What Is Universal Life Insurance?
Combine the protection of permanent life insurance with the value of tax sheltered investing under one umbrella
If you need a lifetime of insurance protection and you’re seeking tax advantaged ways to invest, consider Universal Life Insurance. At Life Guard Insurance, we use Universal Life Insurance as our most flexible and customizable insurance policy. It could be a smart choice if you are looking to protect your loved-ones today and building towards a secure financial future.
Universal Life Insurance combines the security of permanent life insurance protection with a wide variety of flexible investment options. Whether you are a very conservative investor or highly aggressive, the policy fund of a Universal Life Insurance plan can be customized to your risk tolerance. Not only does Universal Life Insurance offer you protection today, but over time, as the cash value inside the policy increases it can create wealth for you in the future.
As an estate planning tool, Universal Life Insurance will keep pace with inflation and the growth of your final tax burden. It offers a wide range of investment options (different for each insurance company) for you to choose from, many valuable riders and benefits that might be added, and flexible payment options.
Protect you family. Invest for your future.
Along with the peace of mind of getting life-long insurance protection with your Universal Life Insurance policy you also benefit from tax-efficient investing. If any of the following applies to you, consider Universal Life Insurance:
- You need permanent life insurance
- You are financially secure and are now focusing on wealth accumulation and retirement
- Want to build a solid financial foundation, both now and for the future
- You already are maximizing your annual RSP contribution
- Looking for tax sheltered investments for non-registered assets
- You are near retirement and are considering estate planning options
How does Universal Life Insurance work?
Every time you make a payment into your Universal Life Insurance policy it is divided up into three parts:
- The insurance premium (the pure cost of insurance – like a Term 100 premium)
- The administration fee and premium tax (usually 2% of premium deposits)
- The remained is deposited into an investment account of your choice
The funds over and above the pure cost of life insurance,the fees and taxes is invested into the policy fund, which is a portfolio of funds chosen by you based on your risk tolerance. The money inside the policy fund is called your Cash Surrender Value and represents the amount of money your could take out of the policy. There are many ways to access your money inside a Universal Life Insurance plan. You can make withdrawals, collapse the entire plan, or borrow against the cash value.
For most people, collapsing their entire life insurance policy makes little sense. Yes you are getting all your money out, but the premiums you have paid for the pure cost of insurance, fees and taxes would all be lost. Those costs are recovered through the payment of the Death Benefit – which will ultimately happen if you keep you policy in force. Making withdrawals from the Universal Life Insurance plan is a good option, but be careful of taxation. All the growth of your money over time is taxable as income (highest possible taxation) when withdrawn from an insurance policy.
One of the best ways to get your money out of a Universal Life Insurance policy is to borrow it out (called leveraging). This allows you to get tax free income while letting your insurance policy deal with the interest accumulation, so you don’t have to make interest payments. This is commonly done through an Insured Retirement Plan strategy.
Upon your death, your beneficiaries or your estate receives the original amount of life insurance you purchased on the policy, plus the accumulated cash value inside the policy – ALL TAX FREE! This money can be used to provide income and security for your loved ones, pay final expenses and estate taxes and/or create a legacy you wish to leave behind.