Universal Life Insurance

"Universal Life Insurance" is a type of permanent life insurance that combines life insurance coverage with an investment savings element and offers flexible premiums. In Canada, universal life insurance is designed to provide policyholders with a way to build tax-advantaged savings while also ensuring that they have a lifelong insurance coverage. This flexibility allows policyholders to adjust their premiums and death benefits to suit their changing financial needs over time.

Key features of Universal Life Insurance include:

1. Flexible Premiums: Policyholders have the flexibility to choose how much they pay into their policy within certain minimum and maximum limits. This allows them to adjust their premium payments based on their current financial situation.
2. Investment Component: Part of the premium payments is allocated to a savings account, which can be invested in a variety of investment options offered by the insurance company. The policy's cash value grows on a tax-deferred basis, providing potential for investment growth over time.
3. Adjustable Death Benefit: Policyholders can often choose between a level death benefit option and an increasing death benefit option. They can also adjust the death benefit amount as their financial needs change, subject to underwriting in some cases.
4. Tax-Advantaged Savings: The investment gains within the policy grow tax-deferred, and the death benefit paid out to beneficiaries is generally tax-free.
5. Access to Cash Value: Policyholders can borrow against the cash value of their policy or make withdrawals, although this may reduce the death benefit and have tax implications.
6. Cost of Insurance: Universal life insurance policies have charges that include the cost of insurance (COI), administrative fees, and possibly other charges related to the investment component. The COI can vary based on the insured's age, health, and the amount of coverage.
7. Estate Planning Benefits: Like other permanent life insurance policies, universal life insurance can be used as part of an estate planning strategy to provide for heirs, cover estate taxes, or leave a legacy to a charity.

Universal Life Insurance offers a combination of flexibility, potential for savings growth, and lifelong coverage, making it a comprehensive financial planning tool. However, due to its complexity and the investment risks associated with the savings component, it's important for individuals considering universal life insurance to consult with a financial advisor to ensure that the policy meets their long-term financial goals and needs.