Universal Life Insurance

Financial planning is crucial for everyone, especially those with a family.  Life insurance offers the protection that you need, in the event of a death.  It’s not a subject that you like to think about, but one that should definitely be planned for.

One of the two most popular types of permanent life insurance, universal life insurance is known for its cash value component.  The difference between the premium cost and the cost of the insurance policy is placed into a cash value of the policy.  The cash value earns interest monthly at a rate determined by the insurer, typically between 2% and 4%.

Main Uses of a Universal Life Insurance Policy

  • Final Expenses funeral service, burial and any outstanding medical bills.
  • Income Replacement – providing support for the surviving family members.
  • Debt – to settle any personal or business debts, including a mortgage or business loan.
  • Long-Term Care – policies that have accelerated benefits for long-term care.
  • Mortgage Acceleration – borrowing against or surrendering an over-funded insurance policy to pay off a mortgage.

There are many universal life insurance policy holders who use the cash value as a source of benefit while the policyholder is alive (instead of as a death benefit).  Benefits may include loans, cash withdrawals, tax planning or funding a pension.


  • Provide protection to you and your loved ones.
  • Helps accumulate wealth.
  • Build a solid financial foundation.
  • Another source of tax-free savings if you’re already at your maximum annual RSP contribution.
  • Tax-free returns for non-registered assets.


There are many universal life insurance policies that come with the option to take out a loan against the policy.  Loans are subject to interest and must be paid back directly to the insurance policy.  Repayment of the principal amount is not required, as that is part of the cash value on your policy.  The interest, however, must be paid back. Any outstanding loans are deducted from the death benefit, in the event that the policyholder dies.


Universal life insurance policyholders may access the cash value earned with their policy during their lifetime.  It may be withdrawn or borrowed against (as covered above).  Early withdrawals may trigger taxes or early withdrawal penalties, but most importantly will reduce the amount available to beneficiaries upon the insured’s death.


If your universal life insurance policy has enough cash value, you can withdrawal funds from it or simply take a break from paying your premium.  There may be points in your life where you need to reduce your monthly expenses.  Unexpected costs always arise including car repairs and home renovations; which can always put a strain on your budget. Your Universal Life policy typically allows you to take an occasional break from paying premiums when necessary, as long as you have enough money in your policy to cover your monthly insurance premiums.

Factors that affect rates

There are many factors that are taken into consideration when purchasing a life insurance policy.  Here is a list of the main factors:

  • Age – typically the younger the insured, the cheaper the rate
  • Smoking
  • General health
  • Coverage amount
  • Term of coverage (length of policy, for example 10, 20, 65, 100 years)

Universal life insurance policies will combine the benefit of protection for a lifetime with a flexible portfolio of investment options.  This type of life insurance provides you with a choice of death benefits, a variety of optional benefits and flexible ways to pay your premiums.  Consider this type of life insurance when looking for a policy that’s right for you and your loved ones.