Investment Limits of UNIVERSAL LIFE – Are there any?
In a Universal life policy to create the tax sheltered long term savings vehicle, you need the fundamental element, life insurance. The unit cost of the life insurance is a function of the insured’s age, sex health status and other insurability factors. Any additional amounts deposited towards the contract is the savings component. The maximum additional amount that may be placed in the contract is based on a complicated formula called MTAR. Simplistically, it is relational to the insurance amount and the cost of that insurance. In other words, the higher the insurance the larger the savings corridor. It is a perfect vehicle, in that most every one needs and has life insurance for one reason or another. Maximizing on this need creates the tax shelter vehicle. Roughly speaking the maximum savings component is 4 times the insurance cost at the younger ages and double at the older ages. So if you need life insurance anyway, its a great way to integrate this program into your RSP program.
