Universal Life Insurance PA


Universal Life Insurance begins with an examination of the financial and political environment in the decade of the 1970s that gave rise to the conditions resulting in the development of the universal life insurance product.  The student will understand the roles played by extraordinarily high interest rates that gave rise to disintermediation and a Federal Trade Commission report that was critical of whole life insurance in the decline of whole life insurance sales.

The key features of the universal life insurance product are examined, including its:

  • Flexible premiums
  • Adjustable coverage
  • Expense and mortality charges
  • Death benefit options and their relationship to the policy’s amount at risk

When the policy features have been discussed, the student is given an opportunity to see how the universal life insurance policy works and is introduced to the various interest rates that play a part in universal life insurance, including the guaranteed crediting rates, current crediting rates and assumed rates (for illustration purposes).  Policy cash values are calculated for both Option A and Option B death benefits.

Cash value access and taxation are considered, and the appropriateness of withdrawals and policy loans are discussed in reference to the policyowner’s intent to repay.  Universal life insurance taxation, following TRA ’84 is examined, and the limitations imposed by the legislation are considered, including the cash value accumulation test and the guideline premium/corridor test. Variable and equity indexed universal life insurance products are discussed, and their differences from declared rate UL products are examined.

Universal Life Insurance has nine learning objectives that are reinforced by the examination.

  1. To understand flexibility of universal life insurance premiums and the adjustability of its death benefit
  1. To be able to compare and contrast universal life death benefit Option A and Option B
  1. To be able to explain universal life expense and mortality charges
  1. To understand the role of universal life guaranteed, current and assumed interest rates
  1. To be able to calculate universal life coverage, net amount at risk, cash value and mortality charges
  1. To understand universal life transactions, premiums, surrenders, loans and withdrawals
  1. To understand how VUL cash values are determined
  1. To understand how cash values are determined in equity indexed products
  1. To be able to explain universal life taxation

Welcome to Universal Life Insurance PA!