Mortality Risk

Pay only a limited amount, such as a refund of premiums or the cash value — A war or military service exclusion limits the insurer's obligation when death results from war, whether declared or undeclared, or from military service in a combat zone. Instead of the full face amount, the insurer typically pays a limited sum, such as the total premiums paid or the policy's cash value or reserve. The exclusion protects the insurer from the catastrophic and largely uninsurable mortality risk of war and is a standard provision found in many life insurance contracts, particularly those issued during wartime.

National insurance concept

Cost of insurance charge — Universal life policies deduct a monthly cost of insurance (COI) charge from the cash value, which covers the pure mortality risk of providing the death benefit, along with expense charges. Because the COI is based on the insured's current age and the face amount, it rises as the insured ages. If the cash value is insufficient to cover the COI and expenses, the policy may lapse unless additional premiums are paid. This structure is what makes universal life a flexible-premium, interest-sensitive product, distinct from the level-premium guarantees of traditional whole life.

National insurance concept