Universal Life Insurance

Universal Life Insurance (UL) is a relatively new insurance product intended to provide permanent
insurance coverage with greater flexibility in premium payment and the potential for a higher internal rate of
return. A universal life policy includes a cash account. Premiums increase the cash account. Interest is paid
within the policy (credited) on the account at a rate specified by the company. This rate has a guaranteed
minimum but usually is higher than that minimum. Mortality charges and administrative costs are charged
against (reduce) the cash account. The surrender value of the policy is the amount remaining in the cash
account less applicable surrender charges, if any.

Variable Universal Life Insurance (VUL) is a type of life insurance that builds a cash value. In a VUL, the
cash value can be invested in a wide variety of separate accounts, similar to mutual funds, and the choice of
which of the available separate accounts to use is entirely up to the contract owner. The 'variable' component
in the name refers to this ability to invest in volatile investments similar to mutual funds.

The 'universal' component in the name is a bit of a misnomer that is used to refer to the flexibility the owner
has in making premium payments. The premiums can vary from nothing in a given month up to maximums
defined by the Internal Revenue Code for life insurance. This flexibility is in contrast to whole life insurance
that has fixed premium payments that typically cannot be missed without lapsing the policy.

Variable universal life is also considered to be a type of permanent life insurance, because the death benefit
will be paid if the insured dies any time up until the endowment age (typically 100) as long as there is
sufficient cash value to pay the costs of insurance in the policy.
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