As we mentioned in the previous article, Universal Life (UL) insurance was introduced in 1981-82, in response to an environment of historically high interest and consumer awareness of the value of self-directed investments because traditional insurance could not compete. with the short term. Interest rates.
Here are some features as below
1.Value of the account
The account value of a universal life plan is the sum of the gross values of all investment accounts within the policy, including income, after deductions for current month’s expenses.
2. Cash Surrender Value
The cash surrender value of a universal life plan is the current value of the account, less loans and surrender charges. Surrender charges are generally based on a multiple of the minimum premium required for the policy. The final charges are greater than the initial charges.
3. Premiums and contributions
Premiums are those amounts necessary to pay the cost of insurance charges and other policy expenses. Deposits are those excesses that have a purely investment character.
4. Death benefit options
The amount of the death benefit payable under a universal life policy is based on 1 of 4 different options
a) Level of death benefit: Level coverage throughout the life of the policy.
b) Levelized death benefit plus accrued gross premiums: The death benefit increases by the amount of each gross deposit in the policy.
c) Indexed Level Death Benefit: The amount of the death benefit increases, annually, by a predetermined percentage.
d) Level of death benefit plus account value: The total amount of the death benefit is always equal to the initial face value, plus the gross account value. This is most popular with 90% of universal life insurance policy owners because
the gross value of the account is tax-free.
5. Superior flexibility
Premium deposits, plus accumulated investment income, must be sufficient to pay all expenses and deductions in order to keep the policy in force, tax-exempt, flexible premium life insurance contract.
Universal life is not for all consumers.
Its flexibility tends to be reflected in administration costs much higher than those found in traditional whole life plans, and the variable nature of the plan may make it unsuitable for clients who want guarantees.
I hope this information is helpful. If you need more information, you can read the entire series of the previous topic on my home page: