What's New about Universal Life Insurance - Part 3

11. What earnings currently are being credited to the policy account on a monthly and annual basis? Historically, how much has that interest dropped in the second policy year? Show me the history of the interest rates credited to this policy's account value.

12. Are any minimum earnings guaranteed?

13. How much remains in the policy owner's account at the end of the first month and at the end of the first year?

14. If I choose to surrender the policy at the end of the first month, how much will I receive? At the end of the first year?

15. For how long is the cash surrender value less than the account value; Le., how long does the back-end load (expense charged if you cancel the contract before the insurance company recoups its expenses) stay in existence?

Keep in mind that the insurance company retains the right to change the charges it makes for mortality and expenses. It is important to know what the company is charging presently and the range within which it can charge. You often will find that charges for mortality are based on the company's current experience. Therefore, the long-term results of a universal life policy depend upon how well the company selects new insurers.

Since this an element over which you have no control, you can do only two things: (1) Choose a quality company with careful under­writing standards, and (2) determine whether or not the maximum potential charges for mortality guaranteed within the contract are acceptable. The maximums by statute are contained in the 1980 Commissioners Standard Ordinary Mortality Table.

Since universal life policies are transparent, you can know the charges being made for mortality at various ages. Because those charges are an important point of comparison, you also will want to check them against the various tables, benchmarks, and existing market rates for term insurance.