Options for customizing your universal life insurance policy

  • Deposits made into the investment component of the policy can choose anywhere between a minimum and maximum value. The higher the contribution, the greater the potential is for tax sheltered growth.
  • Life insurance companies offer various forms of investment packages, so you can choose the best portfolio according to your tolerance for risk.
  • As cash values grow and accrue interest, you choose how you want to spend the money. Some options include: paying for future premiums, increasing the death benefit amount, borrowing from it, or using it as collateral for a loan.
  • Cash values within the policy at death can be added to the benefit as one tax free pay out (Increasing Death Benefit).
  • Choose between a level cost of insurance and a yearly renewable.


Kristy purchases a $100,000 universal life insurance policy from ABC Life. She chooses a level cost of insurance, and her minimum premium is $100 a month. She goes with ABC Life’s Canadian indexed equity fund, and overfunds her premiums by paying $250 a month.

The remaining $150 a month, premiums paid minus the cost of insurance, is credited to the investment account. The investment account’s rate of return is linked to how well the underlying Canadian indexed equity fund performs, which is not guaranteed, however, if Kristy’s investment account generated an average (net of premium tax) return of 5.25% per year it would be worth $24,108.72 after 10 years. This investment account would not generate an annual tax slip, as it is sheltered inside her universal life policy. She could choose at that time to stop paying premiums and instead use the annual earnings on the investment account to pay the minimum monthly premium.

Universal life is ideal for those who want to make occasional investment decisions, and are willing to build a strategy to try and take advantage of the constantly changing underlying market. Universal life is often referred to as a whole life insurance policy that has been “unbundled”, meaning you have complete control to customize all of the features.


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