To start, I’m not an insurance agent who wants to make Universal Life Insurance seem like the best thing since sliced bread. Whatever you want to do with your time or money is your business.
Universal Life Insurance in Canada, can’t make you rich, however if you’re already rich, Universal Life Insurance is perfect for PROTECTING your wealth, to past down to future generations or give to charities.
If you’re a Christian like myself, you’ve purchased life insurance policies with charities as the beneficiaries. I bring this up because it’s hard to GIFT TERM life insurance because Term Life Insurance has an expiry date.
Term life insurance is cheap for a reason: the insurance company(which isn’t your friend) is banking on you outliving your policy.
With that said, term life insurance is better than NOTHING, but if you have the choice between Term Life Insurance and universal life insurance, I’d pick Universal Life Insurance if I were you.
Why Universal Life Insurance is Superior to Term Life Insurance
YOU’RE NOT ENTITLED TO LIFE INSURANCE. Most Canadians imagine that they can QUALIFY for life insurance anytime they feel like it. I’m here to tell you that’s not how life insurance works, when your chances of dying increase, the cost of life insurance goes up and a lot of insurance companies, might outright refuse to qualify you.
This is why people who understand how life insurance works ALWAYS have a whole life or Universal life insurance policy. PERMANENT life insurance means that the insurance company CAN NOT cancel you.
The reason why Universal life insurance is more expensive than term Life insurance is because the insurance company is LEGALLY obligated to pay you the money promised when you die, whereas, with term life insurance, there’s a good chance that you will outlive your TERM life insurance policy.
Universal Life Insurance Is Basically Permanent Term Life Insurance – The Bad Side to Universal Life Insurance.
Let’s be honest: nobody wants to pay for insurance, and the REAL reason Whole Life Insurance gets a bad name is because of the Expensive PREMIUMS. Anyone who understands how COMPOUND interest works, loves Whole Life Insurance, however, if the cost of insurance bothers you, Universal Life Insurance was the answer.
One of the most evil life insurance entities is Primerica; if you’re not RICH by the time you’re about 63, you’d better call your life insurance broker because you’re in for a rude awakening about your future insurance premiums.
If you have a good insurance agent and a universal life insurance policy, he should have told you about insurance premiums getting more expensive as you get older.
So, Whole life insurance is expensive from day ONE; however, in time, the compound interest will benefit you greatly. I’d personally recommend dividend-paying whole life insurance, with Paid-Up Additional Insurance, but that’s just me, I bring this up because Universal life insurance is structured differently.
In insurance, there is a term called indemnity. Basically, indemnity means that Insurance can’t be used as a tool for PROFIT. At best, it’s wealth protection, which is why whole life insurance used to be called live insurance with a savings account.
Universal Life Insurance advocates argued that they didn’t like all the secrecy involved in whole life insurance policies. Insurance companies obviously have to invest the money you send them so they can pay claims.
Universal Life Insurance advocates argued that life insurance customers should be allowed to invest their own money. But if you understand indemnity, you know that this would have to come with limitations.
Life Insurance can’t be a financial instrument for profit, but it also can’t be a financial instrument for LOSS, so this is where Universal life insurance can get a bit complicated.
If you’re going to purchase a universal life insurance policy, The Question you want to ask your agent is: how much Premium do I pay that GUARANTEES my Universal Life Insurance policy won’t LAPSE?
If the number is too high for you, purchase less insurance. What I love about Universal Life insurance is that you have the option to overfund the policy, and overfunding your policy can actually lead to you purchasing more life insurance, which sounds silly when you’re young but starts to make sense when you join me in the old-peoples-club.
I feel for those of you who listen to Dave Ramsey’s life insurance advice. Dave Ramsey and Primerica break hearts when people reach 65 and are NOT rich. Only buy Term Life insurance if you KNOW what you’re getting yourself into and you’re absolutely certain you’re going to be rich by the time you reach 70.
As an older person myself, I know how it is; in your mind, you’re already telling yourself, I’ll leave the money from the life insurance to my grandchildren or children, then one day, you get a call from the insurance agent saying it’s time to renew your TERM life insurance policy, and now it will cost 3x the amount for LESS insurance.
So, the strategy I was told about Universal Life Insurance was ALWAYS to make sure you buy at least a million-dollar policy, AIM for a million-dollar universal life insurance policy, and make sure the beneficiary is REVOCABLE. Why? Because when the Universal Life Insurance premiums go up, at the very least, you have leverage to ENTICE, someone to help you pay the premiums.
You get what you pay for. Term Life Insurance is cheaper for a reason. Term is better than nothing, but I’d personally opt for Universal Life Insurance over Term Life insurance because ANYTHING can happen in this life, and the insurance companies are NOT your friends. If they think something is wrong with you, they will either reject you or charge you ridiculously high premiums for a small amount of life insurance.