Flexible Premium
A universal life feature allowing the policyowner to pay premiums at any amount and frequency within limits, as long as cash value covers the monthly deductions.
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Practice This Concept
In a universal life insurance policy, the insurer typically deducts which amounts from the cash value on a monthly basis?
Cost of insurance (mortality) charges and expense charges — In universal life, each premium is credited to the cash value account, from which the insurer deducts the cost of insurance (the mortality charge based on the insured's age and the amount at risk) and expense or administrative charges, then credits interest at the current rate. Because universal life is an unbundled policy, the owner can see the mortality charge, expense charge, and interest credit separately, which is what makes the cash value and coverage responsive to current interest rates and flexible premium payments.
National insurance concept
Which type of policy combines flexible universal life features with a guaranteed death benefit that stays in force for the insured's lifetime as long as a specified minimum premium is paid, even if the cash value becomes insufficient?
Guaranteed universal life — Guaranteed universal life (GUL) offers the flexible premium of universal life with a secondary guarantee: the death benefit is guaranteed for life (or a specified period) as long as the policyowner pays the required premium, regardless of whether the cash value covers monthly deductions. This makes GUL a popular way to fund permanent needs at a lower premium than whole life.
National insurance concept
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