Universal Life Insurance in Canada:Five Essential Tips for Buyers

Universal Life Insurance provides with you an extremely flexible form of life insurance. You can vary your monthly deposit, choose a level or increasing death benefit options, as well as tailor your investment choices within a tax sheltered account. 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.

Also check out what our insurance partners have to offer:

AIG Life, for example, offers joint life coverage with a twist. One of the best plans around is Canada Life’s universal life plan. Co-operators’ universal life plan has multiple investment options, flexible premiums and level or increasing death benefits. Empire Life’s universal life plan, branded “Trilogy”, is one of the most flexible universal life plans in the industry.


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  • Jonus
    October 10, 2013 at 8:27 pm

    What is the difference between a Universal Life Option A Death Benefit and Option B my policy which I took a while ago references this

    • LSM Insurance
      October 11, 2013 at 12:45 pm

      Hi Jonus, Some older policies worder the option this way. Option is a level death benefit and option b is an increasing death benefit – face amount plus accumulation fund.

  • Allen
    May 14, 2013 at 9:51 pm

    If I cash in a universal life policy do I receive the net policy value or net cash surrender value? Allen

    • LSM Insurance
      May 15, 2013 at 8:34 am

      Thanks Allen. You would receive the Net Cash Value this would factor in any surrender penatlies. Many Universal Life policies have surrender charges in the first 7 to 10 policy years.

  • Rahul
    May 14, 2013 at 4:01 pm

    If I am healthy, would you ever recommend switching term life insurance companies every couple of years to save on premiums? Regards, Rahul

    • LSM Insurance
      May 14, 2013 at 4:12 pm

      If it is a Term 10 policy. This strategy may make sense, but keep in mind that you have to go through a new two year suicide and incontestability period on your policy. So make sure you are truthful on the new application, your broker should have you complete and sign a replacement form when required this will help ensure you are comparing an apple to an apple. Also it probably most important do not cancel the existing plan until the new plan is in place.