Universal Life Insurance

Universal life insurance

an extremely flexible life insurance policy. A policy owner can increase premiums, reduce premiums or cancel premiums. Same to the death benefit.

Death Benefit Option 1

death benefit under which the benefit payable when the insured dies stays level and equal to the initial specified amount. (Option A).

UL Mortality Charges

deducted from the UL policy cash values which will reflect the cost of insurance for that point in insured's life. Similarly to Term but with a cash fund.

Minimum Interest Guarantee

UL policies guarantee a monthly interest credited that will NOT be less than a certain guaranteed min. Typically 3% or 4%.

guideline premium test

a test a policy must meet to qualify as a life insurance. to receive favorable tax status for life insurance. to determine whether the policy is "overfunded".

corridor requirement

minimum amount of pure risk that must be maintained in the policy. meeting this type of requirement qualifies the policy for favorable tax treatment given to life insurance policies.

target premium

premium level at which insurers typically pay full first-year commissions to their agents.

maximum premium

the highest amount that can be paid for that level of death benefit and still allow policy to meet the guideline premium test.

unbundled

Mortality interest and expenses are separate policy elements for the UL insurance. Premium are subjected to cash value which are credited a rate of interest. Insurer deducts the amount to cover the mortality and opert. expenses. Policy's cash value needs to remain in force.

Corridor requirement: Level Death Benefit

cash value increases too rapidly from paying too high premium the death benefit will increase to maintain the min. corridor protection.

Death Benefit Option 2

generally increasing death benefit. Specified amount plus its cash value. the death benefit never decreases to less than the specified amount stated in the policy. cost insurance ded. are higer.

Premium flexibility

payments can be skipped as long as the cash value can support the monthly deductions.

Adjustable Life

policy owner can change three elements: 1) premium 2) cash value 3) death benefit. this can cause the policy to function as a term, ordinary whole life or a limited payment life policy.

minimum premium

the minimum amount that is estimated to cover the cost of pure UL insurance and policy expenses.