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Life Insurance Tip #9

With a Universal Life Policy, the policy will ďlapseĒ (meaning your death benefit will vanish) if the premiums and cash value arenít enough to cover whatís known as the COI, or Cost Of Insurance. For that reason, itís vital to make sure youíre getting a guaranteed UL. With a guaranteed policy, also called a no-lapse policy, itís written into your contract that if you make certain premium payments that the policy will be guaranteed not to lapse until a certain age. Generally, that age is 121, meaning youíd have to be very old indeed to outlive your policy.

Why Should You Own Universal Life Insurance?

  • Permanent insurance with a tax-sheltered investments portion built into the plan.
  • Versatile payment options and interest, customizeable
  • Flexible premium payment structure.
  • The only type of permanent insurance that allows you to modify your policy as your needs change (eg. you can modify the amount of insurance coverage, or add/remove insurance features).
  • A tax-sheltered way to save for retirement.
  • If funded properly, after 10-20 years the tax-free savings from this program should equal or exceed the cost of insurance. In other words, this form of insurance can pay for itself.
  • Perfect for people who think long-term and wish for their insurance plan to increase in value over time.

Options of Universal Life Insurance

  • You choose how much money to put into the tax-sheltered investments portion (within certain parameters), as well as where you invest.
  • Invest in guaranteed investments, or mutual fund equivalents.
  • Can add "Term riders": temporary additional insurance to meet short-term needs (eg. if the universal life insurance policy is for $100 000, but you need $500 000 coverage now, you can add a $400 000 term rider).
  • Can add child or spousal riders: additional insurance coverage on a child or spouse on the same policy.
  • Waiver of premium: a safeguard against losing your policy. If you have an accident and become disabled, you may no longer earn a high enough income to pay your insurance premiums. With the Waiver of Premium option selected, after 6 months of disability, the insurance company will waive all of your premiums so you do not lose your policy. They also refund the premiums you paid over the last 6 months.

Uses of Universal Life Insurance

  • Saving money for retirement.
  • Estate preservation: as soon as you die, any property that has gained value while you owned it (except for the family home) is deemed "disposed of" and your family must pay the taxes. An insurance policy can help pay these taxes. And the money you have in the investments portion of the Universal Life Insurance Policy is passed on tax-free, which helps to leave your family with an un-eroded inheritance.
  • Leveraging: borrowing money against the cash value of the life insurance policy to enjoy the money now.
  • Charitable giving: leaving the proceeds of the policy to charity.
  • Enhanced buy-sell agreements for business partners: the partners take out insurance on each other to continue the business in the event of one partner's death, while simultaneously providing a retirement plan in the process.
  • Pension Maximization: a smarter way to provide a pension for your spouse after you die. Instead of taking a reduced pension income, you can take the full pension and purchase a life insurance policy with the difference. When you die, the payout from the insurance policy can be used to buy an annuity, providing a life-long income for your spouse.


"As a self employed individual, being able to obtain and afford Universal Life Insurance coverage has been a challenge. Centennial-life.com allowed me to find the right policy for my needs within my budget. As a bonus, my husband and I now have life insurance coverage within our original budget!

Marci Lloyd


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