Universal Life (UL) insurance combines both insurance coverage and an opportunity to invest in a "tax-sheltered" investment environment.
In Canada, UL insurance is the only vehicle outside of RRSPs where you can accumulate money on a tax-sheltered basis.
The difference however, is at death, Life Coverage is paid out totally tax free compared to RRSPs which are fully taxable at death. Deposits are paid with "after-tax" dollars, therefore are not tax deductible.
Universal Life is aquired to provide Lifetime Insurance coverage, while enjoying a tax-sheltered investment account for life!
It is an ideal vehicle for Children, as they can have a lifetime growth tax shelter with low cost Insurance. The parents are the owners, so there is no way the child can get at the funds. It’s totally under the parent’s control.
Many people feel that the cash values in the plan are a type of Critical Illness plan. If they should have a medical emergency, the cash value can be used to get fast treatment at a private medical facility.
Many times I have seen retired people keeping their savings in low return investments, as they are concerned about final expenses and taxes.
When you have lifetime coverage, you have the freedom to be more liberal with your investment options. This will provide you with better cash flow.
With lifetime coverage in place, you know that a tax free lump sum will be paid out to take care of taxes and expenses.
So when is the best time to aquire lifetime coverage?
As soon as you can.
Benefits and riders, such as a Child Term Rider, Accidental Death Benefit, and Disability Waiver, are usually optional features with most Universal Life Insurance plans.
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