John, New Brunswick
Universal Life insurance is a unique
blend of term insurance, permanent insurance and a savings account.
You get the advantages of the affordability of a term plan, the
potential lifetime protection of permanent insurance and the advantage
of tax-deferred savings growth within the life insurance policy.
does it work?
Instead of being directed only to pay for the cost of insurance,
your payments is paid into what is called a policy fund. The policy
fund is used to pay for the cost of the insurance now, while the
remaining balance is invested on a tex-deferred basis. Most Universal
Life policies offer a variety of investment account choices to suit
your objectives and tolerance for risk.
types of life insurance provide tax-deferred savings or investment
on the size of the payments you make and how well your investment
account do, the policy fund value can be used to pay for future
costs of insurance or to provide a source of additional savings.
You can withdraw or borrow from the policy fund, but this may impact
your insurance coverage. You may also make extra payments into the
policy fund, up to certain limits, to increase your tax-deffered
is where your payments earn interest based on the investment
account options you choose. The cost of your insurance is
deducted from this fun and what ever is left grows tax-deffered.
With Univeral Life Insurance, the amount of the death
benefit can be flexible. You can choose to have the death benefit
stay the same or you can choose to have it increase over time. It
depends on how much you pay into and withdraw from the policy fund
over the years and how well your investment accounts perform.
Who Buys It?
Universal Life coverage is a good choice for people who want a tax-effective
way to save for retirement outside of an RRSP or pension plan, or
to build up the value of the estate they want to pass on to their
loved ones. It can also be a smart choice for individuals with a
large estate that they wish to preserve and pass on.