Universal Life – flexible coverage for a changing life

What is Universal Life?

Like all permanent life insurance policies, universal life (or UL) policies require a premium payment, usually made monthly or annually, which covers the cost of insurance. Cost of insurance varies based on many factors, such as the age of the life insured when the policy is issued, gender, smoking status, medical rating, and coverage amount.

However, UL is different from other types of life insurance in that it has two elements: the insurance component and the investment component. Unlike other types of insurances, such as whole life permanent insurance, UL allows you to “overpay” and turn your policy into an investment vehicle. More on this below!

If you have any questions please feel free to contact us today.

How Universal Life Works

UL allows for policyowners to “overpay” or “overfund” the policy, essentially using it as an investment vehicle. Any deposits into the policy above the regular premium amount are invested according to the policyowner’s instructions. Depending on their risk tolerance, they may choose to invest in conservative, balanced, or aggressive investment options. As long as required premiums are paid, policyowners have the freedom and flexibility to adjust their payments based on their needs and income consistency. Any extra payments are added to the death benefit, and will be paid out tax-free to the policyowner’s named beneficiaries. Or the policyowner may decide to withdraw these extra funds at some point – they may qualify as taxable income if that is the case.

Is Universal Life Right for You?

Universal life may be the right option for you if…

• Your income is cyclical – UL allows for more flexible premium payment options throughout the life of the policy

• You’ve maxed out your TFSA and RRSP contributions, and still have more to invest

• You want an active role in managing the investment options within your policy

• You’re looking for customizable, flexible coverage that can grow with you

Benefits of Universal Life Insurance

• Coverage is permanent, as long as required premiums are paid

• UL policy premiums tend to be lower than for other types of life insurance premiums

• Cash value can grow tax-free within the policy, subject to government limits

• You may be able to increase, decrease, or possibly even stop premium payments

• Policies can be customized with respect to payment options and frequency, coverage amount and type, payout options, riders, and other benefits

Types of Universal Life Coverage

Minimum Funded Life Pay

• You pay only required premiums, and premiums are payable for the life of the insurance policy

• Most suitable for people looking for simple, permanent coverage, with the lowest initial premium

Minimum Funded Limited Pay

• You pay only required premiums, and premiums are only payable for a specific period, most commonly 10 or 20 years

• Most suitable for people looking for simple, permanent coverage, with a limited premium payment period

Overfunded Universal Life 

• You pay required premiums, and also make additional deposits to use the policy as an investment vehicle

• A great solution for people who have run out of TFSA or RRSP contribution room, or for corporations

Why are people flocking to online insurance?

Choice, flexibility, and convenience. Gone are the days where one insurance company has the best of everything. Let us take care of your due diligence and find the right coverage with the right company.