Universal Life as Term Insurance

  • Universal Life:  The policy can also be structured to operate like term insurance.

California - insurance.ca.gov/01-consumers/105-type/95-guides/07-life/life-ins-guide.cfm

  • We then developed a risk cost for the term portion of the universal life insurance product.




  • It's very possible to have a 25-year term with zero cash value, using a UL product. 
  • UL products go the complete spectrum of selling low premiums or high premiums.
  • There is a company that is issuing a UL product that is a level premium for 30 years.
  • Since the advent of the Technical and Miscellaneous Revenue Act of 1988 (TAMRA), many companies and agents are apprehensive about selling a high premium product.
  • Basically, the high premium product is used to imitate the participating product.
  • We've gone away from that, in trying to go in for low premiums and for longer durations.
  • It's very possible to have a 25-year term with zero cash value, using a UL product. 
  • We all understand the opposite effect, of how everybody is trying to use the UL as a cash accumulator, using it as an investment and trying to maximize the contribution that can be put into it.
  • Tax law, valuation law, compensation, all tend to regulate the product, not the function.
  • And, with the advent of TAMRA, we are regulating how much money can go into a life product at specific durations at least for the first seven years and the combination of annuities and/or premium paid in advance, and shifting the cost between them to minimize the tax effect to the insured.

1990 - Life Product Development, Society of Actuaries

Video: Exam MLC Problem 297 "Learning Objective "Universal Life." Question: Calculate the Level Annual Premium that results in an account value of 0 at the end of the 20th year."  - UW- Madison / SOA - <Bonk: Goal: use a Universal Life policy to design a 20-year term policy.>