Whole life dividends explained: How they work

Whole life insurance dividends are a share of an insurer’s surplus profits paid to participating policyholders. If you own or are considering buying a participating whole life insurance policy, dividends can be a major driver of your long-term cash value.

They’re not guaranteed, but when paid, you can use them to lower premiums, buy extra coverage, or take cash. This guide explains how dividends work, what affects them, and highlights the best dividend-paying whole life insurance companies in Canada.

What are whole life insurance dividends?

Whole life insurance dividends are non‑guaranteed profit shares declared annually for participating (“par”) policies. They reflect the par account’s experience (investments, claims, expenses) and can increase long‑term value via options like paid‑up additions, premium reduction, or cash. It’s important to note that dividends are not guaranteed, and the dividend rate is not the same as your cash value growth rate.

Key features of whole life insurance dividends:

• Available only on participating whole life policies: Non‑participating policies do not receive dividends
• Performance‑based and not guaranteed: Dividends are declared annually and can change from year to year
• Flexible uses: Use dividends to buy paid‑up additions, reduce premiums, take cash, or leave them to accumulate interest
• Favourable tax treatment in Canada: Dividends used within the policy are generally not taxable; interest on a dividend deposit account is taxable annually. They only become taxable when withdrawn as cash or placed in an interest-bearing side account

How do whole life insurance dividend rates work?

Each year, insurers set a dividend scale for participating policies based on par account results. This scale determines the portion of surplus profits credited to eligible policyholders. Dividend rates are influenced by three core drivers:

• Investments: Strong returns on bonds, real estate, and equities support higher dividends
• Claims: Fewer death claims than expected, increase available surplus
• Operating costs: Lower expenses leave more profit to share

The scale guides how dividends are credited to eligible par policies. It is reviewed and declared annually and can change at any time.

What is a Dividend Scale Interest Rate (DSIR)?

The Dividend Scale Interest Rate (DSIR) is the insurer’s internal estimate reflecting the expected net return of the participating account after taxes, claims, and expenses. It informs pricing and projections, but is not a return paid to consumers. A higher DSIR can support higher dividends, but results vary by product, age, and guarantees. Insurers review DSIRs annually and may adjust them to reflect economic conditions and par fund performance.

Dividend Rate vs. DSIR

The key difference between dividend rates and Dividend Scale Interest Rate (DSIR) is how they impact your policy. Dividend rates are the actual payouts policyholders receive each year, affecting cash value, death benefit, or premiums, and are declared annually based on the insurer’s financial results.

DSIR is the insurer’s internal estimate of how its participating account will perform, used to guide dividend calculations. A higher DSIR indicates stronger potential dividends, but it does not guarantee the amount you will actually receive.

Understanding DSIR helps explain why dividends vary, but what you do with those dividends matters just as much.

What are your whole life insurance dividend options?

When your policy earns dividends, you can choose how to use them. Options include reducing premiums, repaying policy loans, taking cash, purchasing paid‑up additions, or leaving dividends in a dividend deposit account to earn interest. The main options include:

• Paid-up additions (PUAs): Dividends buy small amounts of permanent insurance, increasing both your cash value and death benefit
• Premium reduction: Dividends offset some or all of your future premium payments
• Cash payouts: Dividends are paid directly to you. The taxable portion is any amount that exceeds the policy’s adjusted cost basis (ACB), not the total premiums paid
• Accumulation with interest: Dividends stay in an insurer-managed side account and earn interest (interest is taxable annually)
• Loan repayment: Dividends can be applied toward outstanding policy loans, helping restore your policy’s value

The best dividend-paying whole life insurance companies in Canada

The best dividend-paying whole life insurance companies in Canada are those that consistently deliver strong Dividend Scale Interest Rates (DSIR) supported by stable participating account performance. Dividend strength matters because higher DSIRs can enhance long-term cash-value growth and overall policy performance.

Equitable Life currently offers the highest dividend rate, followed by Manulife and RBC Insurance. Sun Life, Empire Life, and Canada Life also remain competitive with strong participating accounts and reliable long-term results. The list below ranks these insurers based on their DSIR and highlights key strengths of their participating products.

