If you want the ability to make changes to your life insurance, universal life insurance may be right for you. Those who feel that neither term life insurance nor participating life insurance are flexible enough to meet their needs may find what they need in universal life insurance.
Unlike term life insurance, universal life insurance is permanent life insurance, meaning it won’t end (so long as you keep paying your premiums). And unlike participating life insurance, it can be more flexible – for example, you can make changes to your premium payments (within legislative limits), allowing you to match your changing needs and financial situation.
Universal life insurance provides you with life insurance protection and the opportunity to build tax-advantaged cash value to support your unique financial goals. It’s life insurance that gives you the opportunity to customize your coverage to match your changing needs and situation.
In essence, this type of life insurance blends traditional life insurance with a tax-advantaged investment component, meaning it can help build wealth over time. If your investment component performs well, you can use the funds to help reach your financial goals, such as financing a child’s post-secondary education or starting a business.
The money you pay into a universal life insurance policy goes into a fund used to pay for the cost of your insurance coverage. Money in the fund is invested and can grow on a tax-advantaged basis.
The growth of your investment component depends on how well your interest options perform and the size of your premium payments. The money in the fund can be used to help make future premium payments or it can be borrowed against, withdrawn or left to the loved ones you designate as beneficiaries. Any cash value withdrawn from the policy may be subject to tax.
Universal life insurance gives you the opportunity to choose how your money will be invested to reflect your unique financial objectives and risk tolerance.
With universal life insurance, you can pay your premiums through a set schedule or ad-hoc payments (within certain limits). You can also adjust your premium payments down the road, without having any impact on your coverage (provided your policy has enough cash value in your policy to cover the cost of your insurance).