Universal Life Insurance

Universal life insurance is a type of cash-value life insurance that provides flexibility in paying premiums and a death benefit. It’s guaranteed, lifelong protection that lets you invest and build your wealth. The cash value component represents the equity that generates a rate of return.

What is Universal Life Insurance?

Universal life insurance offers lifelong protection that lets you invest and build your wealth. You can borrow from your policy with certain tax implications. You decide where to invest your money and the amount you pay. With regular premium payments, you accumulate a tax-sheltered fund. Part of your premium pays for your insurance coverage. Investments may be withdrawn prior to the death of the insured. Universal life insurance is ideal for Canadians who:

Have maximized RRSP, TFSA & RESP contributions and have little to no debt
A business owner transferring significant accumulated earnings to beneficiaries

Universal Life Insurance vs. Whole Life

Universal life insurance and whole life insurance are both types of permanent life insurance, but they have some key differences:

Whole life insurance is a traditional form of permanent life insurance that provides a guaranteed death benefit and a guaranteed cash value component. The premiums for whole life insurance are generally higher than those for term life insurance, but they remain level for the life of the policy. The cash value component of a whole life insurance policy grows at a guaranteed rate and can be used to help pay future premiums, or it can be borrowed or withdrawn, subject to policy terms and conditions.

Universal life insurance, on the other hand, combines the features of term life insurance and investment accounts. Like whole life insurance, it provides a death benefit and a cash value component. However, the premiums for universal life insurance are generally more flexible and can be adjusted based on the policyholder’s changing needs and circumstances. The cash value component of a universal life insurance policy is invested, and the investment returns are credited to the policy’s cash value, which can grow faster than the guaranteed growth rate offered by whole life insurance.

In summary, whole life insurance provides a guaranteed death benefit and cash value, while universal life insurance offers more flexibility in premium payments and investment options, with the potential for higher returns on the cash value component. The best choice between the two depends on the policyholder’s goals, financial situation, and risk tolerance.

How Does Universal Life Insurance Work?

Universal life insurance is a type of permanent life insurance offering death benefit protection and savings. The savings component of a universal life insurance policy is invested, and the growth of the investment is credited to the policy’s cash value. The policyholder can choose to pay premiums that are higher than the minimum required to keep the policy in force, and the excess premiums are credited to the policy’s cash value. The cash value can then be used to help pay future premiums or be withdrawn, depending on the policy’s terms and conditions.

One of the main advantages of universal life insurance is that it provides policyholders with more flexibility than traditional whole life insurance. For example, policyholders can change the death benefit amount, premium payments, and investment strategy as their needs and circumstances change over time. This makes universal life insurance a popular choice for people who want to have more control over their life insurance coverage and investment options.

Who is Universal Life insurance For?

Lifetime protection to preserve your estate
Are from age 0 to age 85
Choose how much to pay into your policy and how you want to pay your premiums
The opportunity for tax-preferred growth in savings
Leave a tax-free legacy for your loved ones
Coverage ranges from $25,000 to $5,000,000
Choice of a wide range of investment account options

Can You Cash Out a Universal Life Insurance Policy?

There are several ways you can take cash out of your universal life insurance policy. But when you withdraw from your policy or take a policy loan, your total death benefit may decrease. Three common ways to take cash from a policy (if there’s enough cash value) are:

Partial Withdrawal: you can withdraw a portion of your cash at any time over the policy minimum
Policy Loan: allows you to access cash by borrowing against the policy fund and repay at any time
Full Withdrawal: if you cancel your policy, you will receive the cash surrender value minus any fees, loans, or market value adjustments

Nic Tustin, BA Econ

I used my experience from Sunlife, BMO, TD, Edward Jones and Canada Life to create apps to help investors pay fewer fees and income tax. I have a degree in Economics from the University of Waterloo, and financial industry designations such as the Canadian Securities Course (CSC), Conduct & Practices Handbook (CPH), Wealth Management Essentials (WME)and LLQP. I primarily focus on tactical asset allocation by actively balancing portfolios to reduce market risk. I’ve built my business on a foundation of integrity, due diligence, and innovation. I have the essential resources and financial expertise to implement these sophisticated strategies and help you understand how the variables, such as length of investment, liquidity of the investment, inflation rate, income taxes, market fluctuations, and interest rate risks can impact the results you want to achieve long term.