馃攳
What Is Universal Life Insurance? Universal Life Insurance Canada - YouTube
Channel: Thomas C Chan - Financial Services
[0]
hey if you're looking for a life
[2]
insurance policy maybe you were
[4]
introduced to neither the term insurance
[6]
or the whole life insurance however
[8]
maybe you want something on the
[10]
permanent side but you are on a budget
[12]
you might wonder is there anything in
[15]
the middle something that gives you the
[17]
protection of a permanent insurance but
[19]
is more cost effective and flexible
[21]
compared to the whole life insurance
[23]
and the answer is yes there is there is
[26]
another option called the universal life
[28]
insurance so in today's video i want to
[31]
talk about what is universal life
[32]
insurance who is it for and more
[35]
importantly what is the proper way to
[36]
set up the plan so you have a better
[38]
idea if universal life insurance is
[40]
right for you
[41]
and as always if this is your first time
[43]
here thanks for dropping by my name is
[46]
thomas and this channel is to help
[48]
canadians to make better choices on
[50]
retirement
[51]
wealth and insurance my goal is to make
[54]
sure you can take one or two ideas home
[56]
so you can make better financial
[57]
decisions onward so if this is something
[59]
that you're interested in make sure you
[61]
click the subscribe button below and you
[63]
will never miss any of my videos let's
[66]
get started
[67]
in canada when you're getting life
[69]
insurance there's essentially two
[71]
options you can get a term that expires
[74]
at a certain age or you can get a
[76]
permanent option the downside to any
[79]
term life insurance is that they expire
[81]
usually at the age of 80 to 85 depending
[84]
on the insurance provider that means you
[86]
may get a nice lumps of money if you do
[89]
pass away before the age of 85 but what
[92]
happens if you die after there are a lot
[94]
of fees expenses and more importantly
[97]
taxes after death and if your life
[99]
insurance expires before you died then
[101]
you have no guarantees your costs are
[103]
covered so in a sense term life
[105]
insurance is a temporary solution to a
[108]
permanent problem and that's why i want
[110]
to tell you more about the permanent
[111]
side when it comes to permanent life
[114]
insurance there are once again two
[116]
options whole life insurance and
[118]
universal life insurance
[119]
universal life insurance is a form of
[121]
permanent insurance that is ideal for
[123]
people who want flexibility it's also
[126]
ideal for young people who are bit tight
[128]
on the budget but still want a life
[130]
insurance in a nutshell whole life
[132]
insurance is like a piece of property in
[134]
the insurance world it has more
[136]
guarantees and you can predict the
[138]
growth however it requires more capital
[141]
and commitments and rate returns
[143]
relatively low as it depends on the
[144]
company's dividend scale where universal
[147]
life insurance is like investments
[149]
that's because you don't just have the
[151]
insurance you also have a savings
[153]
component therefore it's like a middle
[155]
ground between insurance and investments
[157]
you can control how much you want to put
[159]
into the plan and you have the options
[161]
to not put it at all which i will
[162]
explain it later
[164]
now let's briefly look at the background
[166]
of universal life insurance to
[167]
understand better why it exists and
[169]
what's it for universal life insurance
[171]
was introduced about 40 years ago back
[174]
then only whole life insurance exists
[177]
back in the 80s the stock market started
[179]
to get more and more attractive for
[181]
people because they would get a much
[183]
higher return there so a lot of
[185]
investors or business owners were like
[187]
hey the stock market can give me 30 50
[189]
or 80 return where if i just put it in a
[192]
savings account or the whole life
[193]
insurance i will just get 10.
