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Insights & advice

Commonly asked questions about premium offset

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Premium offset–which also be known as Premium Vacation™ and the abbreviated premium payment option (APPO)–can be a complicated topic. To help you understand it better, we’ve answered some of the most common questions people have about it 

Is premium offset included with my policy?

Yes, but it doesn’t start automatically. You can request it when there’s enough value built up in your policy by contacting your advisor or our Client Service Centre. Important: We don’t guarantee when a policy will have enough value to start premium offset or how long a policy will support premium offset.

Why has my premium offset start date changed?

The illustrated premium offset start date is based on the then current dividend scale and your policy details at that time. The illustrated premium offset start date for your policy can change for many reasons, including changes you make to your policy and dividend scale adjustments. We review the dividend scale at least once a year and can’t guarantee future dividends.

When can I start premium offset?

This is specific to your policy and will depend on future dividends, which aren’t guaranteed. For details, please contact your advisor. If you don’t have an advisor, please contact our Client Service Centre and they’ll put you in touch with someone who can help.

You still pay premiums when you’re on premium offset but use any dividends earned by your policy to cover those costs instead of paying them out-of-pocket. How long you’re required to pay premiums depends on the type of participating life insurance policy you bought, changes you make to your policy and dividends.

My dividend is more than my policy’s premium this year, so why can’t my policy start premium offset now?

  • Your current illustrated dividends, and previously accumulated paid-up additional coverage, must be enough to cover the cost of your premium payments for all future years. We use the dividend scale in effect at that time to calculate future illustrated dividends.
  • If you have the enhanced coverage dividend option as well as premium offset, your dividend pays for one-year term insurance first, before paying your policy’s premium and there may not be enough left to pay your premium.
  • If you have a former Prudential policy (with a policy # that starts with 09F) or a Great-West Life policy issued before 2012, your current policyowner dividend and illustrated future dividends must be high enough to cover current and future premiums, based on the dividend scale at that time.

Why are premium offset dates different between policies?

If we distribute participating policyowner dividends, we divide them among groups of policies with common attributes including: the year a policy was issued; the smoking status, sex and issue age of the insured person. This means some policies that seem similar may receive different dividends. Since dividends have a direct impact on premium offset, two policies that receive different dividends may have different premium offset dates.

I have a policy loan. Can I go on premium offset?

Yes, if you have a Canada Life, Great-West Life or former Prudential policy, or if you have a London Life policy and your policy was issued on or after Jan. 1, 2017. However, if you have a policy issued by London Life before Jan. 1, 2017, you need to repay your policy loan and any accumulated interest before you can go on premium offset.

Can I take out a policy loan while on premium offset?

Yes, if you have a Canada Life, Great-West Life or former Prudential policy, or if you have a London Life policy and your policy was issued after Jan. 1, 2017. However, if you have a policy issued by London Life before Jan. 1, 2017, you can’t take out a policy loan while on premium offset.

Can I make additional deposits (using the additional deposit option) when I’m on premium offset?

No. To make additional deposits, you must stop premium offset.

Does additional deposit option (ADO) increase my premium offset flexibility?

ADO increases premium payment flexibility because additional deposit payments buy paid-up additional insurance coverage. If you don’t receive enough policyowner dividends to cover your policy’s premium payment when your policy is on premium offset, we’ll cancel some (or all) of your available accumulated paid-up additional coverage (which ADO helps build), in exchange for its cash value. We’ll use this cash value to cover the rest of the premium payment.

ADO can increase your premium offset flexibility by potentially:

  • Moving up the date when you can start premium offset
  • Allowing you to stay on premium offset longer
  • Make your policy’s premium offset start date (or staying on premium offset) less sensitive to dividend scale changes

Who can I talk to for help?

For details on your policy, contact your advisor. If you don’t have an advisor, please contact our Client Service Centre and they’ll put you in touch with someone who can help.

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