Universal life insurance is a policy that covers a policyholder as long as he/she lives. On top of being insurance, it is also a saving product because universal life insurance accumulates cash value.
It is different from whole life insurance. Universal life insurance is an “unbundled insurance.” This means you can vary your monthly deposit, choose a level or increasing death benefit option, or tailor your investment choices within a tax sheltered account.
This type of insurance was created to correct the drawbacks of whole life insurance.
You can find out more about this product from the video below.
Male, 44 years old, non-smoker, level COI, minimum funded, no serious health pre-conditions, universal life insurance policy for $200,000 coverage
Female, 35 years old, non-smoker, level COI, minimum funded, no serious health pre-conditions, universal life insurance policy for $500,000 coverage
Male, 51 years old, non-smoker, level COI, minimum funded, no serious health pre-conditions, univeral life insurance policy for $200,000 coverage
Video transcript:
Lorne Marr from LSM Insurance shares his view: Universal life insurance is a permanent type of life insurance. There are really three types of permanent insurance in Canada. There is term 100 insurance, which is a permanent policy with no cash value. There is whole life insurance which is a permanent policy with a built-in cash value. And lastly, there is universal life insurance which is a very flexible form of permanent life insurance. It allows you have lifetime protection and an optional savings element.
Universal life insurance policies also allow you to choose between a variety of cost of insurance options and the investment component; you can choose between no-risk type of investments, such as GICs, guaranteed investments, or equity type of investments and those can be a Canadian equity fund, a US equity fund, could be a balanced fund. You do have to watch out for the MERs on some of these funds as they may be a little higher than outside MERS, however, it offers some unique tax sheltering and some companies even offer into the hundreds of investment options.
What’s really good for the person who wants to have a life insurance policy and wants to
have more flexibility with what they do in terms of the investment side of things. That investment component can even be used to take a premium holiday, if you need to miss a premium, or if you want to have a policy paid off in a limited number of years. It offers a lot of flexibility, there is a lot of differences between companies. It’s very important to that if you’re looking at a universal life policy, that you work with a broker who has access to all the different companies and can provide you unbiased advice.
There are numerous cases in which whole life insurance is your best option:
Here is a brief comparison of how universal life insurance compares to term life insurance and whole life insurance.
| Term Life Insurance | Whole Life Insurance | Universal Life Insurance | |
|---|---|---|---|
| Coverage length | Limited (e.g. Term 10 – coverage for 10 years) | Life long | Life long |
| Insurance coverage | Yes | Yes | Yes |
| Cash accumulation | No | Yes | Yes |
| Can choose amounts going into insurance and cash accumulation | No | No | Yes |
A universal life insurance policy allows you to decide if the investment portion of your monthly contribution will be invested into a savings account, GIC, or index based investments.
Universal life insurance rates vary depending on your choices – you can decide on a monthly basis how much you will contribute. Typically, universal life insurance policy rates will be higher than term life insurance’s rates since you are choosing life-long protection with the additional feature of an investment component.
