You already max out your RRSP and TFSA each year and want another tax-efficient place to save.
Why it fits: Universal life lets you shelter more growth from yearly tax while also providing permanent coverage for your family.
Universal Life Insurance
Lifelong protection with flexible premiums and tax-sheltered growth.
Universal life insurance combines permanent life coverage with an investment account inside the policy. You choose how much to pay and how to invest, within limits, and growth is sheltered from yearly tax.
Overview
Universal life insurance gives you permanent coverage plus an investment account inside the policy. You decide how much to deposit and how to invest, and your growth is sheltered from yearly tax within the limits set by Canadian tax rules.
This flexibility makes universal life a strong fit for people who want lifelong protection but also want more say in how their money is used. When you pass away, your beneficiaries receive a tax-free lump sum.
When universal life makes the most sense
Universal life suits people who have a lifelong need for coverage and room to save beyond their RRSP and TFSA. It is often used by business owners, high-income earners and families planning to pass on wealth. Because the account value is not guaranteed, it works best for people who are comfortable reviewing their policy from time to time.
Choosing a policy
When comparing universal life policies, look closely at the details:
- Cost of insurance: level costs give long-term stability, while yearly renewable costs start lower but rise over time.
- Investment options and fees: compare the choices available and the fees charged on each account.
- Insurer strength: we compare plans from Canada’s leading insurers to find the right fit and design for you.
How it works
- 1
Choose your coverage and cost of insurance
Pick a death benefit and how the insurance cost is charged. A level cost stays the same for life, while a yearly renewable cost starts lower and rises with age.
- 2
Make flexible deposits
Pay at least the minimum needed to keep the policy in force, or deposit more to build your account faster, up to the limits set by tax rules.
- 3
Choose your investments
Your extra deposits go into investment options offered by the insurer, such as guaranteed interest accounts or funds linked to market indexes.
- 4
Use it now or later
You can access the account value during your life, and your beneficiaries receive the death benefit, generally tax-free, when you pass away.
Key benefits
Lifelong coverage
Your policy can last your whole life, as long as there is enough value in the account to pay the insurance costs.
Flexible premiums
You can pay more in good years and less in tighter years, as long as the policy has enough value to cover its costs.
Tax-sheltered growth
Investment growth inside the policy is not taxed each year, as long as the policy stays within the exempt-policy limits set by Canadian tax rules.
Choice of investments
You decide how your account is invested, from conservative guaranteed accounts to market-linked options.
Tax-free death benefit
In Canada, life insurance proceeds paid to a named beneficiary are generally received tax-free, including the account value if your policy pays it out.
Bypasses probate
With a named beneficiary, the payout goes directly to them instead of through your estate, avoiding delays and probate fees.
Who it’s for
Your corporation has surplus cash and you want lifelong coverage for estate or succession planning.
Why it fits: A corporate-owned UL policy can grow in a tax-sheltered way and may help move value to your family efficiently.
You are self-employed and your income goes up and down from year to year.
Why it fits: Flexible deposits let you put more in when business is strong and less when money is tight.
Pros & cons
Pros
- Permanent coverage with flexible deposits
- Tax-sheltered growth within exempt-policy limits
- You control how the account is invested
- Can be customized as your needs change
Things to consider
- Investment returns are not guaranteed and can be low
- More complex than term or whole life
- Policy can lapse if the account runs too low to cover costs
How it compares
| Universal life compared with term and whole life | Universal Life | Term Life | Whole Life |
|---|---|---|---|
| Coverage length | Lifetime | 10–30 years | Lifetime |
| Relative cost | Moderate to high | Lowest | Highest |
| Cash value | Investment-linked | None | Guaranteed growth |
| Premium flexibility | Flexible | Fixed | Fixed |
| Best for | Tax-advantaged growth with flexibility | Temporary needs like a mortgage or young kids | Estate planning and lifelong needs |
Run the numbers
Term vs permanentCompare total premiums and see what happens if you buy term and invest the difference.Frequently asked questions
What is the difference between level and yearly renewable cost of insurance?
Level cost of insurance stays the same for life, so it costs more early on but is often cheaper over the long run. Yearly renewable cost starts low and rises every year, which can get expensive later.
How is universal life different from whole life?
Whole life offers guaranteed premiums and cash values. Universal life gives you more control over deposits and investments, but the growth is not guaranteed and you take on more of the risk.
Can I lose my coverage?
Yes, if your account value is not enough to pay the insurance costs and fees, the policy can lapse. Reviewing your policy regularly helps keep it on track.
How much can I put into my policy?
Canadian tax rules set a maximum amount each policy can hold while keeping its tax-sheltered status. Your insurer tracks this, and we help you plan deposits to stay within the limit.
Related products
Whole Life Insurance
Lifelong protection with guaranteed cash value that grows over time.
Term Life Insurance
Affordable protection for the years your family depends on you most.
Segregated Funds
Invest for growth with guarantees that protect your principal and your loved ones.
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