The Overview of Universal Life Insurance

Life Insurance

Universal life insurance is a terrific method to build up cash savings in a tax-advantaged account while simultaneously getting life insurance without having to worry about renewals. It’s critical, like with any insurance policy, to make sure this one is suited for you. Working with a broker, who will assess your needs and help you arrange the appropriate sort of policy for you, is a terrific approach to receive the long-term coverage you require. Today, we’ll discuss the benefits and drawbacks of universal life insurance, as well as how a broker may assist you in determining whether this or another policy is the right option for you.

What is universal life insurance?

Universal life insurance is a sort of permanent insurance that offers coverage indefinitely as long as premiums are paid. It also has a tax-deferred savings account. The funds in this account can be withdrawn, used to increase the policy’s value, or used as security for a loan. Depending on the universal insurance provider you deal with, riders can be applied. A critical illness rider, for example, gives a tax-free lump payout if you are diagnosed with one of the diseases mentioned on the rider and as described in the rider. Some critical illness insurance policies cover the Big 3: cancer, heart attack, and stroke. Others shield you from 25 or more problems, such as kidney failure and serious burns. As you can see, having lifelong insurance in place combined with a living benefits rider can provide a lot of reasonable peace of mind!

Let’s move on to the basic universal life insurance benefits and drawbacks.

Universal life insurance – pros

Term insurance rates (with the exception of Term 100) rise every year, eventually reaching levels that are too expensive. When you’re in your early 30s, term insurance costs roughly $30 per month, but when you renew in your 50s or 60s, it can cost hundreds of dollars. Worse yet, the best term rates are dependent on your age and health. Any deterioration in health (fat, diabetes, high blood pressure, etc.) will increase those rates. Universal life insurance has a significant benefit in this area. That’s all there is to it once you’ve determined your premium range. You don’t have to renew your policy, you don’t have to requalify, and any health conditions that arise during the duration of your coverage have no bearing on your in-force policy.

Another factor to consider while weighing the benefits and drawbacks of universal life insurance is the policy’s flexibility. The premium is split between the cost of insurance and the savings portion because there is a savings account. You will be provided a premium selection. The lowest amount covers the cost of insurance; the larger amount puts the excess in your savings account, but not at a rate that exceeds the MTAR (Maximum Tax Actuarial Reserve – aka, the amount you can save in the policy’s cash account before attracting tax). The policy remains in place as long as your insurance costs are met, so if you have an unexpected expense one month – such as a broken water heater – you can help save money by paying the bare minimum on your premium that month.

The cash savings account is a significant benefit of universal life insurance. You can save the money and use it to support the insurance’s payments (the policy stops when the payments end, so be careful), remove the money, and so on.

Universal life insurance – cons

There are certain disadvantages, such as the cost. Universal life insurance prices are more expensive than term life insurance quotations. Even while the cost savings throughout the life of the policy can more than cover the difference if obtained early, if you’re in your 30s or 40s and shopping for term vs universal, universal is going to be more expensive. There is a simple solution: buy universal life insurance while you are still young and healthy. Even while a universal life insurance quote in your 20s will still be more expensive than a term policy, you’ll lock in an excellent rate that will save you hundreds in the long run, and you’ll have a longer time horizon to enjoy the interest on your cash savings account.



Another disadvantage is the cash savings account. Interest rates on entire life insurance are guaranteed. They aren’t with universal life insurance. As a result, you may experience a loss rather than a win.


Finally, with universal life insurance, keep an eye out for the policy lapse. If your policy is set up to utilize cash to fund the premium at some point, but you’ve already taken money out of the cash account, your insurance will lapse if the money runs out. If you’re going to employ this strategy, keep track of how much money you have in your cash account, and remember that if the coverage expires, you’re out of luck.


Where to find a universal insurance company?

When it comes to setting up your policy, working with a skilled and licensed expert is essential; always consult directly with an agent or broker who has direct connection to a universal insurance provider. Professional guidance is required to best assess your premium range, MTAR limit, and whether you will use the savings to fund the policy. We recommend discussing with a broker because universal life insurance policies are complex and can be structured in a variety of ways.

Brokers are similar to independent insurance agents. They don’t simply sell one company’s plans; they have access to all of Canada’s universal life insurance firms. They learn about your long-term insurance and savings goals before searching the market for the best universal life insurance quote for you.

LSM Insurance partners with over 25 Canadian insurers to find the best coverage for your needs and budget. Contact us immediately to find out if universal life insurance is the best option for you, or if another policy would be better. We enjoy assisting others and have decades of experience; contact us immediately.


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