The primary difference between Whole Life and Universal Life is that on a Whole Life policy, the investment component is built into the premium, but on a Universal Life policy it is divided. Another difference is that for Universal Life policies, the offer of investment options is wider. However, the most important aspect when selecting a life insurance product is that it must fulfil your needs. If your needs are met and the premium for a permanent life insurance is reasonable for you, the next key aspect is whether it is a sound investment.

There are a lot of different and often opposite opinions on this subject, partly because not many people really understand the topic of life insurance as an investment. The main advantages and disadvantages of using life insurance as an investment will be introduced in the following part of our article:

Benefits

* The growth of the earnings within the policy and the MTAR lines are on a tax sheltered basis. For Whole Life policies, the premium is set so as no to exceed the MTAR limit. Universal Life products have a maximum premium set according to the MTAR limit.

* Both the investment part on an increasing death benefit Universal Life policy and the dividends on a Whole Life insurance are added to the face amount and paid out on top of this face amount, tax free.

* The investment portion on a permanent policy can be used for future premium payments, so that you can pay with pre-tax money rather than after-tax.

* Many Universal Life policies have minimum investment rate guarantees in excess of 4%. This is a big advantage for investors who dont like to risk, especially in todays low interest rate environment.

Drawbacks

* Many permanent insurance products have surrender penalties if the plan is stopped within the first few policy years.

* Generally, it is not a great idea to purchase a permanent policy, if you dont need a permanent life insurance, because the mortality charge for the life insurance would be higher.

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pLorne S. Marr has been a very accomplished financial planner since 1993 and runs his own company LSM Insurance Services Ltd. Hes recognized as an industry leader thanks to the commitment to providing clients with value-added services./ppLorne has also been a keynote speaker at numerous industry functions and has appeared in The National Post, The Toronto Sun, the Investment Executive, The Advisors Edge and the Insurance Journal. Dont forget to visit his website a target=_new href=http://www.lsminsurance.ca rel=nofollowhttp://www.lsminsurance.ca/a./pbr
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