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    Why choose LSM Insurance for Universal Life Insurance?

    Term 1
    #1 Independent MGA in Canada
    Term 2
    15 offices across Canada, 220 dedicated employees
    Term 3
    $6B in managed assets
    Term 4
    56,000 applications processed per year

    What is Universal Life Insurance?

    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.

    Sample Universal Life Insurance quotes

    Male, 44 years old, non-smoker, level COI, minimum funded, no serious health pre-conditions, universal life insurance policy for $200,000 coverage


    Best quote: $196 per month

    Female, 35 years old, non-smoker, level COI, minimum funded, no serious health pre-conditions, universal life insurance policy for $500,000 coverage

    Best quote: $251 per month

    Male, 51 years old, non-smoker, level COI, minimum funded, no serious health pre-conditions, univeral life insurance policy for $200,000 coverage


    Best quote: $262 per month

    Universal Insurance: Expert Summary

    Lorne Marr from LSM Insurance shares his experience:

    “Universal Life policies are a type of Permanent Life Insurance policy. They offer more flexibility than Whole Life type policies and most Universal Life policies have a minimum and a maximum premium and you can put extra money into a savings component that can grow on a tax-shelter basis.

    Universal Life policies also come with a variety of cost of insurance. You can have a cost of insurance where it increases as you get older or you can have a level cost of insurance. Universal Life policies can have a level death benefit or an increasing death benefit.

    So, I guess, the take-away message with a universal life policy is that there is a lot of flexibility in those policies and you gonna wanna work with an independent broker who can customize that policy to your specific needs.”

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    What do you need to know about Universal Life Insurance – expert explains

    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.

    Interested in Universal Life Insurance or have questions?

    When do you need Universal Life Insurance?

    There are numerous cases in which whole life insurance is your best option:

    1. You want to have life-long coverage that does not expire.
    2. You want flexibility in monthly contributions and the ability to choose level or increasing death benefit options.
    3. You want a combination insurance and investment product.
    4. You want to decide how your investment component is invested. This policy will let you choose a savings account, GIC, or index based investments.

    How does Universal Life Insurance compare to other products?

    Here is a brief comparison of how universal life insurance compares to term life insurance and whole life insurance.

     Term Life InsuranceWhole Life InsuranceUniversal Life Insurance
    Coverage lengthLimited (e.g. Term 10 – coverage for 10 years)Life longLife long
    Insurance coverageYesYesYes
    Cash accumulationNoYesYes
    Can choose amounts going into insurance and cash accumulationNoNoYes

    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.

    What are Universal Life Insurance rates?

    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.

    Interested in Universal Life Insurance or have questions?

    Four key tax advantages of universal life insurance

    1. Accumulation fund grows on a tax-sheltered basis. Each universal life policy has a minimum and maximum premium. The minimum premium generally covers the cost of insurance and any administrative charges, and anything above the minimum premium, up to the maximum, goes into the policy accumulation fund. This accumulation fund grows on a tax-sheltered basis. Most insurance companies have a range of investment options that the insured can choose from.
    2. Death benefits are paid out tax-free.
      Applicants can choose between a level death benefit or an increasing death benefit. The increasing death benefit pays out the base amount plus the accumulation fund. Both amounts are paid out to the beneficiary tax-free.
    3. Premiums withdrawn from the accumulation fund are paid with pre-tax dollars.
      When the applicant uses the policy accumulation fund to offset future premiums, he or she is essentially paying their premiums with pre-tax dollars. The money within a universal life policy or the accumulation fund within the universal life coverage grows on a tax-sheltered basis. If the fund never leaves the policy and is used to offset future premiums, there are no tax implications.
    4. Universal life contributions do not impact RSP or tax-free savings account contribution limits.
      Universal life contributions are stand-alone contributions that do not impact other retirement or tax-free savings account contribution limits.

    Expert tip from Steve Hazlehurst

    “When I think of Universal Life, I think flexibility. The option to pay the bare minimums to keep the policy going, or to over contribute and grow the investment inside the policy (which you also have the flexibility to choose). The ability to choose from an annually renewing cost of insurance, or to level it from the get go. Cash values generated inside the policy can pay for future monthly premiums, can be withdrawn, or can be used as collateral to obtain a tax-free loan.

    For example, Term life insurance is more rigid. It is a little more boring, but because you can usually get a lot more coverage for the money, this is going to be the right solution for the majority of people. When shopping for my clients, I am admittedly looking for the best deal, but also matching that with companies who have a strong reputation and good conversion options, in the case the client wants to exercise their right to convert their policy to permanent insurance (Universal Life or Whole Life) down the road.

    More from Steve Hazlehurst

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    Five Essential Tips for Buying Universal life Insurance

    Expert tip from Eric Watchorn

    “When considering a permanent policy, the main client differences pertain to the extra contribution of the-beyond the bare insurance cost.

    As discussed, pure permanent insurance is simply defined as Term100 with a level death benefit. As with shorter term coverage, the costs is pure insurance, with no overage, no performance, no side account.

    Universal Life is an extension of the Term100 policy type that allows clients to have a side-account that can allocate extra cash into pure savings with nominal performance and yet good safety, all the way to some equity allocations, bonds, treasury bills etc. At death these extra sums are added to the base death benefits as well.

    Although Universal life coverage often includes several investment options, most people like to see their insurance policies resemble low or no risk, and such, also as an asset to the family net worth statement, and therefore, most keep the side account as low risk and an added savings component to possibly enhance and add to the existing death benefit coverage.

    More from Eric Watchorn

    When purchasing a universal life policy, there are many variables to examine. The following five tips can assist in the process:

    1. Determine whether you want a level cost of insurance (COI) or increasing cost of insurance. A level COI guarantees that your cost of insurance remains level for life and you will not be surprised by future increases. Whereas an increasing COI provides you with lower initial cost of insurance escalating on an annual basis. The advantage of increasing COI is that it can result in a higher cash accumulation in the early years of the policy. The disadvantage is that if the investment component does not perform as expected, the insured can be left with drastically escalating premiums or a policy which is about to lapsed.
    2. Determine which death benefit option best fits your needs. Generally speaking, universally life policy allows you to choose between an increasing death benefit which is the basic face amount plus any accumulation, and a level death benefit which is limited to the basic face amount. When choosing a level death benefit option, the risk charge can reduce as your cash value builds up, thus resulting in lower risk charges and higher cash accumulation.
    3. Choose the investment option which best fits your risk profile. Most universal life policies let you choose a savings account, GIC, or index based investments. Be careful to examine the Management Expense Ratio (MER) associated with the index based investments.
    4. Verify if you have accessibility to your cash value in the early or later policy years. Many universal life policies have high surrender costs should you terminate your coverage in the early years. It’s essential that this is clearly explained by your broker.
    5. Work with an independent broker. Universal life policies can vary dramatically from one company to another and it’s crucial you work with a trusted independent broker who can give you unbiased advice.
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