Universal Life Insurance

Universal life (UL), the most flexible form of life insurance, effectively combines permanent life insurance with the benefits of tax-advantaged investing in a single product. You may have heard the saying: "buy term insurance and invest the difference", well Universal Life takes care of both, all in one policy. And while it does have an investment component, you can decide to pay only the insurance and administration costs each month and not use the investment component.

With Universal Life insurance, you pay an amount of money that is deposited into one or more investment accounts. Each month, the insurance company takes out money to cover the cost of the insurance and administrative costs. The money left in the investment account earns a return based on the performance of the investment account(s) you’ve chosen inside the policy. And it’s important to remember that you don’t have to pay tax on any growth in the investment accounts because it is part of a life insurance policy, provided your policy value does not exceed an amount prescribed under the Income Tax Act.

Who Should Consider Universal Life Insurance?

• Individuals or families seeking financial security and wishing to accumulate additional funds (to carry out retirement plans, for example).
• Young dual-income professional couples that can pay the insurance premium more quickly.
• Persons with a higher-than-average income who are looking for a tax-deferred savings vehicle.
• Business people, to finance a shareholders' agreement or insure a key employee.