How does it work?
Universal Life insurance is a form of permanent insurance that combines life insurance and a customizable investment component into one product. Not everyone utilizes the investment component, but it is always available to you if you deposit more than the minimum costs into the policy. The minimum cost is the cost of insurance, which can either be structured as Level (LCOI) or as Yearly Renewable Term (YRT). Any deposits into the policy over and above the insurance costs accumulate in the investment component. As the policy owner you have full control over where the funds in the investment component are invested, which depending on the carrier can include mutual funds, index funds, bond funds, GICs and more. An important feature of the investment component is that any growth that accumulates within the policy grows on a tax-free basis.
When is it used?
Universal Life insurance is best utilized when you have a permanent need for insurance.