P1P2

Even if there is enough in your account to pay the premiums, continuing to pay premiums yourself means that you build up more cash value.

2007NAIC Life Insurance Buyer's Guide  - 10p

Even if there is enough in your account <SIV> to pay the premiums <P2>, continuing to pay premiums<P1> yourself means that you build up more cash value.

2007NAIC Life Insurance Buyer's Guide  - 10p

Let's review the basic mechanics of Universal Life.

  • The first thing that has to occur is a premium payment. <P1>
  • A premium <P1>may be paid at any time and in any amount desired.
  • Whenever a premium <P1> is paid, loads <E1>are deducted from that premium <P1>.
  • The balance <P1-E1> is added to a fund <SIV>.
  • On a monthly basis, cost of  insurance charges <P2> are deducted from the fund <SIV>.
  • Expense charges <E2> may be deducted from the fund <SIV>, especially in the early policy years, and interest <i>is added to the fund <SIV> on a monthly basis.
  • The cash value <SIV> changes each month based on the net impact of the income <P1/i>and deduction transactions.

    The policy does not lapse if a premium is not paid; rather, it lapses if the fund balance becomes too small to pay the next month's cost of insurance. 

--  BEN H. MITCHELL

1981 - Universal Life, Society of Actuaries