1. Equitable Life dividend rate: 6.40%

Equitable Life’s Equimax Estate Builder and Equimax Wealth Accumulator plans are known for strong dividend performance and long-term growth. These participating plans are supported by a growing $2.73 billion par fund and offer lifetime coverage with 10-pay, 20-pay, and pay-to-age-100 options. Wealth Accumulator provides earlier cash-value access, ideal for building wealth for education, business, or retirement. Estate Builder emphasizes long-term value and supports estate planning by helping cover taxes and fees on asset transfer. Equitable Life’s dividend rate is 6.40%, and dividends can be applied as paid-up additions, enhanced coverage, or cash payouts.

2. Manulife dividend rate: 6.35%

Manulife’s participating plans, including Manulife Par with Vitality Plus, Manulife Par, and Performax Gold, offer affordable and flexible payment terms. They provide lifetime coverage with 10-pay, 20-pay, and pay-to-age-90/100 options, allowing policyholders to complete payments early or spread them over time. These plans are supported by a 138% LICAT ratio, ensuring long-term guarantees, stable dividends, and reliable performance. Manulife’s dividend rate is 6.35%, with dividends available as paid-up additions, premium reductions, or cash payouts.

3. RBC Insurance dividend rate: 6.30%

RBC Growth Insurance and Growth Insurance Plus provide guaranteed cash values and flexible premium options (10-pay, 20-pay, or life-pay). Both plans include the Juvenile Guaranteed Insurability Benefit, allowing a child to purchase additional coverage later without medical exams. Growth Insurance builds long-term, tax-deferred cash value and death benefit, while Growth Insurance Plus accelerates early cash-value accumulation and supports policy loans or collateral use. RBC Insurance’s dividend rate is 6.30%, and dividends can be applied as paid-up additions, enhanced protection, or cash payouts.

4. Empire Life dividend rate: 6.25%

Empire Life’s participating plans, EstateMax and Optimax Wealth, are supported by a $1.21 billion par fund, known for stability and long-term results. EstateMax is designed for conservative estate growth with steady dividend performance, while Optimax Wealth provides smoother, predictable cash-value growth, offering reliable access to liquidity. Empire Life’s dividend rate  is 6.25%, and dividends can be applied as paid-up additions, enhanced protection, or cash payouts.

5. Sun Life dividend rate: 6.25%

Sun Life’s participating plans, Sun Par Protector II, Sun Par Accumulator II, and Sun Par Accelerator, provide strong estate and wealth-planning benefits. The plans are backed by Sun Life’s $21.2 billion participating account supporting over 400,000 active par policies. Sun Par Accumulator II focuses on early cash-value growth for investments, business, or other financial goals. Sun Par Protector II maximizes long-term growth and death benefit for estate planning. Sun Par Accelerator builds cash value faster for earlier access. Sun Life’s dividend rate is 6.25%, and dividends can be used as paid-up additions, enhanced protection, or cash payouts.

6. Canada Life dividend rate: 5.75%

Canada Life’s participating plans, Wealth Select and Estate Select, are backed by the $61.9 billion participating account, the largest in Canada, with approximately 1.4 million participating policies in force. Wealth Select provides early cash-value access for withdrawals or policy loans, while Estate Select focuses on long-term growth and maximizing the death benefit for estate and legacy planning. Canada Life’s dividend rate is 5.75%, and dividends can be applied toward paid-up additions, premium reductions, enhanced coverage, or cash payouts.

Historical dividend rates from 2022 to 2026

The table below shows historical dividend rates from 2022 to 2026 for Canada Life, Empire Life, Equitable Life, Manulife, RBC Insurance, and Sun Life, along with the current rates. These rates show the dividend scale interest rates declared by insurers, which are used as one component in calculating participating policy dividends, and help you compare past performance across these leading Canadian insurers.

How to find the best dividend-paying whole life insurance in Canada

Choosing a dividend-paying whole life insurance policy with strong historical dividend performance can have a significant impact on your long-term cash value and estate planning goals. At PolicyAdvisor, we help you compare participating whole life policies from Canada’s leading insurers. Our licensed experts explain how each plan works, highlight the differences that matter, and guide you toward an option that aligns with your financial goals.