Why Universal Life is becoming so popular?

Universal Life is one of the most accommodating, multipurpose products available. The combination of term insurance and tax-exempt (tax-free) savings accumulates to accomplish two very important objectives:

To have money at time of death to pay the tax liability on your estate. As well, money will be needed to provide capital for paying off the mortgage, the children's education, final expenses, etc. This is nothing new to any of us.

To increase your retirement income. Its ability to shelter your investments from annual taxation makes Universal Life very attractive for you, "while alive."

Major accounting firms in Canada are investigating Universal Life and are suggesting that after maximizing your RRSPs, you should consider the merits of this tax-exempt product.

Becoming popular

Universal Life has evolved as a result of tax changes affecting life insurance introduced in 1981. Now, over 20 years later, it is gaining increased acceptance. This is not unlike RRSPs, which took just under 20 years to go from introduction to being a household investment. Similarly, mutual funds were introduced in the 1950s, yet only a few participated compared with today's levels.

Over time, companies offering products such as RRSPs and mutual funds improved their products so much that the average consumer could not afford to stay on the sidelines any longer.
Such is the case for Universal Life. Insurance companies have finally added great investment choices that allow for wealth accumulation in a tax-free environment. In the 1980s and early 1990s, the only investment choice was Guaranteed Investment Certificates (GICs). In 1995, they introduced the first index-based investment, tied to the S&P 500. In the last six years, we have witnessed the options increase to more than 250 choices with certain insurance companies.

We live in a country where we will need to depend on our own retirement savings to survive, and Universal Life gives us a fighting chance against the tax we pay both today and in the future.

How you benefit

We spend a lifetime accumulating funds in our savings. Does it bother you to know that almost half of this account may disappear to tax and not go to your loved ones or charities? Term insurance inside Universal Life is a lot less expensive than tax and, if structured properly, may cost nothing. Why not investigate a Universal Life strategy to pay the tax?

Do you have a portion of your investments triggering dividends and/or interest income? Why not reallocate this portion of your portfolio to the tax-free environment of a Universal Life strategy?

There are so many ways to benefit your retirement income and, at the same time, plan for the next generation that make Universal Life worth considering.