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Infinite Banking in Lévis

Lévis faces Quebec City from the south shore, high on the cliffs. It is also the birthplace of Canada's co-operative financial movement, which gives its readers a rare advantage: they already understand what a member-owned institution is.

The city across the river, and what began here

Levis occupies the heights of the south shore facing Old Quebec, with the ferry connecting the two sides year-round. The Forts-de-Levis National Historic Site preserves the nineteenth-century defences, and the Levis terrace gives the view the city opposite cannot have of itself.

It is also where Alphonse Desjardins founded the first caisse populaire in 1900, and where Canada's co-operative financial movement began. That gives readers here a rare advantage on this subject: you already understand what it means for a financial institution to belong to its members rather than to outside shareholders. So this page can be more precise than most.

What participating actually means, and what it does not

A participating policy is issued by an insurer that distributes a share of its participating account's experience to the holders of those contracts. That resembles the model you know, and the resemblance is real but partial. It is worth being exact about the two points where it stops.

First, dividends are not guaranteed. They are declared annually by the insurer's board of directors based on the account's experience: investment results, mortality, expenses. A good year promises nothing about the next, and the scale can be revised downward.

Second, a participating policyholder is not an owner of the insurer in the way a member owns their co-operative. They hold a contract entitling them to a share of declared dividends, which is not the same as a vote on governance. Anyone presenting this strategy by telling you that you become the owner of an institution is telling you more than is true.

What the cost of living adds

Housing in Levis remains more affordable than on the north shore while offering full access to the capital region's economy. That is a real advantage for this strategy rather than a detail: the whole structure rests on premiums maintained without interruption for decades, and a household whose mortgage does not consume everything reaches the stable surplus the arithmetic needs far sooner.

The counterpart is that the usefulness question gets harder. Levis carries substantial financial sector, public service and health employment, and therefore a great many workplace pensions. If you hold a defined benefit plan, half the usual argument does not apply to you: it already provides a lifetime income that does not depend on markets. What remains is access to capital during your working life, because a pension is not collateral, and the survivor question, which depends on reading your own plan.

The two Quebec rules that bear on access

A designation naming a married or civil-union spouse is presumed irrevocable in Quebec unless declared otherwise. Elsewhere in Canada it is revocable by default. An irrevocable designation cannot be changed without the beneficiary's consent and can restrict the ability to request a loan or assign the policy as collateral. For a reader drawn to this strategy precisely because of the access, that is the first thing to verify.

Exemption from seizure is the second. It depends on the class of beneficiary, on when the designation was made and on the circumstances. It is never absolute and it disappears if the policy is assigned as security for a loan.

Where it does not fit

A reader with a strong indexed pension, no dependants, no corporation and no identifiable capital need is a poor candidate. So is a household early in a mortgage, without an emergency reserve, or carrying high-interest consumer debt. Cash surrender value is typically below cumulative premiums for many years and commonly for more than a decade, so an early exit is a loss.

Nothing on this page is advice. No assessment has been made of anyone reading it, and the author is not a neutral party: he is licensed to sell the contracts this strategy uses and is paid a commission when one is placed. Ask for the illustration in French, which is your right under the Charter of the French Language, read the guaranteed column first, check the licence in the AMF register, and take the answers to an accountant and a notary of your own choosing.

One closing word this city's history makes plain. The first caisse was founded on modest deposits and it lasted because nobody abandoned it partway. That is exactly what separates an arrangement that works from one that costs money. Nobody loses conviction in year one. They lose it in year seven, when nothing spectacular has happened yet. If you already know you will be tempted then, say so at the start and begin smaller.