Universal Life Insurance

Adjustable life insurance under which (1) premiums are flexible, not fixed; (2) protection is adjustable, not fixed; and (3) insurance company expenses and other charges are specifically disclosed to a purchaser. This policy is referred to as unbundled life insurance because its three basic elements (investment earnings, pure cost of protection, and company expenses) are separately identified both in the policy and in an annual report to the policy owner. After the first premium, additional premiums can be paid at any time. (There usually are limits on the dollar amount of each additional payment.) A specified percentage expense charge is deducted from each premium before the balance is credited to the cash value, along with interest. The pure cost of protection is subtracted from the cash value monthly. As selected by the insured, the death benefit can be a specified amount plus the cash value or the specified amount that includes the cash value. After payment of the minimal initial premium required, there are no contractually scheduled premium payments (provided the cash value account balance is sufficient to pay the pure cost of protection each month and any other expenses and charges. Expenses and charges may take the form of a flat dollar amount for the first policy year, a sales charge for each premium received, and a monthly expense charge for each policy year). An annual report is provided the policy owner that shows the status of the policy (death benefit option selected, specified amount of insurance in force, cash value, surrender value, and the transactions made each month under the policy during the year premiums received, expenses charged, guaranteed and excess interest credited to the cash value account, pure cost of insurance deducted, and cash value balance).