Is Universal Life Insurance Policy a Smart Investment?

Universal life insurance is a smart investment as it offers lifelong coverage. It also provides flexible premium payments and options for how you’ll invest the policy’s cash value. The policy’s cash value of standard universal life insurance in Canada grows according to the insurer’s portfolio’s performance. Besides, you can use the cash value to pay premiums.

What Is Universal Life Insurance?

Unlike term life insurance, which only provides coverage for a set of the period, such as 10 or 20 years, universal life insurance is permanent policy insurance. It means your coverage can last up to your entire life as long as you pay the premiums. 

Purchasing universal life insurance is a smart investment, but your employer can offer it to you as a universal life insurance group. So if you can’t afford it, you can ask your employer about it. If you’re wondering about the cost of universal life insurance, the answer is it varies. The cost depends on your age, medical condition, location and other factors.

Universal Life Insurance is a Smart Investment

Universal life insurance has a cash value component that is separate from the death benefit. Every time you make a premium payment, a portion is placed on the insurance cost, and the rest becomes part of your cash value. 

The cash value is guaranteed to grow according to your minimum yearly interest rate. However, it may grow faster, depending on the insurer’s market performance.

Universal life insurance is a smart investment because it has a cash value that can be used as:

  • Surrender Value – If you think you no longer need the policy, you can surrender it back to the insurer. What’s good about it is the insurer will give you your cash value in return.
  • Loan Collateral – You can borrow money from your insurer. Plus, you can use your cash value as collateral. That’s the maximum amount you can borrow. However, these policy loans are subject to interest rates set by your insurer.
  • Premium Payments – You can also use the cash value to pay a portion of your entire premium payment. But keep in mind that policies will lapse if your cash value drops to zero. You have to keep close track of the amount.

What are the Advantages of Universal Life Insurance? 

Aside from the fact that universal life insurance is a smart investment, it has a few additional features and benefits.

Withdraw or Borrow Money Using the Cash Value

When you pay your universal life insurance policy premium, a portion of each payment is placed on your death benefit payments. Whereas the other part goes to building up your policy’s cash value. 

Over time, after you save your money, you may withdraw or borrow money against the cash value. However, the available amount of cash value will vary per company. The rules on how and when you can do this also vary per insurance company and policy.

Your Cash Value Earns Interest

Generally, your universal life plan’s cash value earns interest that’s in line with current money market rates. Therefore, it’s important to note that the interest rates may fluctuate along with the market. 

It means that the interest you receive may also go down. But, some insurance companies offer protection against that. They offer it with a minimum performance guarantee on the policy.

Flexibility With Premiums

Besides cash value, one of the good benefits of universal life insurance is its premium flexibility. If your account’s cash value can cover the costs, you may reduce or stop paying your universal life policy premiums for a certain period.

It can help you if money becomes tight, and you’re looking for ways to lower your monthly bills. However, your coverage may end if you use up all your account’s cash value to pay your premiums. Besides, you must continue paying the premiums to keep your policy in force.

Adjust the Policy’s Death Benefit

Your universal life policy can also extend to your death benefit. At some point, if you want to increase the amount that’s paid out upon your death, you can adjust it. It is something some insurance companies allow, as long as you pass a medical exam. 

Also, one of the benefits of universal life insurance is that you can reduce the death benefit and reduce the policy’s cost. Remember that if you increase the policy’s death benefit, it may also increase the premium you’ll pay.

How Much Does Universal Insurance Policy Cost?

To determine whether universal life insurance is a smart investment, you must know it’s cost.

The cost of universal life insurance with a $500,000 policy typically ranges from $1,683 to $10,315. However, it depends on your age when you purchase insurance. If you get a universal life insurance policy at a younger age, your premiums will be way cheaper. On the lower end, a $500,000 universal life insurance policy will cost a 30-year-old male non-smoker $2,069 annually. For a 45-year-old male non-smoker, you can expect to pay around $3,648 annually.


Universal life is a smart investment, as it gives you the option of dividing your payment for your insurance premiums and savings. Besides, the insurance company determines your minimum payment costs. They can base your payment on your policy’s cost, the amount of your death benefit, and other administrative fees.

If you are looking for standard universal life insurance in Canada, visit Life Insurance Direct today. We offer flexible coverage plans and at the best prices too!

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