[195]
also i have to put away that money i
[198]
have no idea what the insurance company
[199]
has to do about it so therefore more and
[202]
more people are steering away from their
[204]
whole life insurance
[206]
to the point where the insurance
[207]
companies had to come up with a product
[209]
where instead of mixing all the savings
[211]
and insurance together why don't we
[213]
bundle the plan and let the client to
[215]
choose where you want to invest so you
[217]
get to have life insurance and also the
[220]
flexibility of investment and with a tax
[222]
advantage it makes everyone satisfied
[225]
hence the name universal life it became
[227]
popular because of the high transparency
[230]
you know exactly the cost of insurance
[232]
and how much you put into the investment
[234]
where whole life insurance is kind of
[236]
like a black box you don't know what
[238]
happens to that money and especially
[240]
before 2009 before tax rate saving was
[243]
introduced a lot of investors love it
[245]
because the money in the insurance plan
[247]
can grow tax shelter and if it done
[249]
right it can be tax-free when they
[251]
withdraw the savings from it
[253]
so who is it for universal life
[255]
insurance is ideal for anyone who likes
[258]
to invest who is relatively young tight
[260]
on budget but wants a permanent life
[263]
insurance
[264]
let's say you want to have a 500 000 of
[266]
life insurance you are a 30 year old
[269]
male non-smoker a whole life insurance
[272]
will probably gonna cost you around 400
[274]
to 500 a month
[276]
but universal life insurance can start
[278]
at 150 dollars per month therefore it's
[281]
great for people on a budget
[283]
and you might wonder why such a big
[286]
difference and that has a lot to do with
[289]
the how you structure the plan
[291]
first we need to understand universal
[293]
life insurance has two components the
[295]
insurance and the investment part they
[298]
are separate and you know exactly how
[300]
much money you're gonna put into the
[302]
investment and how much into the
[303]
insurance parts so for the cost of the
[306]
life insurance portion there are two
[308]
options you can choose between level or
[311]
yearly renewable term
[313]
level means the cost of the insurance is
[315]
fixed from now until the day that you
[317]
pass away
[318]
why iot means that every year they will
[321]
increase the cost of insurance as we are
[323]
getting older
[324]
the beauty of ylt is when you are young
[327]
the cost of insurance is much cheaper
[329]
compared to a level plan and let me give
[331]
you an example
[332]
john is 30 years old married he wants
[336]
universal life insurance because he has
[337]
the flexibility and he can choose how
[340]
much he wants to put in
[342]
for a level universal life insurance the
[345]
cost for five hundred thousand dollars
[347]
is around three hundred dollars per
[348]
month where if john chooses ylt the cost
[351]
starts at 60 dollars per month for his
[353]
current age and the year after is around
[356]
62 dollars and the year after maybe is
[358]
around 65 per month yes the cost of
[361]
insurance keeps increasing but it takes
[364]
john to reach age 65 to stop paying 300
[367]
for the cost of insurance
[369]
so which one should you choose level or
[371]
ylt
[372]
using john's case if his budget is
[375]
around 400 per month and decides to do
[377]
the level cost of universal life
[379]
insurance at age of 65 he will have
[382]
around 140 000 in cash value and
[385]
252 000 at the age of 75 based on a 5
[390]
return on investments
[392]
but if john choose rlt instead the cost
[395]
insurance is 60 and it can use the
[398]
remaining 340 for investments and
[401]
therefore he will have around 400 000 at
[403]
age 65 and 700 000 at the age of 75
[408]
so it really depends on your age and how
[410]
much money you'd like to put aside if
[412]
you want to invest more and you are
[414]
young ylt will be a better option and
[417]
that's because we can leverage the youth
[419]
to get the lowest cost possible and
[421]
invest that difference into the markets
[424]
where if you're hitting your 50s or 60s
[426]
and want to lock down the cost instead
[429]
of increasing over the years the level
[432]
will be a good option now for the
[434]
investment portion you have a variety of
[436]
things that you can do you can use it
[438]
for savings term deposits
[441]
bond or equity-based funds the range of
[444]
yearling return per year can be between
[446]
1 to 20 percent depending on your risk
[449]
and market performance with the current
[451]
low interest environment i suggest
[453]
investing into the equity fund like an
[455]
index fund it's relatively safe and
[458]
gives you a good return overall
[460]
plus you're doing this for a long time
[462]
anyway
[463]
what's more i always recommend making
[465]
sure the universal life that you have
