See how a universal life policy grows money tax-sheltered, then turns it into tax-free retirement income through leverage.
UL value at retirement
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Tax-shelter advantage
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After-tax income / yr
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Total income drawn
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How this works. Deposits above the policy's insurance cost land in a tax-exempt
investment account (the accumulating fund) that compounds without annual tax, much like an
RRSP. The blue line is that shelter; the green line is the same deposits in an ordinary taxable
account. The exemption test caps how much you can shelter for a given death benefit;
anything over the limit spills into a taxable side fund. In retirement you can take a series of bank
loans against the policy's cash value (leverage): the cash is tax-free and the account
keeps compounding, so the loan is only repaid from the death benefit. Withdrawing instead triggers a
taxable policy gain.
Educational illustration of standard Canadian insurance concepts. Figures are illustrative, not an insurer’s rates.
Illustration only, not a quote or advice. Figures are simplified for education and do not
reflect any specific insurer's rates. Consult a licensed advisor.