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Universal life (UL) was introduced in 1981-82, in response to a historically high interest environment and a consumer awareness of the value of self-directed investments because traditional insurance could not compete with short-term interest rates. the life insurance industry's response was to introduce new money products, like universal life, whose investment returns would be based upon a pool of new short-term debt and not be weighted down by historical, low-coupon, long-term portfolio assets.
Unlike term and whole life insurances, this policy blends term insurance and an investment account into one contract. Also its premiums can be increased or decreased, paid when due or at unscheduled dates, or stopped entirely and restarted at the owner's will provided the policy value is adequate to maintain the cost of the insurance.
This type of policy is adapted well to satisfy the changing insurance and investment needs of its owner.
1. Flexible coverage
The prime attraction of the universal life policy lies with its flexibility that allows owner of universal life insurance policy to increase or decrease the policy's face amount and evidence of insurability is usually needed for the increases. Its flexible coverage also established a life insurance contract that (subject to an insurability requirement) allowed the policy owner to:
a. Increase or decrease the face amount of insurance
b. Add more lives insured
c. Substitute one life insured for another
2. Flexible investments
Unlike traditional plans, where the policy account value was invested in a portfolio by the insurance company's investment managers, universal life offers the policy owner the option to choose the weighting of investment within the account value from a wide range of options: from savings accounts, to guaranteed term deposits, to funds that track specific market indices and mutual fund-like investments.
All universal life contracts are subject to annualized expense charges of various natures that are deducted monthly, on a pro data basis
a) Provincial or State premium taxes
b) Mortality deductions
c) Rider charges
d) Annual administration fees
e) Insurance mortality deduction
Increase or decrease each year or level term rate.
I hope this information will help. If you need more information, you can read the complete series of the above subject at my home page:
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