Universal Life Insurance: What You Need to Understand Before You Commit

Lately, universal life insurance has been getting a lot of attention - and not all of it positive.

Much of the recent buzz followed NASCAR driver Kyle Busch, who publicly shared that he lost roughly $8 million inside an indexed universal life insurance policy. His experience sparked an important conversation about the risks embedded in certain insurance products and highlighted how misunderstood these policies can be.

While Canada does not sell indexed universal life (IUL) policies in the same way they exist in the U.S., we do offer universal life products that carry similar structural risks. Kyle Busch’s story serves as a powerful reminder: if you don’t fully understand how your policy works, the consequences can be severe.

A Cautionary Tale Worth Paying Attention To

Kyle Busch’s loss wasn’t the result of recklessness. It was the result of a product that didn’t behave the way it was expected to over time.

Universal life insurance is often marketed as a flexible, tax-advantaged solution that combines insurance and investing under one roof. And while that sounds appealing, the reality is far more complex.

To understand why these policies can fail, we need to step back and look at the different types of insurance available, and what each is actually designed to do.

The Three Main Types of Life Insurance

Term Insurance

Term insurance is the simplest form of coverage. You pay a fixed premium for a set period of time, and if you pass away during that term, your beneficiaries receive a death benefit.

It’s similar to home or auto insurance: inexpensive when you’re young, but increasingly costly to renew as you age. Term insurance is useful for temporary needs, but it doesn’t build value, and eventually, it expires.

Whole Life Insurance

Whole life insurance provides permanent coverage and builds guaranteed cash value over time. Premiums are higher upfront, but they remain level for life.

The cash value grows steadily and can be accessed through policy loans without interrupting the policy’s growth or jeopardizing the death benefit when designed properly. This makes whole life insurance a stable, predictable, long-term asset.

Universal Life Insurance

Universal life insurance combines a life insurance component with an investment account. Part of your premium pays for insurance, while the rest is invested - often in market-linked options.

Here’s the key distinction many people miss:
the insurance portion of a universal life policy is not permanent - it’s term-based.

As you age, the cost of insurance rises. When those costs increase, they’re deducted from the investment portion of the policy. If markets underperform, fees rise, or assumptions don’t hold, the investment account can be depleted faster than expected, and sometimes catastrophically.

Another major concern is the surrender charge, which can lock up your cash value for years, making it expensive, or impossible to exit the policy without significant loss.

Why I Choose Not to Sell Universal Life Insurance

I don’t believe universal life insurance is inherently evil. And I don’t believe all agents who sell it are dishonest.

But I do believe these policies require a very specific client profile, ongoing management, and a tolerance for volatility that most families simply don’t have, or want.

My philosophy centers on safety, certainty, and control.

Universal life ties your long-term financial security to market performance while simultaneously increasing insurance costs over time. That combination directly conflicts with the principles of infinite banking, which prioritize uninterrupted growth, liquidity, and predictability.

Why Specialized Whole Life Insurance Works Differently

Properly designed participating whole life insurance - used in infinite banking strategies - offers features universal life cannot reliably provide:

• Immediate access to a significant portion of cash value

• Policy loans that do not disrupt ongoing growth

• Guaranteed, steady cash value and death benefit growth

• Protection from market volatility

• Long-term certainty and control

These policies aren’t built on projections or assumptions. They’re built on contractual guarantees.

Moving Forward with Clarity

Not all universal life policies will fail. But many fail quietly, slowly, and only reveal their weaknesses decades later - when options are limited and consequences are irreversible.

Insurance should bring peace of mind, not ongoing anxiety.

If you currently own a universal life policy, or are considering one, it’s critical to understand how it behaves over time, what assumptions it relies on, and how it aligns with your broader financial goals.

For those looking for an alternative rooted in stability and long-term certainty, participating whole life insurance remains a powerful and proven option.

If you’d like to explore how infinite banking can create a calmer, more intentional financial life, I invite you to book a review of your current insurance strategy. Together, we’ll ensure your policies support your goals—not sabotage them.

Ready to learn how to drastically transform your finances and leave a legacy that truly impacts generations?