Universal life insurance in Canada allows consumers to purchase a permanent life insurance policy while also receiving access to tax sheltering of investments. Universal life insurance very basically consists of two components - an insurance component and an investment component. It's easiest to consider it as a pure life insurance policy with a savings account on the side. You can choose to pay just the minimum insurance costs, and completely ignore the savings account or investment portion of the policy. By doing so, you effectively are using it as pure life insurance.
Features of universal life insurance:
Provides permanent, guaranteed insurance coverage..
Most versatile of all insurance types, can be customized to fit any situation.
Perfect for people who think long-term and wish for their insurance plan to increase in value over time.
Contains flexible investment options including guaranteed investments and mutual funds.
You can deposit money into the account or take money out, just like a bank account... with one major twist: this "bank account" is sheltered from taxation.
This tax-sheltered feature makes universal life insurance plans a great way to save for retirement.
When planned right, the money you save by having tax-sheltered savings can help (or even totally) pay for your insurance policy.