Michel A. Saleh

Financial security advisor   *
Mutual funds representative   **
514 282-3276 1 866 665-0500, 23276

My financial chronicle

Universal life insurance

The art of combining insurance protection with tax-free savings

Like Mini-Wheats cereal, with its frosted side and its nutritious side, universal life insurance has two personalities! It's the perfect combination of a life insurance product and a savings vehicle, but can be a little confusing to people new to the financial product world. Read on and learn a bit more.

By its very nature, universal life insurance is made for people who want to not only protect their estate but also accumulate capital tax free-two prerequisites for financial security. You can even opt for universal life insurance simply as a tax shelter, without really needing coverage in the event of death.

In the personal financial planning world, it is generally accepted that this type of tax shelter is beneficial for people who

  • Have no (or little) debt
  • Have maxed out their RRSP, i.e., have no more unused contribution room
  • Have funds available to save

Let us add that you should also have some time ahead of you, say, at least ten years. If you don't meet these criteria, it's best to consider another way to save.

With this type of vehicle, coverage in the event of death is usually not the primary objective. The main advantage is that the money you invest generates a tax-free profit, as in an RRSP. However, the amount you invest is nondeductible.

Universal life insurance also provides a significant tax advantage upon death, since all the funds accumulated tax free are treated as a death benefit and, as such, are not taxable to the estate. These funds are added to the base coverage amount, and the total is paid out tax free.

Some people invest heavily in universal life insurance policies. Fifty thousand dollars, one hundred thousand dollars, and sometimes more. The limit is set by tax law and depends on the death benefit (coverage in the event of death) to which you subscribe. Still, you don't need a great deal of money to invest in such a product. You can make a single lump sum payment or periodic deposits. Universal life is one of the most flexible products on the market.

Lastly, let us note that not all universal life insurance products are the same. That's why before making a decision, you should take advantage of my services as a financial security advisor so I can explain the subtle differences between products and help you find the one that's best for you.

Make an appointment today!