Universal Life Insurance for Canadians

Universal Life Insurance for Canadians

One of the most flexible types of life insurance available for Canadians is the Universal life insurance.  There are several options while choosing a Universal Life. You could select a level death benefit or an increasing death benefit. You could select several deposit options. This implies that you could pay a minimum cost of insurance or you could contribute an extra amount towards savings, a.k.a an accumulation fund. There are several investment options which enables you to select a portfolio according to your desire and risk averseness.

These are some of the features that make the Universal Life different from Whole Life, where most of the above mentioned elements are fixed and static.

In a Universal Life Plan, there are  many elements to consider and hence it is important to understand each very well. While working with a life insurance broker, there could be a lot of clarity and explanation provided to you. A broker represents a large number of companies and plans. He or she could explain the different types of Universal Life plans and illustrate the differences between the plans of several companies.

The principal features that would need your attention while buying a Universal Life Policy in Canada:

1. Level or Increasing Death benefit: You are going to need to decide if you want to have a level death benefit or an increasing death benefit. A level death benefitis going to be the face amount of the policy which is fixed and does not change.  An increasing death benefit is the face amount as well as any accumulation in the policy.

2. Minimum Premium and Target Premium: A minimum premium is the cost of insurance which one pays to keep the coverage going. That premium can either be level or YRT ( yearly reneable term). In a Target Premium, they could select the monthly amount or deposits that they wish to make. Usually it is over and above the minimum premium. The difference between the Target Premium and Minimum Premium creates an accumulation fund. That saving can be put in a portfolio of segregated funds which are affiliated to the Universal Life policy, or it can also be put in a GIC.

3. Level versus YRT ( yearly renewable term) cost of insurance: You will also have to decide if you want to choose a level cost of insurance or an increasing cost of insurance. A level cost of insurance is when the cost of insurance remains constant for the entirety of the policy. A YRT option is when the cost of insurance starts out low and then it starts to climb on a yearly basis. The real advantage of a YRT cost option is to build saving in the policy while the cost of insurance is low. It is important to understand and match the cost type with your objective.

4. Accumulation Fund ( Policy Fund) : It is important to understand the several ways to have an access to the  accumulation fund. It could be in the form of a withdrawal, a policy loan and even a roll over to the death benefit at the time of death. It is also important to understand the element of tax and tax sheltered growth of your accumulation fund. There could be , in some cases, surrender charges that could apply to your policy within a certain time frame of the policy.  Check the fine print on the policy to determine what the surrender costs are going to be in case you have to cancel the policy in the first few years. Your broker will be able to explain all of these things to you.



Life Insurance is a wealth maximising tool

A life insurance policy serves the purpose of replacing the income in case of an untimely death of the family breadwinner. In case of a family with two or three small kids, a mortgage and some additional debt, a life insurance policy on the parents would be extremely important…


A Limited Pay Life Insurance ( a video)

This is a quick way to pay off the cost of your permanent insurance within a certain number of years. That time period is usually gauranteed. So, your permanent life insurance covers you for life however you pay premiums for a specific period of time. It is helpful especially when, in later years of your life, you donot have to pay for insurance…


Universal Life Insurance: providing tax savings related benefit 

Universal life insurance provides several advantages to Canadians with regards to taxes. The following are four key tax advantages of universal life insurance.

Buying Life Insurance for kids

This could be a very sensitive topic for discussion for some. However, depending on the family situation, parents do consider taking insurance on their kids in the following manner:    Life Insurance on the kids is taken in small amounts as a rider to the parents’ policy. This is a very cost effective way to insure the kids…

Please feel free to contact Aman Kapur at www.youinsuranceguy.ca or by phone 1-416-509-2540 to assist with the plan of your choice. Or simply click here to request a quote.


Your Insurance Guy

Prepared by:  Aman Kapur


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