The universal life insurance policy is a more recent type of life insurance policy available to Canadians. This universal life insurance Canada policy was specifically designed to address the limitations of the whole life insurance policy. It is therefore more of a blend between whole life and term insurance policy with extra unique characteristics.
The Universal life insurance policy is a permanent life insurance cover in that it covers the insured individual for his or her whole lifetime. The insurer can therefore not cancel the cover unless in a case of fraudulent information provided by the person insured and such cancellation must be done within a given period of time. The universal policy has a cash value that accumulates with time similar to that of a whole life policy. However, the main difference between a whole life policy and a universal life insurance Canada policy is that premiums are flexible and the insured can adjust the premiums. Consequently, the cash value and the death benefit are also not fixed or guaranteed and they vary with the premium adjustments. The main idea of this type of the policy is to try and encourage the person insured to increase their premiums and grow their policy cash value while still enjoying tax deferrals. Some of the main advantages of universal life insurance are given below.
The main advantage of the universal life insurance policy over any other type of insurance policy is its flexibility. The person insured makes premium adjustments depending on their financial situation. If the individual gets a pay rise, they can increase their premiums and consequently their policy cash value. On the other hand, an individual can reduce their premiums when they have budgetary constrains. This is unlike the whole life policy where the premiums are level throughout the policy period. Even with term policy, the premiums are set by the insurer and the insured cannot adjust premiums within the term period.
The universal life insurance Canada policy is usually cheaper than a whole life policy although more expensive than a term life policy for a given face value. The insurance company manages to maintain the premiums of the universal life policy low by reducing the cash value of the policy. This low price enables more Canadians to afford a life-long insurance cover at more affordable premiums. However, due to the complex nature of the policy, one needs to do a thorough check on the universal life insurance quote received in order to ensure that they are receiving expected value.
Most universal life insurance Canada companies provide loan facilities against the cash value of the policy. The advantage of such a loan is that the individual only gets to pay the interests that accrue on the loan while the principal is deducted from the cash value of the policy over an agreed period of time.
Many of the life insurance companies will also provide for the withdrawal of the accumulated cash value of a universal life insurance policy. However, such withdrawals attract heavy fees and charges. Furthermore, such withdrawals are only provided after a considerable period of time. These are some of the considerations you need to keep in mind while reviewing a universal life insurance quote.
Another major advantage of the universal life insurance policy is that in case you get financially severed for example with a job loss, you do not have to pay any premiums and such premiums will be deducted from the accumulated policy cash value. This is unlike other life insurance policies whereby the agreed insurance premiums need to be paid throughout the cover period.