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Universal Life

At P.D. Foster Insurance we wish everyone knew more about Universal Life Insurance. It is a form of Permanent Life Insurance offering one of the best options to create a nest egg starting at a young age. It provides the choice to either access the policy you’ve contributed to at a low rate over time, or leave behind a generous financial gift for loved ones when you die

What is Permanent Life Insurance?

Permanent Life Insurance is a special type of insurance policy that not only provides coverage to beneficiaries, but also an investment that builds value over time. As a result, you can leave the policy to a beneficiary, or access your contributions as a loan or withdrawal. Even if you choose to access funds, anything left goes to your beneficiaries when you die.

What is Universal Life Insurance?

Universal Life Insurance works like other forms of Life Insurance in that it requires you to pay a premium for your insurance coverage. However, that is where the similarities end.

As you pay your premiums to cover the insurance costs you contribute to your insurance coverage, while also creating an investment. You choose the type of investment you prefer, and you can access any of the funds you save above the money required to cover your insurance costs. These funds are the cash surrender value (CSV).

Like other forms of Life Insurance, you choose a beneficiary, and that person receives the insurance coverage at the time you die. Unlike Term Life Insurance, you have the benefit of the legacy for your loved ones, but also benefit from the policy while you are alive. You are taxed at the time of withdrawal, and you do have to pay a provincial ‘policy tax’ that ranges between 1% to 5%.

How does Universal Insurance work?

The money saved through the policy is accessed in a few different ways:

  • Withdrawals: You can withdraw a minimum of $500 at any time, which in turn decreases the amount of money left for your beneficiary. The maximum amount you can withdraw is based on the policy and you have to pay income tax for any money you withdraw.
  • Policy loans: You can borrow money from the policy based on its cash value and pay interest as you would with other loans. In order to borrow from your policy, there has to be enough money to cover the costs charged by the insurance company to cancel your policy. Because it is a loan, you do have to pay it back. However, despite having access to the money via a loan, the value of the policy continues to grow. You can repay the loan at your own pace, with a minimum loan requirement of $500 which is taxable income.
  • Policy cancellation: If you decide to cancel your policy most insurance providers charge what is called a surrender charge if you cancel after having the policy for nine years. The CSV is deposited in your account,and you have to pay income tax the same year the policy is cancelled.

Who should consider Universal Life Insurance?

Universal Life Insurance is suited to those looking for a Permanent Life Insurance policy that allows them to grow their wealth. The younger you are when you get the policy, the lower the premiums, making it a lucrative investment option that also benefits your loved ones when you die.

However, there are some risks associated with the investment aspect of the policy and therefore it is recommended for those who are financially secure and can afford more risk with their investments.

It is an excellent option for those who have already contributed the maximum amount to their RRSP or TSAF and are close to retirement and want an additional form of savings. It is also a good option for those who want to increase their estate for their beneficiaries.

How are Term Life Insurance premiums calculated?

There are several factors used when calculating your premiums including your:

  • Age: Life Insurance premiums increase as you age, so it is always best to choose to contribute to a life insurance policy at a younger age, so your premiums remain lower.
  • Health: If you suffer from chronic diseases or have a family history of disease, your premiums can increase.
  • Lifestyle: Lifestyle choices such as smoking can also increase costs.
  • Gender: Statistically women live longer, so can usually see less premiums than their male counterparts.
  • Occupation: Higher risk jobs can increase your premiums.

We will discuss your specifics to help you make the right choices for your Universal Life Insurance policy.

Why Choose P.D. Foster Insurance

At P.D. Foster Insurance we have been offering Life Insurance Solutions in collaboration with a variety of insurance providers to our customers since 1949. When it comes to Universal Life Insurance policies, we are excited to help our customers also build their wealth. We provide comprehensive Universal and Permanent Life Insurance policies that both provide a safety net for financial support when you need it, while also providing for loved ones when you die. Our goal is to find the right policy for your needs, so you reap the full benefits of this very versatile Life Insurance option.

For more information about Universal Life Insurance, speak to our team today.

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