Universal life (UL) is one of those products that are just overused. It is often sold with a great pleasure but most of the time you can have the option to limit your investment choice by looking that, do you really need an insurance?

Let us make it clearer; for instance, if you go for 20-year term insurance, it is total waste of money if you live more than twenty years! The term for life called as ‘term 100’ means you got to pay a flat premium throughout your life and it is really to be thought that this term 100 generally pays out if you reach age 100 even if you are still on this earth!

Universal life generally comes with minimum premium payment as the term 100. However, you can go for higher premium and the extra amount will be used to go for some investment in the policy. Your family is dependent on you and when you need them to be economically safe, you need insurance policy.

There is no need to replace your income once you retire because by the time you reach that age, your children would be adults and no more dependent on you. Your spouse will be getting your investments and most of your pension and therefore, the need for income replacement goes away as your age advances.

The role of salesperson begins here. They create a ‘need’ of insurance in front of you when you think about your future and income replacements. Generally, main needs usually used are the taxes you have on your estate and when you avoid probate fees. These taxes become problem especially if you have fixed assets and your kids want to keep them. This is because when you give asset to your kid, your estate first needs to pay the capital gains tax, which could be high. In case, if you don’t have any investments, then they can only pay it by selling your own asset.

For almost all people, the main asset is RRSP’s and their houses that their kids won’t keep. In this way, your estate has lots of cash. For instance, if your estate is $1 million and there shall be $200,000 tax when you die, this means your kids get $800,000 instead of $1 million. Here you need to think that is it worth paying life insurance premiums you need to pay for your entire life?

Probate fees are normally from 0.5% to 1.5% and in this calculation; it could be $10000 on your $1 million estate. These rates are of the assets those are passed by the will. You avoid the probate fees because the death benefit passes outside the will since the insurance policy names a beneficiary.

Life insurance premium for minimum universal life is generally at least 1% of the death benefit a year. In this way, you can get 10-20 year term for only about 1/3 the cost. So if you live for two years, you have already wasted more in big premiums as compare to the savings in probate fees.

Overall, universal life insurance makes no sense for your money if you don’t have a need for insurance for your life. If you want to go for it, it is advisable to go for the plan that is cheaper than the term 100. Think twice before investing your money as look at the rates that are offered to you. Check out that whether they are higher than others or not.