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Universal Life Insurance

Universal Life Insurance Magnifying glass

Years ago, a need developed among many Canadians who invested through whole life insurance policies. As interest rates in the investment market rose, people took a stern second look at the return on investment (ROI) of their tax-efficient whole life policies. They cringed, realizing that a portion of their investment portfolio wasn't gaining as much interest as other parts. As a result, many Canadians started to look for more aggressive investments to take advantage of the increases in Canadian interest rates. To meet this demand, the insurance industry introduced a new type of insurance investment vehicle called universal life insurance.

Nowadays, Universal Life Insurance is the most flexible life insurance policy to be found in Canada. It is a permanent life insurance policy and investment product that is designed to respond more quickly to changes in the marketplace. Like its predecessor, universal life wraps strong cash values into a life insurance policy. The big difference, however, is that universal life insurance more clearly separates the investment aspect from the insurance policy. In some policies, you get fairly extensive reach into which types of investments are used.

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Tax-efficient Investment Growth

Universal Life Insurance offers many tax advantages inside of it, similar in nature to your RRSP and LIRA. In fact, many Canadians are using universal life after maxing out their RRSP. Unlike an RRSP, however, when you're ready to retire and want to access the cash value from your Universal Life policy, you can do this tax-free. Through a process called Collateral Assignment, you can gain access to the cash value without it being taxed. The accumulation of cash in the policy and the accessibility of this cash in retirement dramatically enhance your capability for wealth creation.

You can also use Universal Life as a wealth or estate transfer strategy. You can accumulate cash inside of the policy and upon your death, roll or transfer the policy to a different owner tax free. Through years and generations of tax advantaged growth, Universal Life Insurance is one of the most powerful wealth transfer strategies available.

Comparing Universal Life Policies and Making Your Choices

Because universal life insurance is investment oriented, many of the choices you make will be heavily influenced by your financial goals. Most universal life insurance products offer fairly extensive reach into the investment options. Some policy holders will choose to invest in indexed stocks, some opt for particular mutual funds and others will choose to stick with longer-term guaranteed interest rates. What options are available for investing varies between products and companies. But between universal life insurance products, any money that you deposit in excess of what is required for the basic cost of insurance can be used as part of the investment fund. These types of options make universal life extremely flexible.

Like whole life insurance, many universal life insurance policies offer you the option to pay for the entire cost in a shorter period of time. If you don't like the idea of paying for life insurance well past retirement, there are many policies that can shrink this span of time down to as little as 10 years. After which, you no longer have to make any insurance payments, but still have a permanent life insurance policy in effect.

We highly recommend talking to an insurance broker or your financial advisor before choosing a universal life policy. As flexible as it is, it's equally complicated. To get the best returns on your investment, you will need professional advice.

CanEquity Insurance has all the details to help you make the right choice when it comes to a Universal Life Policy. Trusting CanEquity to provide you with these options makes sense. Call toll-free or use our 30 second contact form to talk to one of our professionals right away.

Contact us to learn more and get an insurance quote!
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