Universal life insurance is the best product for individuals who:

• I.) are Planning for the long term (2 reasons - 1. need for permanent coverage & 2. need tax-sheltered growth).
• II.) have RRSP contributions maxed out.
• III.) are in higher tax brackets.

UL is offered by many insurance companies, e.g., Manulife, Canada Life, Sunlife, Industrial Alliance. Since the product is somewhat complex, illustrations play a very important role in demonstrating the features and advantages of UL products. A key issue in this regard is what kind of costs and assumptions are built into these various illustrations. The output varies based on different input parameters like assumed interest rate, overfunding, cost of insurance (i.e., YRT or Level). The costs of maintaining these policies (i.e., Policy fee) vary—some companies charge $100 a year, while others charge $120 a year. Something to consider. You can put more than the minimum required amounts into the policy. For people who can pay a big lump sum of money upfront or make high contributions in the first few years, the tax deferral provided by UL can really be impressive.

When comparing illustrations for various UL policies, the reality of assumptions the illustration is based on should be examined, keeping these points in mind:

1. Cost of Insurance (Mortality Cost) - Is it Level or YRT or Yearly/Annual Renewable Term?
2. Guarantees, if any, for "Cash Value" or "Cash Surrender Value."
3. Is Return credited to your investments within a policy?
4. Currency exchange rate exposure can easily wipe out any returns on your investments if the price of the Canadian dollar goes up, for example, if investing in global or US equity.
5. Policy fees and expenses differ significantly from one UL policy to another.
6. Is the guarantee only for a few years? Is there a guaranteed fee?
7. The sensitivity and volatility of the whole projection of investments to be considered as well.
8. Participating UL Policy is like a traditional whole life policy; they pay 'dividends.'
9. Which riders are available? Examples include term life, disability, critical illness, long-term care, AD&D, child term.
10. Does your premium get invested immediately when they receive it, or do they wait until a certain amount is collected, reducing the time during which your money works for you?
11. Surrender charges - may apply in the initial years.
12. Number of lives under one policy that can be insured.
13. Automatic rebalancing of investment portfolios.
14. Preferred rates for people with good/excellent health.
15. Check if the company automatically deducts 2% from every premium, in addition to the 2% premium tax they are obliged to deduct by law.