A Basic Introduction to Universal Life Insurance

Universal Life (UL) is a “flexible premium” “current assumption” “adjustable death benefit” type of cash value life insurance. The term flexible premium means the policyowner is permitted to select whatever premium he or she wishes to pay—within limits—and later to adjust or change the premium. Policyowners may even skip premium payments as long as the cash value is sufficient to cover policy charges. The term current assumption means that current interest rates, as well as current mortality and expense charges, are used to determine additions to cash values. The term adjustable death benefit means that the policy permits policyowners to raise or lower their policy death benefits. However, increases may require evidence of insurability.

As a result of this tremendous flexibility, UL captured a significant share of the new insurance market since its introduction in the late 1970’s. Some insurance companies even use the term flexible premium adjustable life to describe their UL policies.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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