468,350 |
| Year-20 offset | $307,093 for 20 years, then $0 | $9,859,806 | $23,403,948 |
| Maximum ADO | $406,081 through year 20 and beyond | $13,345,864 | $30,703,098 |
Non-guaranteed values under the current dividend scale. The same contract, funded four different ways.
“Pay to age 100” in context.
The contract’s base premium may be payable to age 100. That is the contractual duration, not necessarily the plan. In practice the planning paths include continuing to fund, electing offset at a chosen point, adjusting or stopping the ADO, accessing cash value through an appropriate strategy, or simply preserving the policy for estate and corporate liquidity.
The illustration you accept should reflect the funding plan you actually intend to follow, rather than being selected because it shows the largest future numbers.
Is Manulife’s 6.35% dividend scale a 6.35% return?
No. Manulife’s current 6.35% Dividend Scale Interest Rate is not a 6.35% return credited directly to cash value.
The DSIR is one input into how dividends are determined. Expenses, insurance and mortality experience, taxes and other factors also matter, and the cost of the insurance and the guarantees is already reflected in the illustrated policy values. The right way to evaluate a design is to look at the actual contributions, the projected cash value, the projected death benefit, the offset timing and the reduced-scale scenario — not the headline rate.
A short note on borrowing cost
A current lending example may use a stated collateral-loan rate around 4%. If borrowed funds are used for an eligible income-producing purpose and interest is fully deductible, the corporation’s after-tax borrowing cost may be lower than the stated rate.
| Component | Illustrative figure |
|---|---|
| Stated collateral-loan rate | 4.00% |
| Estimated tax effect at a 50.67% rate assumption | 2.03 percentage points |
| Approximate after-tax interest cost | 1.97% |
Illustration only, using a 50.67% corporate tax-rate assumption. The actual result depends on the use of funds, the corporation's tax position and whether the interest is deductible.
This is not a guaranteed spread, and it is not a reason to subtract 4% from 6.35% and call the difference a return. The two figures measure different things.
Insured Retirement Program preview.
The same policy can be modelled as a retirement cash-flow source. In this carrier example the policy is funded at $307,093 annually for ten years, then models collateral loan advances of $398,892 per year for 20 years, with a projected net estate value of $6,608,236 at assumed life expectancy after the modelled loan.
The appeal is straightforward: policy cash value becomes a potential retirement cash-flow source while the insurance and estate value stay in place. The result depends on policy performance, the 5% modelled bank-loan rate used in this carrier example, the 90% lending assumption, and the timing and duration of the advances. Full detail: the Insured Retirement Plan guide.
Immediate Financing Arrangement preview.
An Immediate Financing Arrangement establishes the permanent policy, assigns it as collateral, and borrows back a portion of the available cash value so corporate capital can remain deployed in the business or other investments.
The schedule shows deposits, cash surrender value, death benefit, modelled CDA credit, loan advances, loan balance, net cash flow and the projected amount remaining at death. This particular illustration uses a 5% modelled loan rate, the current dividend scale less 1%, and a 50.67% corporate tax assumption.
Results depend on lending approval, interest rates, policy performance, the collateral arrangement and whether the interest and collateral insurance deductions are available on the facts. Full detail: the Immediate Financing Arrangement guide.
What should your illustration be designed around?
- A comfortable base commitment the corporation can support in a weak year.
- The amount of ADO flexibility you want to keep.
- The contribution period you actually expect to fund.
- The earliest offset range you would find acceptable.
- Both the current and the reduced dividend scale.
- Whether cash value will be accessed, and how.
- The primary goal: accumulation, estate value, retirement cash flow or financing.
- The effect any loan would have on eventual estate value.
Questions to ask before accepting an illustration
- What is the base premium, and what happens if we pay only that?
- How much of the annual figure is optional ADO?
- What is the illustrated lifetime ADO room, and how much are we using?
- What do the guaranteed columns show on their own?
- What does the reduced dividend scale do to cash value and offset timing?
