Universal life insurance unbundles the components of a traditional permanent insurance policy, allowing you greater control over how, and when, you make your monthly or annual payments.

Besides the basic premium that must be paid to keep the insurance in force, there is also a savings feature to universal life that allows you to pay additional amounts into the policy. Think of it as an investment account that's built into your insurance plan. You could, for example, place money in a fund that is linked to the performance of the S&P/TSX Composite Index and use the earnings to pay future premiums.

Another advantage to universal life is that investment earnings accumulate free from taxation for as long as they remain inside the policy. You can let your money grow in this tax-sheltered environment, and then withdraw funds when you are in a lower tax bracket – perhaps during retirement or a period of unemployment. The savings can be significant.

For example, someone in the top marginal tax rate who earns $1000 in interest will only get to keep about $540 after taxes. Sheltering those earnings inside a universal life policy could have saved that person $460!

If you'd like to learn more about universal life insurance and how it might fit into your financial plan, please contact me at 780-425-4058 or e-mail at andy@amhfinancial.ca