Last updated : April 25, 2024

What is universal life insurance?

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.

Benefits of universal life insurance

Flexible premiums

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.

Tax-preferred investing choices

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.

Cash accessibility

If your policy has cash value, you may have access to extra funds to supplement your retirement income or during a time of illness.  

Lifelong protection

Guaranteed lifetime protection – this means your coverage does not end after a certain period.

How does universal life insurance work?

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.

Our universal life insurance products

SunSpectrum Universal Life II

Ideal for people who want:

  • Lifetime protection
  • The opportunity for tax-preferred growth in savings
  • To design an investment mix in their policy using a variety of investment account options

Key Features:

  • Coverage ranges from $25,000 to $5 million
  • 13 investment options
  • A reduced paid-up feature - allows you to reduce your death benefit and stop payments any time after age 70
  • Guaranteed investment bonus rewards you for maintaining and growing your policy fund value

SunUniversalLife II

Ideal for people who want:

  • Lifetime protection
  • The opportunity for tax-preferred growth in savings
  • Extensive flexibility with a variety of death benefit, cost of insurance, and investment options

Key Features:

  • Coverage ranges from $100,000 to $25 million
  • 5 death benefit options
  • 6 cost of insurance options
  • 21 investment options

Not sure which permanent life insurance is right for you? Speak to a Sun Life advisor.
Our advisors look at your specific needs to help you decide which insurance products are the best for your situation.

Enter your postal code to find an advisor near you.

Frequently Asked Questions

What is the difference between whole life and universal life insurance?

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.

Speak to an advisor to see which one best suits your needs

Can I still apply for universal life insurance if I smoke or vape?

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?

Read more about life insurance for smokers

Can you convert universal life insurance to whole 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.

Speak to an advisor for more details

What happens when a universal life insurance policy matures?

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   .

Can you cash out a universal life insurance policy?

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

Does Canada have indexed universal life insurance (IUL) or variable universal life insurance (VUL) policies?

No, Canadian life insurance companies don’t offer indexed universal life insurance or variable universal life insurance policies.

An advisor can address any of your questions about universal life insurance.

They can help you figure out which product is right for you and provide you with a customized quote.

Enter your postal code to find an advisor near you.

Additional resources

How much life insurance do you need?

Do you need to submit a life insurance claim?

What are the differences between all types of life insurances?