Universal Life Insurance Canada: FAQs

Universal Life Insurance Canada FAQs

Universal life insurance is not the type of product you buy off the shelf. In fact, there are so many variables, you really need to talk to experienced universal life insurance Canada agent to decide what type of policy you want.

Universal Life Insurance Canada: FAQs

But, before you do that, take at look at what is available. You want to make sure you are armed with enough knowledge to ask the right questions.

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Also, to ensure that you are provided with all of the options available.

What Does Your Premium Include?

Your insurance premium includes the cost of the insurance coverage, small administration charges and a portion that is applied to your cash value account. You can choose the amount of premiums you pay, within reason.

Unlike a whole life insurance policy, with a universal plan, you have the option to choose where the cash value amount will be invested.

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Most companies will also tell you exactly how much of your premium is going towards your investment account and how interest and earnings are calculated.

Also, the company will guarantee a certain return, usually between 2 and 14 percent. So, no matter where the money is invested, or how the investment performs, you are guaranteed your earnings will never be less than your guaranteed rate of return.

There is also a maximum amount you can earn from a universal life insurance Canada. The company puts a cap on your earnings to level out the risk they are taking. Remember, a bad investment can cost the company a lot of money. The company is not guaranteed a minimum return on the investment like you are.

If sometime during your life tragedy strikes, either physically or financially, you can cash in your policy and receive all of the accumulated funds in your cash value account.

If you leave the money in your account, upon your death your beneficiary receives the face value of the policy, plus all of the accumulated funds. With a whole life insurance policy, your beneficiary only receives the death benefit. Any funds in your cash value account revert back to the company.

Customizing Your Universal Life Insurance Canada Plan

With a universal life insurance Canada plan, you can customize your policy to change as your life changes. You can implement solutions to evolve as your lifestyle changes, and as your budget and savings objectives change.

Plus, you get to decide where the money will be invested, if you so desire. You can select an investment mix that takes into account your personal circumstances and the amount of risk you are willing to take.

Tax Advantages

The money you earn in your investment account is not subject to taxes, as long as it stays in your account. If you make a premature withdrawal there will be taxes due, but not nearly as much as a withdrawal from your RRSP would cost.

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Additionally, the death benefit paid to your beneficiary is tax free. In some cases, the accumulated cash value may be tax free, as well.

Flexibility

A universal life insurance plan is probably the most flexible type of insurance you can buy. You not only have the option to choose where the money will be invested, you also get to choose the amount of premiums you will pay.

You choose the premium level and the payment period that suits your situation. Of course, you may have to have a medical exam and the amount of coverage must be justified.

Usually, you will want more than just the minimum required to cover the insurance portion. You want your premiums to be a little higher so that you can build up your cash value.

Additionally, once you have a sizable amount in your cash value account, you can choose not to make any more premium payments at all. The premiums will be deducted from your cash value amount.

Universal Life Insurance Canada: FAQs

Different to RRSPs

Unlike RRSP contributions, the amount deposited into the investment portion of your life insurance policy are not tax deductible. However, the funds grow tax free.

Many banks now offer tax free savings accounts, but in the past any interest you earned on your savings was taxable. The earnings or interest in your cash value account is never taxable as long as the funds stay in your account.

Universal life insurance Canada policies may be especially attractive to you if you have maxed out your annual RRSP contribution and want a different option for tax-deferred investment growth. Withdrawals are taxable. But if you wait until after retirement when you income may be much lower, the taxes will be lower, as well.

Another way to avoid paying taxes on the investment portion is to leave the money alone. In most cases your beneficiary receives the cash value amount tax free.

The money is also not subject to probate or executor fees. So, if your reasons for wanting a universal life insurance policy is to leave as much money as possible to your loved ones, then just let the money keep on growing.

Variable Universal Life Insurance

A variable universal life insurance policy gives you additional options as to where your money will be invested. You can select separate accounts with varying rates of return, usually higher paying stocks and bonds. You still have all of the flexibility and benefits of a universal policy.

Aside from that, there really isn't much difference between a variable policy and a standard universal insurance policy.

Now you know a little bit about how complicated a universal life insurance policy can be. You can not just put a few figures into the quote box and get an estimate of how much the premiums will be. Mostly, because you yourself decide how much the premiums will be.

Ask For Guidance

When you want more out of your life insurance policy than to just provide some money to your loved ones in case something happens to you, then permanent life insurance is the answer.

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We're waiting to help you! Contact us today for a free consultation about Universal life insurance. We'll contact you with your answer, or to make an appointment, free of charge.

If you want control over your investment and to leave even more money for your loved ones than just the face value of the policy, a universal life insurance Canada policy is definitely your best choice.

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