Take Advantage Of Tax Savings With Universal Life Insurance

If you're a prudent Canadian, you likely already know the value of life insurance and have your own life insurance plans in place. You know that the primary reason for buying life insurance is to have the funds available to help pay final expenses, to help ensure you family's financial future, and to help ensure your legacy is passed on as you wish.

What you may not know is this: By selecting the right type of permanent life insurance policy, you can save on taxes and accumulate a cash reserve that builds through the years - a cash reserve that is readily accessible should you need a quick money infusion for any reason.

This type of permanent life insurance is called "Universal Life Insurance" and here's how it works:

• Unlike other types of insurance, Universal Life Insurance includes two distinct parts. Each payment you make is divided into an insurance premium and a deposit into an investment (or investments) of your choice.

• The growth in the investment portion of your policy is considered tax-deferred by the Canada Revenue Agency as long as it is not redeemed. For that reason, Universal Life Insurance investments tend to enjoy faster growth than most conventional, non-registered investments.

• Most Universal Life Insurance plans allow you to choose the amount of life insurance you want and to adjust the death benefit and premiums to fit your changing circumstances.

• Your death benefit – including the full value of your investment account – will be tax free to your beneficiaries.

• And, you can access the cash reserve in your Universal Life Insurance policy if needed to pay for unexpected expenses. You can do this by permanently withdrawing some or all of the cash reserve; through a loan secured against the cash reserve of the policy; or by using your policy as collateral for a line of credit.

A Universal Life Insurance policy can be a good option for people seeking financial security while accumulating additional funds for use in an emergency or to carry out certain aspects of their financial plan (such as developing sufficient income for retirement). It should also be considered a long-term investment because the return on the investment portion, combined with the tax savings, deliver the best results when left to grow over time.

If you want insurance and long-term, tax-deferred investment growth, Universal Life Insurance can be a good option for you. A professional advisor can help you select the right policy with the right combination of insurance amount and investments options that fit your personal risk tolerance and your overall financial and legacy goals.