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- Universal Life Insurance Coverage
- 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 or credited on the account at a rate specified by
the insurance company. This rate has a guaranteed minimum but usually is higher
than that minimum. Mortality charges and administrative costs are charged against
and reduceed the cash account. The surrender value of the policy is the amount
remaining in the cash account less applicable surrender charges, if any. But
universal life has its own disadvantages which stem primarily from this flexibility.
The policy lacks the fundamental guarantee that the policy will be in force
unless sufficient premiums have been paid and cash values are not guaranteed.