- In what year does projected cash value exceed cumulative contributions?
- What is the earliest illustrated offset year, and what does offset at a later year look like?
- If we borrow, what advance rate and loan rate are being modelled?
- What is the projected net estate value after any modelled borrowing?
- What has to be reviewed each year to keep this design on track?
Get a custom illustration for your corporation.
We will build a starting illustration around the amount your company can realistically fund, then show you the base premium, flexible ADO, projected cash value, death benefit and offset options in plain language.
Frequently asked questions.
The base premium is the contractual annual premium for the guaranteed insurance amount. In the example on this page it is $157,092.60 a year. The Additional Deposit Option (ADO) is flexible extra funding — $150,000 a year in the same example — that buys paid-up insurance and can accelerate cash value and death benefit growth. The base premium is the commitment; the ADO is the flexibility.
Yes. Cash value can generally be accessed through a collateral loan from a bank, a policy loan from the insurer, a withdrawal or partial surrender, a full surrender, or by using policy values to support premium offset or a premium-loan provision. Each route has different tax, cost and coverage effects, so the method should be chosen against the objective.
Lenders commonly consider advances of up to roughly 90% of the cash surrender value of a participating whole life policy, and some programs go higher or lower depending on the policy and the lender. The figure is not a policy guarantee: the advance rate, approval and terms are set by the lender at the time of application.
Premium offset means the policy’s own values and dividends are used to support the required base premium, so the owner may stop paying that premium from outside cash flow. The base commitment does not disappear — the illustration shows how policy values may cover it. Offset is based on projected dividends and is not guaranteed.
Yes. The illustrated “earliest” offset year is the earliest illustrated option, not a decision made at purchase. Once offset is available, the owner can elect it in that year or later, or keep funding. Many owners also adjust or stop the ADO while continuing the base premium.
No. Manulife’s current 6.35% Dividend Scale Interest Rate is one input into how dividends are determined; expenses, mortality and insurance experience, taxes and other factors also matter, and insurance costs are already reflected in the illustrated values. Judge the policy on contributions, projected cash value, death benefit, offset timing and the reduced-scale scenario.
Where a corporation borrows for an eligible income-earning purpose and the statutory requirements are met, interest may be deductible, and a separate collateral insurance deduction may be available where its conditions are satisfied. Deductibility depends on the use of funds, the lender arrangement and the corporation’s tax position, and should be confirmed with your CPA.
When a corporation is the beneficiary, the death benefit is generally received tax-free, and the amount exceeding the policy’s adjusted cost basis may be credited to the corporation’s Capital Dividend Account. Subject to a valid s.83(2) election and the applicable rules, capital dividends can then be paid to Canadian-resident shareholders without personal tax.
At a minimum: date of birth, sex at birth, smoker status, province of residence, and the approximate annual amount the corporation can fund. Ownership (personal or corporate) and the primary objective — accumulation, estate value, retirement cash flow or financing — shape the design. Underwriting later refines the final rate.
Where to go deeper.
These pages carry the technical detail behind the numbers on this page.
Footnote
This publication is protected by copyright. Goald & Co Financial Inc. is not engaged in rendering tax or legal advice. This guide contains a general discussion of insurance illustration mechanics and should not be construed as tax or legal advice. Should you wish to discuss this or any other Goald & Co guide, please contact info@goald.ca.
Build the illustration around your numbers.
We start with what the corporation can genuinely fund, then show the base premium, the flexible ADO, projected values and offset options in plain language.
Get a custom illustrationDisclaimer. These examples use actual Manulife illustrations dated August 5, 2026, prepared for a hypothetical 43-year-old male non-smoker. They are educational examples, not quotations or recommendations. Dividends, non-guaranteed values, premium-offset timing, interest rates, lending availability and tax results are not guaranteed. Insurance and lending are subject to approval. Tax treatment depends on the policy owner’s circumstances and should be confirmed with qualified tax and legal professionals.