Universal Life Insurance – Tax-Advantaged Investing

The main advantage of universal life insurance is that it combines life insurance with the growth potential of tax-advantaged investing.

Universal Life Insurance in Ontario

Universal life insurance is guaranteed, lifelong protection that lets you invest and build your wealth. It’s one of the most flexible insurance products available on the market that covers you for life. It is intended to combine permanent life (no end date) insurance coverage with greater flexibility in premium payment, along with the potential for greater growth of cash values. Lots of options and flexibility make universal life insurance a good choice if you want to accumulate wealth and have peace of mind in knowing that your loved ones are well-protected.

If you seek lifetime insurance coverage and tax-advantaged investing, consider universal life insurance.

Understanding Universal Life Insurance

To make it simple: there are two parts to a universal life insurance plan: insurance and investment.

1. Like any other permanent life insurance, the “insurance” part of a universal policy is your peace of mind of knowing that when you pass away your loved ones will be financially protected.
2. The “investment” part of a universal policy is that you can accumulate your wealth tax-free, within limits set by the government. You can withdraw or borrow from your policy, with certain tax implications. You can also choose who to leave your money to.

Universal life plans offer a wide range of investment options, a choice of death benefits, optional benefits and riders, flexible ways to pay your premiums, and innovative ways to access the value you accumulate over the life of your plan.

Generally, there are several types of universal life insurance policies which include variable death benefits, equity indexed universal life insurance and more.

Universal life insurance benefits

• Lifetime insurance coverage
• Greater flexibility in premium payment
• Many tax-advantaged saving options to help set aside more for your retirement, and build value even if options such as your RRSP are maxed out
• How you invest into your policy is entirely up to you, and many insurers offer a variety of indexed, fixed, and guaranteed interest accounts at your disposal.
• Designed to offer more flexibility: you can choose your investments and payment schedule
• Cash value grows at a variable interest rate, which could yield higher returns
• A safe way to build wealth.
• Can protect your estate and provide for your retirement
• A way to continue savings when your RRSP is maxed out
• Tax-favored returns for non-registered assets
• With certain tax implications and within limits set by the government, you can withdraw or borrow from your policy

Flexible death benefit –another advantage of universal life insurance

Flexible death benefit means the policy owner can choose to decrease or increase the death benefit, but that would typically require the insured to go through a new underwriting.

Another feature of flexible death benefit is the ability to choose from option A or option B and to change those options during the life of the insured:

• Option A is often referred to as a level death benefit. Generally speaking, the death benefit will remain level for the life of the insured and premiums are expected to be lower than policies with an Option B death benefit.
• Option B pays the face amount plus the cash value. If cash values grow over time, so would the death benefit which is payable to the insured’s beneficiaries. If cash values decline, the death benefit would also decline. Presumably, option B death benefit policies would require higher premiums than option A policies.

Disadvantages of universal life insurance

• Doesn’t have the guaranteed level premium (that is available with whole life insurance)
• Variable rates also mean that the interest on the cash value could be low
• High regular payments: you may consider universal life insurance if you are financially secure and want to focus on wealth accumulation.

Is universal life insurance right for you?

Consider buying a universal life insurance policy if you want to build upon a solid financial foundation, seek tax-advantaged returns for non-registered assets or want to focus on estate preservation.

Universal life insurance combines permanent life insurance coverage with a flexible portfolio of investment options, customized to your financial needs and aligned with your risk tolerance. In today’s world of complex tax laws, if you want maximum protection for your estate – and universal life insurance can provide it.