Universal Life Insurance (UL)
Flexible permanent insurance with unbundled pricing: premium, death benefit, and cash value accumulation rates can each be adjusted. Cash value grows at a declared interest rate with a guaranteed minimum.
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Practice This Concept
A no-lapse guarantee on a universal life insurance policy provides that:
The policy stays in force despite unfavorable policy performance, as long as the required minimum premium is paid as scheduled — The no-lapse guarantee, also called a guaranteed death benefit or secondary guarantee, ensures that a universal life policy remains in force for a stated period or for life, regardless of how the cash value performs, provided the policyowner pays the required minimum premium on schedule. It addresses the risk that poor credited interest or rising costs could otherwise exhaust the cash value and cause the policy to lapse. The guarantee protects the death benefit, not the cash value.
National insurance 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
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