7.3 Term-100 (LCOI, little/no CSV) and Limited-Payment Whole Life

How Term-100 works

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Term-100 is badly named for exam traps. It is not a 100-year term that expires like Term 20. It is permanent insurance. The “100” refers to the usual premium-paying period and the level-cost pricing to age 100. If Samir Rahman, 58, Calgary, buys $300,000 of T-100 and dies at 91, the beneficiary is paid. If he dies at 102, many Canadian T-100 contracts have already become paid-up at 100 and still pay. Coverage is for life, provided premiums due before that paid-up point were paid.

What T-100 usually does not do is build a meaningful cash surrender value. Global Pacific and other Canadian product notes state the industry pattern: T-100 typically does not accumulate cash values, though a given contract might show a CSV at a stated duration — read the specimen. The Canada Protection Plan glossary used in the market describes T-100 as lifetime coverage with a level premium, often paid-up at 100, and says non-forfeiture such as reduced paid-up may be available. CISRO’s curriculum still flags the teaching use-case as the client who does not need non-forfeiture. Translate that as: do not recommend T-100 to someone whose goal is a savings account, a future policy loan, or a rich reduced-paid-up fallback. Some carriers (Empire Life’s Term to 100 material, for example) print guaranteed reduced paid-up values starting in a later year — that is a modest safety net, not traditional whole-life CSV.

FCAC’s consumer page says permanent policies usually build cash value. T-100 is the curriculum’s deliberate exception inside the permanent family. If a stem says “permanent, cheapest lifetime face, client refuses a savings component,” T-100 is the chassis. If the stem says “permanent and she wants to borrow in 15 years,” you are back in whole life (or UL), not T-100.

Level cost of insurance (LCOI)

CISRO lists LCOI as a T-100 content, not as trivia. Yearly renewable term (YRT) charges the current year’s mortality: cheap at 40, brutal at 80. LCOI averages that lifetime mortality into a level insurance charge. On a standalone T-100, you see LCOI as a level premium to age 100. The insurer is doing the same economic job as a whole-life level premium — prefunding later mortality — but it is not building a large owner CSV. The prefunding stays in the insurer’s pricing/reserve for the death claim, not in a surrender cheque for Samir.

That is why T-100 can cost more than Term 20 and less than traditional whole life for the same $300,000. You are buying lifetime mortality on a level ticket without paying for the savings component.

Do not import UL vocabulary into a T-100-only stem. Inside universal life, the owner may choose YRT or LCOI/T-100-style cost of insurance as an unbundled charge against an account. That choice appears in Chapter 8. On this paper, if the product is Term-100, LCOI is how the premium stays level for life, not an investment option Samir picks each January.

Worked illustration — not a quote — $300,000, male 58, non-smoker:

Samir is 58, will retire at 62, owns shares that will trigger a deemed disposition at death in an unknown year, and says he does not want a savings product or to manage a UL account. Cash flow in retirement can support $3,400 a year more easily than $7,200. T-100 matches CISRO’s long-term / no-non-forfeiture example. If he later wants a loan against a policy, he does not have one; that limitation must be disclosed at recommendation, not at claim time.

Advantages and disadvantages of T-100

Advantages. Permanent duration at a lower premium than cash-value whole life. Level premiums, so there is no Term-20 renewal cliff at 78. Simple: no dividend scale, no investment account, no deposit max to police. Fits estate liquidity, final expenses, and dependents who will need support whenever death occurs, when the client will not pay for CSV. Can be a conversion target when a term clause lists T-100 (Chapter 6) and the client wants permanence without funding PUAs.

Disadvantages. Little or no CSV, so no meaningful policy loan, weak non-forfeiture, and nothing back if Samir lapses at 74 after paying for 16 years. Premiums often run to age 100 unless a limited-pay T-100 is used — a long bill in a long retirement. No participating dividend engine. Inflation still erodes a level $300,000. If cash flow later breaks and there is no CSV to APL, the lifetime need becomes an uninsured death. Some clients hear “Term-100” and think they bought term. Document the word permanent.

When T-100 is appropriate (CISRO). Needs are long term and non-forfeiture benefits are not required.

• Samir’s share-gain tax at death: long term, he does not want savings. T-100.
• Funeral and a small legacy at whatever age: T-100 or a small guaranteed whole life; T-100 if they refuse CSV.
• Adult child with a disability who will need support after both parents die: permanence required; T-100 if budget cannot fund whole-life CSV and they accept lapse risk with no safety net — or a modest whole-life base if they need RPU as a backstop.
• Not T-100: a 10-year mortgage only (use term). A client who asked for a retirement side fund (use whole life or UL). A client who will need to borrow from the policy (whole life). A client who wants premium offset (par whole life, with the scale warning from section 7.2).

Limited-payment whole life

CISRO lists limited payment whole life as its own whole-life content. It is not T-100 with a nickname.

Limited-pay whole life charges a higher premium for a shorter period — commonly 10-pay, 20-pay, paid-up at 65, or a single premium — after which the base policy is paid-up. Coverage continues for life. CSV typically continues to grow, especially on participating plans whose PUAs still credit after premiums stop. The owner still has policy loans and the non-forfeiture menu. RBC Insurance’s current whole-life consumer page, for example, lists life pay, 10-pay, and 20-pay on participating whole life: after 10 or 20 years, base premiums stop and coverage remains. That is one carrier’s menu, not a national statute, but it is the product shape the exam tests.

Keiko Sato, 40, Vancouver, specialist physician in peak earnings, wants $500,000 of permanent coverage paid-up before she cuts back at 60, and she wants CSV for a possible later collateral assignment. 20-pay whole life fits: she pays a large premium for 20 years (hypothetical $11,000 a year versus $6,400 life-pay), then the base is paid-up at 60. T-100 would be cheaper annually but would not give the savings component and would not finish in 20 years unless she bought a limited-pay T-100 — which still would not create traditional CSV. Life-pay whole life would leave premiums due in retirement, which she wants to avoid. Term 20 would expire at 60, the opposite of her goal.

Juvenile and high-cash-flow uses. A grandparent who pays 20-pay whole life on a child so the child reaches adulthood with paid-up coverage is a classic limited-pay file. A business owner who just sold a division and can write a single premium (subject to exempt-test and underwriting limits) is buying a paid-up contract immediately. Limited-pay is how you match front-loaded cash flow to a lifetime need without pretending T-100 is a savings plan.

Exam traps. “20-pay” does not mean 20 years of coverage. “Term-100” does not mean Term 20 that renews to age 100 at the old rate (that would be a renewable-term clause). LCOI on T-100 is not a dividend. A limited-pay whole life that is paid-up is not automatically on premium offset; offset is a par dividend projection, whereas limited-pay paid-up is a contractual end to base premiums. You can have a 20-pay par whole life that is contractually paid-up in year 20 and still illustrates extra PUAs; the paid-up date on the base premium is guaranteed if she paid the 20 premiums, while the extra illustrated death benefit is not.

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