MTHEL131 Chapter Notes - Chapter 6: Universal Life Insurance, Cash Flow, Mutual Fund Fees And Expenses
14 Oct 2013
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Flexible premium, adjustable death benefit, unbundled life contracts. After initial payment, policy owners pay whatever and whenever they wish, as long as the cash value covers policy charges. Insurers introduced these in hopes of selling more policies. Administrative costs are high, and uncertainty with cash flow has proven to be a challenge for many firms. Policy owner is able to see how money is allocated. Option a: death benefit pattern: the death benefit is the face amount only. Option b: level net amount at risk: the death benefit is the face amount plus the policy value. Although its long-term cost is higher, there is a relatively larger death benefit. Policy-owners pay whateer and whenever they want. Disadvantage is that policy-owner might allow policy to lapse because there are no required premiums. Many companies offer no-lapse guarantee" for a certain number of years after the minimum premium has not been paid.
