Last updated : April 25, 2024
Last updated : April 25, 2024
Universal life insurance is one of the most flexible types of permanent life insurance for Canadian residents.
It offers key financial planning features such as lifelong protection that never expires and opportunities for tax-preferred savings growth. This type of life insurance is a great way to help protect your family from financial hardship after you die, by maximizing your estate and financial value.
Select the amount of premiums you pay. Pay more than needed to keep your policy in good standing so that you have more flexibility in the future when you retire or have less income.
Choose from a variety of diversified investment account options. Any interest you earn in your account won’t be taxed while it remains in your policy.
If your policy has cash value, you may have access to extra funds to supplement your retirement income or during a time of illness.
Guaranteed lifetime protection – this means your coverage does not end after a certain period.
Universal life insurance work similarly to whole life insurance, while providing a little more flexibility since you can adjust your premiums and death benefit. Premiums may consist of two components: a cost of insurance (COI) amount and a saving component, known as the cash value. The cash value is only accumulated if there is an excess in premium payments and can grow over time.
The COI is the minimum amount of a premium payment needed to keep the policy active. It consists of several items rolled together into one payment, including the cost of providing the death benefit, administrative fees, optional benefits added to your policy, and provincial taxes. COI will vary by policy based on the policyholder’s age, insurability, and the insured risk amount.
Over time, the cost of insurance will increase as the policyholder ages. However, if sufficient, the accumulated cash value will cover the increases in the COI.
Ideal for people who want:
Key Features:
Ideal for people who want:
Key Features:
Whole life insurance offers a guaranteed fixed death benefit and premiums. Some whole life policies can also include a cash value component.
Universal life insurance can offer more flexibility on your death benefit, premiums, and the investment savings elements of your policy.
Yes. You can apply for universal life insurance, even if you smoke or vape.
However, using tobacco or nicotine can put people at a higher risk of smoke-related illnesses – which can translate to higher premiums.
Have more questions about how smoking, vaping, or using cannabis can affect your life insurance?
Generally, universal life insurance contracts don't allow a conversion to whole life insurance.
However, most term life insurance policies can be converted to permanent life insurance policies.
Universal life insurance covers you for your entire life, meaning the policy doesn’t mature. If premiums are paid, your universal life insurance policy will never expire .
Yes, but when you withdraw from your policy or take a policy loan, your total death benefit may decrease.
3 common ways to take cash from a policy (if there’s enough cash value) are:
Partial withdrawal – you can withdraw a portion of your cash at any time.
Policy loan – allows you to access cash by borrowing against the policy fund.
Full withdrawal (cancelling your policy) – if you cancel your policy, you will receive the cash surrender value minus any fees, loans, or market value adjustments There may be tax consequences associated with a full (cancelling the policy) or partial withdrawal or taking a policy loan. Surrender charges may also apply to full or partial withdrawals..
Speak with an advisor to learn more about how to cash out a universal life insurance policy
No, Canadian life insurance companies don’t offer indexed universal life insurance or variable universal life insurance policies.