Permanent insurance, with flexiblity to change premiums, payments and death benefit options.
Universal Life has several unique features not found in whole life policies. Specifically, the policyowner is provided with the flexibility to vary the timing and amount of premiums and the face amount, depending upon present needs.
Cash values are a function of past and present premium payments, interest crediting rates, mortality charges and expense charges. The interest rate credited to the policy cash value is based on current rates of interest, subject to a stated guaranteed minimum interest rate. In addition, current mortality and expense charges are deducted from the accumulation value, but the only guarantee is that these charges will not exceed certain maximums. As a result, the policyowner bears more of the risk of adverse trends in mortality and expenses than if a traditional whole life insurance policy were purchased. On the other hand, if the insurance company’s mortality costs and expenses improve, the policyowner may benefit through lower charges.