Universal Life Insurance and the Advantage of Having a Tax-Exempt Policy

Universal Life insurance policies can offer Canadians a unique tax-sheltered opportunity.

Universal life insurance plans have a minimum and maximum premium. Any additional funds deposited above the minimum premium payment will go towards the policy investment fund, which builds on a tax-sheltered basis up to the maximum premium.

Thankfully, this maximum premium is linked to the Maximum Tax Actuarial Reserve (MTAR) limits, which means that any portion above this amount will not grow on a tax-sheltered basis. Additional advantages of a Universal Life policy are the following:

1. Many carriers have a wide variety of investment options — just look at BMO Insurance, which has over 400.

2. The accumulation fund within a universal life policy can be paid out tax-free on top of the policy face amount. This allows the insured to have funds grow on a tax-sheltered basis and still guarantees their beneficiary is paid out tax-free when the insured pass on.

3. The entire accumulation fund can be used to offset future premiums. This is another significant benefit because the insured are essentially paying their insurance premiums with pre-tax dollars rather than after-tax dollars.

For more details on Universal Life Insurance and the tax advantages that it offers, please contact us at 1-866-899-4849 or visit our Universal Life Quote Page.

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  • Connie Rutz
    May 14, 2013 at 10:02 am

    Most consumers are unaware of life insurance. If you do a search for life insurance, you should find several helpful sites and articles to assist you. It is very important to rely on professional help to guide you with the numerous options available.

    • LSM Insurance
      May 14, 2013 at 1:59 pm

      Hi Connie,

      Thanks – you make a good Point Universal Life is a complex type of insurance, there are many investment and cost of insurance options. You can also add a variety of benefits and riders to most plans.