Life Protection
Beyond Coverage: How Universal Life Insurance Builds Wealth and Legacy in Canada
Let’s imagine you’re building a financial plan not just for today, but for decades to come. You want protection for your loved ones, but you also want flexibility. You want something that adapts as your life changes—whether you’re growing a business, planning your estate, or simply building wealth. That’s where universal life insurance enters the picture.
Unlike term insurance, which covers you for a set number of years, universal life insurance is designed to last your entire life. It’s a permanent policy, meaning it stays in force as long as you keep up with the required premiums. But what makes it truly unique is its dual nature: it’s part life insurance, part investment account.
How It Works
When you pay your premium, part of that money goes toward the cost of insurance—the amount needed to keep your coverage active. The rest goes into an accumulation fund, which grows tax-free inside the policy. You choose how that fund is invested, based on your risk tolerance and goals. Over time, this fund builds cash value that you can access, borrow against, or use to pay future premiums.
You can even adjust your premiums and death benefit as your needs change. That’s the beauty of universal life—it’s customizable.
When It’s a Smart Fit
Universal life insurance is best suited for Canadians who want lifelong coverage and financial flexibility. It’s especially powerful in these scenarios:
Estate planning: You want to leave a legacy or cover final taxes so your heirs aren’t forced to sell assets.
High-net-worth individuals: You’ve maxed out your RRSP, TFSA, and RESP, and want another tax-sheltered growth vehicle.
Business owners: You need long-term coverage for succession planning or key person protection.
Charitable giving: You want to leave a tax-efficient gift to a charity.
Flexible financial planning: You want control over how much you pay and how your money grows.
Example:
Amira owns a successful dental practice and wants to ensure her children inherit it without a tax burden. She purchases a universal life policy with a $1 million death benefit and invests in conservative funds within the policy. Over time, the cash value grows, and she uses it to offset premiums. When she passes, her children receive the full benefit—tax-free—and can keep the business intact.
When It’s Not the Best Fit
Universal life insurance isn’t for everyone. It may not be ideal if:
You only need temporary coverage—like to cover a mortgage or raise children.
You’re on a tight budget—universal life is significantly more expensive than term insurance.
You prefer simplicity—universal life requires ongoing attention and planning.
You’re young and just starting out—term insurance may offer better value early on.
Example:
Jake is 28, newly married, and just bought a home. He needs affordable coverage to protect his spouse and future children. A universal life policy would be overkill. Instead, he opts for a 25-year term policy for $750,000, which costs him less than $30/month.
Premiums and Flexibility
One of the most attractive features of universal life is premium flexibility. You can:
Pay the minimum to keep the policy active
Pay extra to build cash value faster
Use the accumulation fund to cover future premiums
Adjust your death benefit over time
But keep in mind: the cost of insurance increases with age. If your accumulation fund doesn’t grow enough to cover those rising costs, the policy could lapse. That’s why regular reviews with your advisor are essential.
The Investment Component
Inside your policy, the accumulation fund can be invested in a range of options—typically 30+ choices depending on the provider. These might include:
Guaranteed interest accounts
Market-linked funds
Balanced portfolios
Conservative or aggressive strategies
The growth is tax-sheltered, as long as it stays within government limits. You can leave the cash value untouched to increase your death benefit, or use it during your lifetime—for retirement income, business needs, or emergencies. Just note: withdrawals may trigger taxes and reduce the payout your beneficiaries receive.
Canadian Providers
Several major insurers offer universal life policies in Canada, each with their own features:
Working with a licensed advisor is key—they’ll help tailor the policy to your goals and ensure it stays on track.
What You Can Do With the Cash Value
The cash value inside your universal life policy isn’t just for show. You can:
Borrow against it (policy loans, subject to interest)
Withdraw funds (may trigger taxes)
Use it to pay premiums
Leave it untouched to boost the death benefit
Just remember: any money you take out reduces the amount your beneficiaries receive. And if the fund runs dry, the policy could lapse.
Final Thought: Universal Life Is About Control and Legacy
Universal life insurance isn’t just about protection—it’s about planning ahead with intention. It’s for Canadians who want lifelong coverage, tax-efficient growth, and the ability to shape their financial legacy.
It’s more complex than term insurance, and it costs more. But for the right person, it’s a powerful tool—one that offers flexibility, permanence, and peace of mind.
Whether you’re building a business, planning your estate, or simply want to leave something meaningful behind, universal life insurance gives you the control to do it your way.