[467]
has death benefits plus fund meaning if
[470]
you pass away you get both the death
[473]
benefits plus whatever that you save
[475]
inside the plan tax free
[477]
now let's dive deeper the beauty of
[480]
having a universal life insurance is
[481]
that you can control how much you want
[484]
to put into the plan
[485]
in john's case he can choose to put in
[487]
200 this year and he can also choose to
[490]
put in 2 000 next year now you might
[493]
wonder
[494]
why should you pay more than the minimum
[497]
and that's a good reason to it think of
[499]
this insurance like a coffee cup
[501]
anything inside this cup is tax shelter
[504]
so the cla won't text you on the portion
[507]
of the investment
[508]
and depending on the size of the cup
[510]
whether it's tall grande or venti it
[513]
depends on the amount of the insurance
[515]
coverage that you buy
[516]
and yes there's a cost to this cup but
[519]
if everything is planned accordingly the
[521]
interest that you earn from the
[522]
investment can cover the cost ready
[525]
that means you now have a
[526]
self-sustainable system and comes with a
[529]
free insurance
[530]
remember tax free saving increases the
[533]
room by six thousand dollars every year
[535]
if you're a high income earner you
[537]
should max out the room pretty quickly
[540]
so a lot of business owners or
[541]
professionals like to buy a universal
[543]
life insurance to create more tax
[546]
buckets besides from the tax free saving
[548]
or the rrsp and that's why universal
[551]
life insurance is also called the rich
[553]
men's tax-free savings account
[556]
another great feature of universal life
[558]
insurance is something called the
[559]
premium holiday
[560]
let's assume you pay into your insurance
[562]
plan for a few years but suddenly
[564]
unexpected expenses coming up maybe you
[567]
have to buy a place or you lost a job in
[569]
that case you can use the cash value to
[572]
pay for the cost of the insurance
[575]
on the other hand whole life insurance
[576]
have a similar feature but it probably
[578]
won't kick in unless you have the plan
[580]
for more than 15 years
[582]
and that's why like i said whole life
[584]
insurance is like buying a place no
[586]
matter if you're sick or layoff you're
[588]
obligated to pay the mortgage
[590]
now like anything it has a stance as
[593]
well and compared to your whole life
[594]
insurance that is a lot of moving parts
[598]
for the universal life insurance
[599]
especially if you're choosing the ylt
[602]
option the downside of having the ylt is
[605]
that if you don't invest enough into
[607]
your insurance plan one day the cost of
[610]
the insurance side would be much higher
[612]
than the investment side and i do see a
[615]
lot of cases like that the agent just
[618]
sold a client a ylt ul policy but put
[621]
all the investments into a savings
[623]
account as a result as the client is
[626]
getting older the return from the
[628]
investment cannot cover the cost and
[630]
speaking of investment because it's
[633]
market dependent
[634]
think back in the 2008's or 2011 the
[638]
stock market dropped around 30
[640]
so therefore most of the universal life
[642]
insurance follow as well where the whole
[645]
life insurance is still able to pay six
[647]
to eight percent on those charging years
[650]
meanwhile just like a mortgage most of
[652]
the whole life insurance now can be paid
[654]
off in 20 years where universal life you
[657]
pretty much want to keep paying until
[659]
the day that you pass away yes you can
[661]
access the premium home day option but
[664]
that's the risk of policy lapsing when
[666]
there's not enough money in the plan if
[669]
you're thinking about universal life
[670]
insurance now there are a couple of
[672]
things to consider in advance
[674]
do you want to choose ylt or level
[677]
what kind of investment would you like
[679]
to choose
[680]
and more importantly will your insurance
[682]
advisor going to review the investment
[685]
performance with you from time to time
[687]
or you have those agents that never come
[689]
back to review i personally have both
[692]
the whole life insurance and the
[694]
universal life insurance because now i
[696]
can have both for the world but i do
[698]
find universal life insurance is
[700]
especially beneficial if you're young
[702]
and looking for asset accumulation it's
[705]
transparent and you're more in control
[708]
alright as usual hope you learned
[710]
something from this video please share
[712]
this video with your friends or family
[713]
who are looking for insurance and
[715]
comment below if you have any questions
[717]
i need your feedback to make the video
[719]
better
[720]
hey thanks so much for watching this is
[722]
thomas and i will see you in the next
[724]
video
Most Recent Videos:
You can go back to the homepage right here: Homepage