What Is Universal Life Insurance?
Universal life insurance is the most flexible insurance protection available. This type of insurance gives you the ability to determine and at times, adjust your death benefit and investment mix. Universal life also provides tax advantages for you as an investor. Build your portfolio while you protect your loved ones.
Universal life insurance offers you two important benefits :
- Savings (often tax-deferred)
- Life insurance coverage for the long-term (usually lifetime)
You determine the blend you want of investment and insurance protection. When you make deposits beyond your prescribed insurance premiums, these funds can be invested and will earn interest. Your investment portion will grow – and tax on your investment will be deferred.
When the value of your policy builds, you can withdraw funds or take out loans against the your account. Like other loans, you will incur interest.
With universal life, you can maintain your level of coverage or you can opt to increase it over time. Or you can choose a combination of level and increasing value of life insurance.
On payout, there are no tax implications for your beneficiaries.
When Should You Buy Universal Life Insurance?
Universal life insurance is an important building block of your long-term wealth strategy. This insurance is designed to protect you and your loved ones and help you build your portfolio throughout your life. It is a popular choice for people who :
- Have no more room for RRSP contributions.
- People who want to augment their estate for children and grandchildren.
- Entrepreneurs and businesses who want to protect their business’s value.
Advantages Of Universal Life Insurance
Universal life insurance offers a unique blend of insurance and tax protection for you now and to your beneficiaries in the future. You have security and opportunity built into one policy. Other advantages include :
- When paid out on death, the policy usually provides tax-free inheritance for your beneficiaries.
- Under current federal tax law, investment growth is tax-deferred – an income tax savings for you now.
- Universal life insurance is flexible – you decide the blend of life insurance and premium payments.
What Universal Life Insurance Does For You
Universal life insurance is an investment vehicle for you as well as long-term insurance. It does the following :
- Provides a death benefit.
- Can be used for unexpected needs such as funeral expenses, loss of income or even mortgage pay out.
- Can assist you in business planning.
- Helps with wealth management and growth.
- Can be used as tax-deferred savings.
Tips For Purchasing Universal Life Insurance
- Speak to an insurance professional : Universal life insurance is more complicated than other types. Speaking with a professional will ensure that you understand the term of your policy.
- Ask questions : Don’t assume that you know the definition of terms in your policy. Ask for clarification about terms like disability, death benefit and beneficiary .
- Understand the difference types of coverage : It’s easy to get confused. Learn the benefits of one type of life insurance over another is important.
If you have invested in universal life insurance, check in periodically with your financial advisor to make sure your policy is on track with your financial goals.